This year’s Operations Planning Guide covers turbine-powered, in-production aircraft. For out-of-production aircraft data contact AirPower Software Group. Aircraft operating costs are presented in a format that separates information into six areas: direct costs, fixed costs, variable costs, annual cockpit subscription services costs, annual cabin services costs and annual trip support costs.
Aircraft Category Aircraft are grouped into six categories reflecting similarity of aircraft size, mission and operations. Category 1 aircraft are turboprops weighing less than 12,500 lb. and very-light jets weighing less than 10,000 lb.; Category 2, multiengine turboprops weighing 12,500 lb. or more and light jets weighing 10,000 to 19,999 lbs.; Category 3, jets weighing 20,000 to 29,999 lb.; Category 4, jets weighing 30,000 to 40,999 lb.; Category 5, jets weighing 41,000 lb. and up; and Category 6, ultra-long-range jets with NBAA IFR ranges above 6,000 nm. Certain data are common to all aircraft in a category for purposes of calculating mission cost by listed range, including airframe systems parts and labor, engine reserves, APU reserves, and propeller reserves for turboprop aircraft. Fixed Costs, Annual Cockpit Subscription Services Costs, Annual Cabin Services Costs and Annual Trip Support Costs are provided for reference only and are not included in the Direct Cost figure for each of the mission ranges.
Direct Costs Direct Costs are calculated based on the business aircraft missions shown in BCA’s 2021 Purchase Planning Handbook. Three missions are shown for each aircraft: 300 nm, 600 nm and 1,000 nm. Ultra-long-range aircraft (Category 6) missions are 1,000 nm, 3,000 nm and 6,000 nm. The fuel expense for each mission is based on the fuel burn figure for the mission, provided by the OEM, and calculated under conditions shown in the Handbook. Missions are calculated utilizing the manufacturer’s recommended cruise setting; therefore, cruise settings may vary from aircraft to aircraft, i.e., max cruise versus long range. Where the aircraft cannot cover the mission distance with an 800-lb. (four-passenger) payload, BCA shows a reduction in payload or a reduction in mission length at the editor’s option. Direct Costs include a bundling of mission fuel consumed from the Purchase Planning Handbook, maintenance labor, parts and reserve costs from the Variable Costs section of this guide, apportioned to the actual flight time for the listed nm mission length. Fuel price used is based on a nationwide average price of $4.48 per gallon for Jet-A at press time. Fuel consumption calculations account for taxi, takeoff, climb, cruise, descent and landing for the applicable mission as appropriate for the aircraft category. (Note: Longer missions will lower average hourly fuel burns due to more time in cruise; conversely, shorter missions will increase average hourly fuel burn figures since proportionally more time is spent in the takeoff and climb phase rather than cruise.) Fixed Costs (Annual) This area of expense includes those costs that must be borne by a flight department irrespective of the level of aircraft utilization. The years 2020-21 have been transitional years, particularly for flight department salaries and due to the impact of the COVID-19 shutdown last year. Airline demand for qualified pilots is picking up as passenger loads return to pre-COVID-19 levels. Salary surveys published last year quickly become obsolete as the economy gains momentum. This year is shaping up as somewhat normalized as qualified crew demand and supply shifts toward hiring of qualified flight crew in the airline segment. Most corporate operators held on to their crews through the pandemic. In the next year to two years there is a potential for compensation adjustment including longer term incentives escalating to prevent migration to airlines. Salaries: Included are salaries for flight crew, cabin crew and director of maintenance where appropriate. We interviewed Sheryl Barden, CEO at Aviation Personnel International), for state of the industry insights with respect to aviation salaries and the current state of business aviation operations, curtailment and travel limitations. Barden’s overarching message is: “We are seeing a return of normal flight operations and hiring in business aviation, particularly in the aircraft management company sector. Fractional and charter operators are also in the hiring mode as their demand increased over the last 12-16 months.” However, airline retirements were accelerated in response to the pandemic, which resulted in a loss of a significant number of pilots who will have to be replaced earlier than planned as airline demand returns. Airline pilots are being called back from furlough, airlines are actively hiring, and the pilot shortage is again significant, says Barden. She also notes that “corporate flight department crew retention remains paramount as the economy opens up. Most organizations are returning to full flight operations domestically, yet global operations are far from pre-pandemic levels, and there is no clear vision as to when they will return to full potential. Once the global economy opens fully and companies are assured that they will not be caught in a quarantine overseas, international operations will resume normalized conditions. Salary adjustments for 2021 started the year flat but have resumed an upward trajectory in anticipation of having to make significant operational adjustments in the next year or two.” Flight department salary increases should be “in the range of a cost-of-living increase (2-3% range) this year,” she says. However, “many organizations are starting to plan for increases moving forward as pilot demand tightens. Overall, flight operations have been impacted and there is no ‘one-size-fits-all’ formula that can be