What do you charge yourself for flight hours?

[Downeast25]

I am part of a group of 4 owners in a DA40. We have the plane leased to a flight school to help offset the cost of ownership. That obviously comes with some trade-offs, the main ones being wear and tear as well as putting more time on the Hobbs. As owners, we are charged by the school at a rate of $103/hour wet. My concern is, if we did not have it at the school, we may pay more or less and are not really getting the advantage that comes with having it at the school.

I would love to get a sense of what you charge yourself to operate your plane/hour.

[CFIDave]

In my experience most aircraft owners flying recreationally really don't want to know how much it costs per hour to operate their plane (or especially bother to set up some type of personal charge back system) -- they just pay the bills as they come due. Being able to own and operate your own plane: priceless.

However you can build a very detailed cost model with multiple components:

- Cost of acquisition (e.g., loan payments, or cost of capital for down payment or if you paid cash)

- Depreciation (decrease in market value of the aircraft each year, based on age and total hours flown)

- Fixed (annual or monthly) costs of operation (e.g., hangar/tie-down, insurance, database subscriptions, annual inspections, XM satellite weather subscription, personal property taxes, etc.)

- Variable (hourly) costs of operation (e.g., fuel, oil changes, hourly engine reserve based on TBO/TBR, 100 hour inspections if on leaseback with a flight school, etc.)

- Tax savings (assumes business use, or leaseback with a flight school)

And of course a calculation of hourly cost is very heavily influenced by the number of hours you fly per year: the more you fly, the cheaper the hourly cost.

[carym]

Dave has given a very thorough list of the factors that should go into such a calculation. Exclusive of the cost of acquisition and depreciation, I found that flying approximately 100 hours/year in my DA42 the cost was about $350/hr. Depreciation, alone, would have added another $250/hr to that cost Please, don't tell my wife what it cost us to have that plane for 9 years

[Rick]

Here's how I look at it (to keep myself from going crazy!) Once you own the airplane, all the acquisition costs, the depreciation, and the fixed costs - these are all out of your hands now, and that money is going (or gone) even if you never fly another hour. So let's ignore all of that for a moment!

Every hour you fly costs you fuel, oil, tire wear, and engine reserve - and possibly some additional maintenance (if you are on 100-hour inspections, it's obvious - if you're doing annuals, it's more fuzzy...). In my case, I figure it costs me about $60/hr to fly my 2007 DA40. I'm not sure if that's the sort of number you're looking for or not, but I like that number a lot more than any of the other numbers I can come up with that account for the fixed costs!

[CFIDave]

OK, like Rick only looking at the variable costs of operating our DA42-VI including engine reserves for a pair of Austro engines, 100 hour service/oil changes, and 13 gal/hour for JetA: $91/hour.

With such a reasonable marginal cost per hour of flying, I don't worry about taking the plane out for "$100 hamburger" runs on nice days. Not many twin owners can say that.

[carym]

For my 1.7 engines I had to add in the costs of clutch and gear replacements every 300 hours and using about 1 qt oil/engine/8 hours did increase the variable costs a bit more than Dave's $91/hr (without engine reserve). But that does seem about right. It is the $500/month hangar fee, $5000/yr annual, $4000/yr insurance, $600/yr XM weather/radio subscription, $150/yr jeppsen monthly updates, etc that really adds to the cost. This doesn't include the things that break and need repair (like $1500/ECU). It's a good thing that I never think about these other costs

[shorton]

I have my 2007 DA40 as part of a flight school fleet. I keep detailed accounting records. Based on 18+ months of ownership and more than 1000 hobbs hours with the school, my direct operating costs (fuel and historical mx) are $74/hobbs hour. This does not include a reserve for engine or prop (probably another $15/hour for both). This also does not include the cost of upgrades I did that were not absolutely necessary (new interior and stripes). Of course the cost of fuel at your airport and any negotiated fuel discount passed on to you by the school will alter the cost per hour. I think Rick's $60/hour estimate for a non-flight school aircraft sounds about right.

What you pay the school for your use depends on many variables. Many flight school aircraft owners pay FMV rental for the purpose of avoiding sales tax on the purchase price. Instead they pay sales tax on the rentals received. This strategy requires that every hour of use is paid for at a fair market rate.

Other owners pay nothing to the flight school for their personal use and the cost of fuel and other services provided by the school (including their marketing or management fee) are deducted from the rentals received from third parties before a check is passed to the owner (or an invoice if a deficit).

It is important to note that in the typical scenario the difference between the two scenarios above (paying the school FMV vs. paying the school nothing) yields the same result. Whatever you pay the school should flow back to you less expenses you are responsible for.

In your unique situation where there are 4 co-owners it makes sense to pay the school something per hour and use the school accountant as the "administrator" of the co-ownership. In a co-ownership there has to be a payment per flight hour by each owner to a central account to cover at least the direct operating costs. So, your payment to the school makes sense for this purpose. The exact amount depends on the services the school provides and the terms of your co-ownership agreement. I guess the real question is, what does $103/hour cover and how much 3rd party revenue is received to offset some of your expenses.

[rwtucker]

CFIDave and Scott have laid out all of the issues in developing a complete model but I have one question. Isn't what the flight school pays your four-person partnership per-hour a required number in figuring this out incrementally? Then, wouldn't gross receipts per year (or whatever) be required to refine the incremental costs? Based on your single $103 number, I don't see any way to come up with an answer. Also, other details such as who is flying under whose insurance would be important.

[Steve]

I don't charge myself for flight hours...


...but my wife makes me pay...

Steve

[Erik]

In my experience most aircraft owners flying recreationally really don't want to know how much it costs per hour to operate their plane (or especially bother to set up some type of personal charge back system) -- they just pay the bills as they come due. Being able to own and operate your own plane: priceless.

That is exactly my philosophy. If I actually accurately tracked how much I am spending I might become intimidated and reduce the amount I fly. Instead paying bills and flying are almost disconnected. I just fly when either I have somewhere to go, or I feel like it because the sky is blue, or its been long enough that I feel guilty and the engine needs to be run, or the pilot (me) needs practice. I feel guilty for not flying. If I tracked cost carefully I bet I would feel guilty when I do fly.