Michael – go on and bamboozle and advise your customers that an engine overhaul adds value all you want. There is zero difference between singles and twins in this regard. You drag up a fluke anomaly example at some flying school to prove your point? Ask normal users if anyone got the total cost of the overhaul and installation back. You won’t find it. Single or twin don’t matter.
There are two ways of looking at this.
I would prefer to buy a given plane with a shagged engine. Discounting the purchase price by the cost of the OH means I end up with a known quantity up front, rather than an OH done by the cheapest of several quotes, which is what most sellers will do when they are selling the plane soon.
But I doubt many people will see it that way. Most would prefer a freshly OHd engine, regardless of who did the work.
But I doubt many people will see it that way. Most would prefer a freshly OHd engine, regardless of who did the work.
They do, but they don’t pay for it. If you have a C172 worth 60K, do a 40K overhaul (which is what it’ll cost when everything is said and done), you can’t turn around and sell it for $100K. You’re lucky to get $70-80K for it, but most likely nothing for your troubles.
€120,000 in annual operating dry leases for a five to ten year 172S is brilliant, even if you sell them for scrap after ten years, you probably have cleared €400-500k in after tax net present value on a €50k to €100k equity lease investment.
Michael how can we get in on this?
Michael wrote:
Go tell that to my client with his late model 172S on lease-back doing 50 hours and generating 10,000€ (dry) a month .
Where, please, do you find clients who pay EUR 200 dry/hour for a 172 ???
And yes, I’m in !!AdamFrisch wrote:
Bottom line is this – only way to not lose money on planes (except for buying a PC12) is to buy a plane with run out engines and keep flying it forever, never overhaul. It will not depreciate. All other ways will lose you money.
Hmm, not sure about that. Particularly in Europe someone might eventually call that game and make you overhaul as the Swis do right now if an engine is over 24 years old. Or the engine will eventually give up and then you are you are standing there with an unairworthy airplane. Those do sell for peanuts if at all, so called “Projects”. I know a Seneca II in great condition and useable avionics which is sitting on the ground for 3 years already with two run out engines because nobody wants to pay for that. Last price I saw was 25k for the airframe with the avionics. And no, the engines can no longer be run on condition as they are genuinely not airworthy.
I think the best way to keep depreciation in check is to buy an airplane which has basically reached rock bottom of it´s hull value. A Mooney/Arrow or similar with some half or 3/4 timed engines for 30-40k Euros is about there, good half time Senecas go for about 50k Euros these days. Always assuming a good prebuy inspection you can´t really go very wrong with airplanes like that because even the most shagged out trainers sell for not much less.
Mooney – yes, where some CAA’s mandate overhaul at TBO or 12 years, your hand is of course forced. But they normally say if an engine’s at 80% of it’s TBO, it’s considered a runout from a value purpose. And I think you can ask for a 20% extension as well, right? So in that bracket, is probably where you’ll find the plane that depreciates the least, if that’s the goal. So for a C152 with a 2400hr TBO, that would be from 1920hrs to 2880hrs. A considerable time for a 50-100hr/year owner.
Europe: again massive can of worms.
EASA has mandated ELA1 for planes of < 1200 kg which declares TBO what it really is, a full recommendation without any legal binding. You can therefore declare your engine on condition and run it to the point where certain parameters are no longer met. Same goes for props. It also turns over the responsibility for the maintenance program of your plane over to the owner.
However, some CAA’s feel that they will not stand for this, the Swiss CAA has recently in all practice abolished “on conditon” at all. Any engine older than 12 years has to have cylinders pulled regularly for inspection of the crankshaft and they will mandate an overhaul after 24 years no matter what. Also some exponents have stated that they will NOT honour ELA 1 nor ELA2 and continue to mandate full maintenance programs also for private ops.
I understand that it will probably take a lawsuit to stop this, up to the European courts, but nobody is willing to do that. Instead, people simply submit or leave aviation. I will not submit, once my engine reaches 12 years, if this is still there, then I will either sell off and leave or move to a different registry.
Also some exponents have stated that they will NOT honour ELA 1 nor ELA2 and continue to mandate full maintenance programs also for private ops.
Which ones? Where is their official statement about that?
boscomantico wrote:
Which ones? Where is their official statement about that?
They would not be so stupid as to write this out so that it can be legally attacked, it is their actions which amount to this. Switzerland certainly has no wish to relinquish control over the maintenance programs and has, via these, given the owners the restrictions on the engine and prop TBO’s and declaring SB’s compulsory e.t.c. I can put you in touch with the guy who was fighting this fight with the Swiss CAA if you wish. He however has now stopped for the moment as his engine suffered a sudden stoppage and will be overhauled anyway. I did ask my rep however what I need to change with my IHP after ELA1 comes in force and was told “Nothing, we carry on as before” which is not according to ELA1. ELA1 will be put in formal use in February and we need to wait what their final word will be (which may change with the new director) but that is the status quo. I understood from people who try to fight this here that there are similar problems in other states.
It would not exactly be new for national CAA’s dragging their feet or outright refusing such things until they are forced? P&F has written about the German CAA’s failures more than once, CB IR, other things, which needed to be fought.
I am also told that the Swiss AOPA and Aeroclub are standing by to take the issue up with EASA once ELA 1 is de jure implemented, if the restrictions they impose do not get lifted. Right now, everyone who bothers to ask is told they will stay.