applied to define current operations. Many flight departments are now dealing with crewmembers who choose to be non-vaccinated. However, new protocols are in place to ensure that business aviation can support the host organization safely and efficiently in a COVID-19 world/economy,” says Barden. She believes retention strategies including bonuses, restricted stock, work-life balance and general working conditions in flight departments, large or small, play key roles in mitigating personnel churn and attracting talent when needed. “Multiple-aircraft flight departments may consider employing pilots as first officers instead of opting to qualify all pilots as captains.” She also cautioned that maintenance professionals continue to be in short supply. Directors of maintenance play a crucial role and can have a direct impact on airframe resale value by ensuring a high degree of aircraft maintenance and repair status along with associated documentation, according to Barden.” In summary, variation across the industry relative to total compensation is substantial. Therefore, benefits are not a calculated factor in salary estimates that would ordinarily cover health care, retirement, bonuses, restricted stock and other benefits typical for a corporate flight department. Salary data are based on available insights from varied industry sources including Aviation Personnel International. Flight Crew Recurrent Training: Expenses shown are based on average transaction costs for representative aircraft models. Actual expenses can vary due to market capacity fluctuations, changes in training locations, and other factors such as training volume and length of commitment. The crew training landscape has changed significantly over the past 24 months with several acquisitions and new developments. FlightSafety International and Textron Aviation announced a joint venture to serve operators of the Cessna, Hawker and Beechcraft product lines. Simcom Aviation Training was acquired by Flexjet and Nextant parent company, Directional Aviation, which marked a major new entrant into the business aviation training space. Lastly, CAE purchased Bombardier’s business aircraft training unit. Additionally, there has been continued expansion of in-aircraft or hybrid training options (flight training device with in-aircraft training) for non-type-rated turboprop aircraft as well as several owner-flown jets. Insurance underwriters continue to expand the number of approved training providers for these platform types, and many operators are seeking training options that are closer to their base location, or that require less time away from it. Training costs remained effectively flat for current-production aircraft. Training expenses shown are based on average transaction costs for representative aircraft models. Actual expenses can vary due to market capacity fluctuations, changes in training locations, and other factors such as training volume and length of commitment. Cabin Crew Recurrent Training: These expenses are provided as budgetary planning numbers only. Maintenance Training: This estimated cost is per-technician and includes initial maintenance training on an aircraft model. Data reflected here were initially compiled by ARGUS. Hull and Liability Insurance: Aircraft hull and liability (and all aviation insurance in general) premiums remain in a “hardened” state since last year’s guide, particularly for single-pilot, owner-flown, high-asset-value aircraft. Market forces that continue to impact premiums include global catastrophic property/casualty loss events, aviation losses in the sector (aircraft hull and liability claims), cost of repairs and loss of underwriting facilities over the last 36 or so months, which has limited competition and reduced capacity. All these factors have made the smaller market space restrictive on high hull and liability limit aircraft along with continuing to drive tighter requirements on pilot qualifications. Hull and liability rates reflected in the guide are established based on key experience and type-specific training as noted below. Actual premiums can vary significantly from those noted in 2020 and beyond. Tom Hauge, national sales director at Wings Insurance), shared his insights for this year’s guide. “My job as an insurance broker is akin to that of a salesman. I work to position the buyer in the best possible light to the underwriter. The level of thoroughness and details on a particular risk achieved through interviews with my clients can directly correlate to the quality of the market results [quote]. Come prepared to give your broker all the information needed to put you in front of an underwriter.” Your broker will specifically ask about your:
Your broker will also dig into your use case for the aircraft including:
Hauge advises, “When you get down to the final step of selecting one insurance policy over another, choose the proper policy for broadness of coverage, liability limit needs, checkout or transition requirements, and, finally, pricing. Other considerations include: Do you plan to dry lease time in the aircraft to a third party? Does the policy cover this use? Can dry leasing be added to the policy, and if so, at what additional cost? What minimum experience requirements do your pilots need to have to be approved by the policy underwriting company or what might be the requirements/minimum experience threshold to add additional pilots? Do all your pilots hold these qualifications and experience, and if not, what will be required to have them approved by the insurance underwriting company?” Also, some insurers will now mandate simulator-based training for the pilots--some allow training to be completed in-aircraft--so this topic should be addressed with your broker when reviewing insurance quotes from various underwriting carriers.
