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Misconceptions on Aircraft Costs

By December 3, 2018 January 16th, 2019 No Comments

Aircraft ownership involves a massive cost; it includes purchasing an aircraft, registering it, operating and maintaining it. But the misconceptions are more massive than the actual cost. People often get misguided due to conmen and they feel hesitant to get involved in such matters. The misconceptions around the cost of an aircraft is huge and the truth needs to be revealed.

Most people consider the cost of an aircraft as any other automobile or building a house. Here is where they make the mistake. A brief study on the cost of airplane registration, aircraft title search, ownership and maintenance is given here below.

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The biggest misconception that people make is focusing on the acquisition cost and not the operating cost and asset value. The misconception arises for example, when people look at aircraft A with the selling price of $20 million and $17 million for Aircraft B. Aircraft A seems the costlier option if the capabilities of the two are same in terms of range and cabin, however that is not always the case.

How to know if one aircraft costs less than the other? You need to evaluate the total costs to own, operate and dispose of the aircraft. The operation and maintenance are the two major costs including the residual value after a certain time. Aircraft A may have lower fuel consumption than aircraft B, but the airframe maintenance cost is similar to aircraft B. Let’s take a look at the cost per hour.

Fuel – For aircraft A it is $1,376 and for aircraft B it is $1,521.

Maintenance – $784 is for aircraft A and $677 is for aircraft B.

Engines – Aircraft A costs $580 and aircraft B costs $560.

Evaluating these costs, it comes out that the cost per hour is $2,740 for aircraft A and $2,758 for aircraft B.

Aircraft A is capable of flying 8% faster than the latter. Therefore, it will take fewer hours to complete a trip from origin to destination. In that case, it is calculated that if aircraft A takes 400 annual hours for completing trips, aircraft B will take 432 hours for completing it. As a result, the cost per year would be $1,096,000 for aircraft A whereas it would be $1,191,456 for aircraft B. Aircraft A will cost almost 10% less than aircraft B per year, making it cheaper to use, even though the initial cost is more. The difference will count as $1 million over 10 years.

In comparing the two exemplary aircrafts resale value is also significant to be included. After 10 years the estimated residual, the value will be higher for aircraft A.  The 10-years cost is calculated to be $27,460,000 for aircraft A and $27,914,560 for aircraft B. The resale value is $10,000,000 and $7,500,000 for aircraft A and B respectively.

Despite having more capability than aircraft B the cost of aircraft A is either less or the same. Therefore, the decision of purchasing the right aircraft is a bit tricky. If you just go by the purchase cost, you may lose out on a profitable deal.

Take help from Aero Title, we provide all consultations about choosing the aircraft and perform the aircraft title search and airplane registration procedure on your behalf. Call us up and get the best deal.


Author sparkcreates

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