These are just examples to consider, says Hauge. “When you review your policy choices, make sure all your missions/usage, pilots, etc. are covered. Without this knowledge, you could find yourself in an uncovered situation, responsible for a multitude of damages. With the right broker by your side, and the proper information, timing and knowledge about your policy, you can smoothly navigate the aviation insurance purchasing process and gain a policy that best fits your needs.” Insurance estimates are based on the aircraft being flown by professional, simulator-trained flight crews or well-qualified pilots with sufficient PIC time in type, particularly for the owner-flown, single-pilot class platforms. In other words, best-case scenario as opposed to minimum qualification scenarios. Hull Insurance per $100: This is the factor used as a multiplier to arrive at the total annual cost of hull insurance for a particular aircraft. It is derived from actual aviation insurers’ quotes. Insurance quotes can vary greatly depending upon whether the aircraft is covered under a fleet policy or a standalone policy. The first number reported is the estimated annual cost of hull insurance for a particular aircraft based on its BCA-equipped price as reported in the 2021 Purchase Planning Handbook. The cost is computed by multiplying the cost per $100 of hull insurance factor by the BCA-equipped aircraft price. The figure includes war risk coverage, which constitutes on average $0.03-0.05 per $100 of hull insurance. Liability Insurance per $M: This figure represents the total annual cost for liability insurance for an aircraft model. Aircraft in Categories 1 and 2 are assumed to carry $5 million in liability insurance; Category 3 aircraft carry $100 million; and Categories 4-6 carry $200 million to $500 million in liability insurance coverage depending on make and model. The annual cost is computed by multiplying the amount of liability coverage in millions by a per $M factor supplied by a leading provider of this type of insurance coverage. Hangar/Office: Expenses shown here are based on national average annual costs reported by flight departments in 2017 and escalated for 2021 based on the annual rate of expected inflation. The figures shown in each cost area are broken down by the six aircraft categories and will generally be the same for all aircraft included in the same category. This figure is an annual cost per aircraft and includes hangar and office rent, as well as additional facilities costs such as utilities, ground upkeep, snow removal, janitorial service and insurance (other than aircraft insurance). It is valid to multiply the figure by the number of aircraft in a fleet to arrive at a total flight department cost. Actual rental costs will vary widely from one geographical area to another. Variable Costs (Per Flight Hour) These expenses are directly related to operation of the aircraft and are represented as an hourly cost figure. Included are aircraft systems parts and labor expense, and engine, APU, avionics and propeller reserves expenses as appropriate. For in-production aircraft it is assumed the aircraft is covered by manufacturer’s warranty. Figures shown are based on aircraft OEM direct estimates with warranty effect incorporated unless otherwise noted. For OEMs that did not participate this year, an inflation escalation was added to the most current available data and noted in the remarks section. Labor expense is computed by multiplying the maintenance labor hours per flight hour ratio by the nationwide average service center hourly maintenance labor cost (Category 1: $115/hr.; Category 2: $115/hr.; Category 3: $120/hr.; Category 4: $126/hr.; Category 5: $135/hr.; Category 6: $135/hr.). Labor expenses for each category noted here were used in the preparation of in-production aircraft maintenance labor costs per flight hour. Airframe Systems Parts and Labor: This figure is a model-specific hourly expense with warranty considered. It should be noted that warranty periods and coverage vary from OEM to OEM and are not specifically defined in this description. Contact the OEM for policies related to new aircraft warranty and pre-owned aircraft within the warranty period for transfers related to the airframe, engines, APUs and avionics. The following descriptions define how maintenance man-hours and parts expense were calculated into mission costs: Maintenance Labor Hours per Flight Hour: An aircraft manufacturer-supplied ratio of maintenance man-hours per flight hour. The number reflects an average for the first five years of operation while under warranty, including scheduled maintenance and unscheduled maintenance events. Maintenance man-hours per flight hour are multiplied by the corresponding labor rate, by aircraft category, and incorporated into the airframe systems parts and labor variable cost figure line item. Parts Expense: This hourly expense is derived from model-specific manufacturer’s quotes and includes parts expense for airframe systems. In-production aircraft parts expense provided by the OEM have warranty taken into consideration. It should be noted that some warranty periods cover time frames less than five years but are not specifically called out in the guide. Airframe systems parts calculations assume unscheduled maintenance events would be covered by warranty and do not include reserves for engine or APU overhauls, hot sections, long-range maintenance events or propeller reserves. Those items are listed separately in the variable costs section. Avionics repair costs during the warranty period would also be covered by OEM warranty and therefore no reserve costs are shown for Category 1-6 aircraft. Regulatory mandates should be separately budgeted for when evaluating operating costs for each aircraft. Engine Reserves and APU Reserves (where applicable): These expenses are based on OEM input for in-production aircraft where provided. Engine and APU OEMs and third-party service providers offer programs designed to fix or cover an operator’s scheduled and unscheduled maintenance requirements on a per-hour, fee-paid basis. Engine and/or APU loaners may not be covered by these programs for unscheduled events resulting in significant out-of-service time for the aircraft. Consult policy terms and conditions or the service provider for specifics. Avionics Reserves: For in-production aircraft, avionics reserves for Categories 1-6 are assumed not to be applicable due to OEM warranty coverage during the first five years of operation following entry into service. Additionally, upgrades to cover regulatory mandates are not factored in hourly operating costs. Propeller Reserves (where applicable): These expenses are based on OEM input for in-production turboprop aircraft. Annual Cockpit Subscription Costs These expenses are related to cockpit navigation equipment database updates, safety services associated with flight planning, and other services associated with flight operations. These services are typically purchased through the OEM in the case of FMS and GPS navigation or ground proximity system databases, and service providers for data link, flight planning, charts and maps, and digital weather-related products. Information in this section is dependent on cockpit avionics configuration and pricing offered at the time of aircraft delivery, or as contracted with a cockpit services provider. Procurement of subscription services from a provider that offers training support on use of products as well as troubleshooting, system configurations on-wing and satellite communication link setup for service delivery where needed are highly desirable support elements. Typical subscription costs that vary depending on mission needs are reflected in this section. However, annual aircraft utilization and bundling of other services may reduce these expenses. Navigation and EGPWS/TAWS Databases: Annual subscription prices are derived from OEM data sources or estimated where OEMs do not publish publicly available pricing, and therefore should be viewed as directionally correct for budgetary planning purposes. Navigation database prices do not include optional bundled or enhanced feature pricing unless specifically noted. For example, navigation database, plus terrain, traffic or other charts and maps can be covered in a one-time renewal, or annual subscription price depending on the avionics manufacturer. The aircraft or database supplier should be consulted for price quotes. Expenses shown vary depending on cockpit avionics equipment configurations and are approximated averages for in-production aircraft. Annual Cabin Services Costs Cabin services costs assume the aircraft is optioned with appropriate equipment at time of delivery from the factory. AirPower Software provided budgetary planning numbers for Swift Broadband (SBB), Ka/Ku, SatTV and cabin/Iridium phone services. Estimated air-to-ground service costs are derived from published pricing where available. Cabin services except for air-to-ground and cabin/Iridium phone are applicable to aircraft Categories 4-6 due to suitable empennage and/or vertical stabilizer antenna/radome solutions and suitable space for installation. Cabin services costs for activation, on-wing field labor support, aircraft crew training expense or ongoing technical support associated with troubleshooting complex satellite communications equipment and networks are not included. Many service providers offer a continuum of support services and should be contacted directly for information related to ongoing support and service activation. Annual Trip Support Costs Annual trip support costs are similar for all aircraft in a particular category, reflecting comparable aircraft capabilities and mission utilization. Trip support costs include catering service, flight crew travel, international trip support, concierge, ground handling and landing/parking fees. For aircraft in Categories 5 and 6, 400 annual flight hour utilization rates were used to arrive at budgetary planning estimates. For Categories 1-4, 250 annual flight hour utilization rates were used. Mission durations vary substantially, which resulted in a change in the way these costs were calculated for the 2021 Operations Planning Guide. Many operators elect to use a service provider in the case of concierge and international trip support due to complexities associated with overflight and landing permitting and other logistical arrangements. International trip aupport and concierge were not factored in for aircraft in Categories 1-4 unless otherwise noted, or the aircraft had sufficient NBAA IFR range to justify a budgetary planning estimate. Operations Planning (Aircraft Acquisition) Selecting a new or replacement airplane can be a complex, daunting task, particularly for first-time buyers and those upgrading to a new platform. Acquisition planning involves a thorough operational needs review to ensure you purchase the right aircraft for your unique mission needs. We interviewed Michelle Wade, managing partner at Jetstream Aviation Law, to add perspective to the overall Operations Planning Guide. Due Diligence: Wade cautions, “The due diligence portion of an aircraft acquisition is critically important, even in a limited supply of readily available quality aircraft environment that we’re seeing today.” To ensure you receive the aircraft value for which you negotiated, do not limit the scope of your due diligence just to close the purchase. Confirm the physical condition and title to the aircraft are satisfactory and work with your team to ensure the aircraft you purchase will meet your needs. Team Planning: Wade shared some key advice: “Assemble a team of subject matter experts including technical, operations, tax, legal, staffing and general consulting expertise in addition to the owner’s in-house business team. Using a robust team to create a complete acquisition plan that considers mission needs, utilization plans, business goals, tax laws and FAA regulations can avoid future problems. Start your planning early, allowing sufficient time to research questions arising from unique business needs.” When asked for additional clarification, Wade advised: “Well-defined utilization information narrows the list of aircraft to consider, narrows the list of significant tax issues to address, and helps identify how FAA regulations will affect ownership and operation of new aircraft.” The answers to these questions will help clarify the intended utilization of the aircraft:
Tax Goals: Wade says this is an area where “particular attention needs to be paid. Missteps here can be costly. Defining tax goals is essential, including both federal and state tax factors. One significant decision in an owner’s federal tax planning includes whether to take a tax deduction for bonus depreciation. Bonus depreciation may allow the owner to deduct the entire purchase price on the owner’s tax return in the year of purchase; however, it is important to understand the impact of IRS bonus depreciation regulations on the planned flight operations.” Wade adds that “Significant flight hours for personal use, or business flights that also carry passengers traveling for non-business purposes, may negatively affect an anticipated bonus depreciation deduction. Planning with the entire team to address how to best satisfy tax goals and business goals while complying with FAA regulations can avoid unpleasant 11th-hour surprises. State sales and use tax, state property tax and the availability of any exemptions should be considered and will impact ownership planning and aircraft operations. Each aircraft owner has a unique business structure, unique tax goals and unique business goals. There is no “one-size-fits-all” tax plan when buying a new aircraft. Early discussion of the planned operations and desired tax benefits will allow the team to identify and address any potential conflicts between business plans, tax laws and the FAA regulations.” Financing: Wade states: “The process of identifying potential aviation lenders, obtaining quotes and selecting a lender should begin at least several months before funds are needed. It takes time to provide the required due diligence to the selected lender, obtain loan approval, review the loan documentation, and negotiate important business points into the loan documents while ensuring a smooth closing.” Home Base Logistics: Depending on where the aircraft will be based, this planning element is critical to ensure an expensive asset is not parked on the ramp, unprotected. Wade further advises that the aircraft acquisition team should also identify the resources needed to support the new aircraft.
Insurance premiums have increased as noted in the guide’s hull and liability insurance section, and the desired coverage limits must be balanced against insurance premium payments. Purchase Agreement: Wade says: “Once the desired aircraft is identified and basic business points of the acquisition negotiated, the parties will execute a sales agreement. For new aircraft, the manufacturer provides their standard sales agreement. Certain terms are not negotiable, but others can be revised to ensure a good delivery experience for everyone.
“Planning for the delivery when negotiating the purchase agreement can create an easier closing experience.” In summary, there are many other details to be planned and executed when purchasing a new aircraft. The use of a team of experts is essential to avoid delays and unexpected surprises during the planning and purchasing process. Working with such a team will significantly streamline your purchase and ensure the experience is a good one. Aircraft Bluebook Summary (Pre-owned Market) We discussed pre-owned aircraft market conditions with Chris Reynolds, valuations manager at Aircraft Bluebook. His assessment of the overall market environment was like other high-demand assets—hot summer deals. “As we move into the second half of 2021, the temperature keeps climbing outside and the pre-owned aircraft market looks to keep pace. There are no summer doldrums for buyers and sellers this year! While Aircraft Bluebook completes analysis for the upcoming fall edition, the data observed continues to show a robust pre-owned market with an inventory-smashing appetite. In fact, as many buyers have re-emerged from their pandemic-induced pauses, pre-owned inventory levels compared to a year ago are drastically lower and the bargain deals are scarce,” says Reynolds. “As the U.S. economic markets are resuming their pre-COVID-19 multi-year gains, confidence in the pre-owned markets has responded in kind. Quality aircraft are harder to find by the day and competition is absolutely helping to make a sellers’ market not seen in a while, reality.” Reynolds adds, “The substantial activity that Aircraft Bluebook has observed from the second quarter, despite challenging available inventory, is a positive sign for an industry where values in some markets fell 15-30% the previous year. Good aircraft are in such high demand that many transactions are happening off-market before they even make it to market, which again illustrates the need of buyers and the challenges of the pre-owned inventory levels. For the upcoming fall Aircraft Bluebook, the data observed indicates an overall stabilization in values and in many cases moderate increases in value. While these movements are in no small part supply side based, it is likely these conditions will persist through the second half of 2021.” In summary, Reynolds says, “Going forward it will be interesting to see if the OEMs get in on the frenzy and bolster their new delivery positions as the pre-owned market continues to tighten. There are still unknowns ahead as the country and world continue to deal with the COVID-19 fallout [logistics challenges and supply bottlenecks/component shortages, product scarcity] and possibilities of future lockdowns, potential changes to tax policies, inflation, etc. Demand as expected continues to be perpetuated by the U.S. market, which is not surprisingly also enjoying the strongest return of aircraft utilization year over year, which is no doubt a warm welcome to flight departments, FAR Part 135 operators and FBOs alike. For now, demand and values remain strong, and that combination is likely to remain through the second half of this year.” General Abbreviations and annotations are used throughout the tables. “NA” means not available or not applicable to a particular aircraft model. Single-pilot (SP) certified aircraft will not include a salary for the copilot in the guide tables and assumes the aircraft is owner flown unless otherwise noted due to insurance requirements or typical mission usage. “NP” signifies that the specific performance is not possible. “OC” means on condition. Footnote Cirrus Aircraft offers the JetStream program, an all-inclusive operating cost per flight hour product that includes recurrent training, all scheduled and unscheduled maintenance, all subscriptions and more. Variable costs, which are normally included in JetStream, are broken out only for the purposes of calculating direct costs for each of the predefined ranges.
About AirPower Software Group Our mission is to provide the aviation marketplace with data and information necessary to make informed buying decisions and manage risk. AirPower offers advisory services on-demand. Our product, Aircraft Budget Analyzer, is used to perform flight department budgetary planning, side-by-side aircraft operating cost and performance comparisons including charter and leasing strategies, and solutions to aid in the identification of business aircraft suitable for various mission needs. AirPower Software conducts research and data collection related to aircraft operating costs for both in- and out-of-production aircraft, primarily focused on fixed-wing, turbine-powered platforms, and a limited number of high-performance piston aircraft. For out-of-production aircraft data contact AirPower Software at Support@Airpowersgi.com, or go to AircraftBudgetAnalyzer.com to review PlaneFastFacts Aircraft Search feature.
