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Use Caution When Comparing Aircraft Costs

by David Wyndham 1. March 2013 13:44
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When comparing aircraft costs, understand what costs are included, what costs aren’t, and how the costs are calculated. If you don’t take all three into account, you can end up with cost data, that although technically correct when viewed alone, is an invalid comparison.

Let’s take an easy one. Fuel How much do you spend on fuel? We did this for a benchmark client, asking what their cost per gallon was for fuel at home and on the road, as well as their annual fuel budget. Seemed straightforward until I started looking at the results. At home, several operators reported fuel costs of less than $2.50 per gallon. This was when then national average was over $5 per gallon. I was able to follow up with the operators and I found out two things:

1. These operators had their own fuel farms.

2. The cost of fuel to them was the wholesale cost when the truck pumped the fuel into their storage tanks.

These operators correctly and accurately reported that their fuel cost at home was less than $2.50 per gallon. The cost of the installing and maintaining the fuel tank and operating their fuel truck, as well as the taxes and fees were all excluded from their cost of fuel. Those costs were in the cost of the hangar and grounds throwing that benchmark off as well. So my intent was to arrive at the “Total cost of fuel inclusive of every cost of every item needed to get the fuel into the aircraft tank.” But without a lengthly definition and explanation, how is an operator to know exactly what I need?

When comparing costs, you need to be clear and consistent in what costs are included and how those costs are calculated.

Another area where costs can be reported in disparate ways is maintenance. “What is your cost of maintenance?” is such an open, and loaded question. Do you get your aircraft maintained at a service center? Do you have in-house maintenance staff? Do you have inventory and how/where does that cost get recorded? Did you record the costs as an accrual or as they occurred?

As an example, take a major airframe inspection due every six years on a large business jet. The cost of that inspection is $240,000. As an answer to “what is your cost of maintenance?”, it could be:

1. $240,000 this year as the inspection was done this year ($600 per hour if flew 400 hours)

2. $40,000 per year accrual for six years (or $100 per hour is flying 400 hours each year)

While in our costing we look at the $100 per hour as the cost of the above inspection, neither accounting is incorrect. When comparing costs, we stress using an accrual method. This way the cost of something is allocated over the time it took to accrue that cost.

If budgeting, then you need to look at the timing of the cost. Comparing costs by looking at a budget can be helpful as it shows not only what the costs are expected to be, but when they are likely to occur. If you are evaluating the acquisition of a used aircraft, when the major airframe inspection is next due can be important. So while Both Aircraft A and Aircraft B can have a similar budget, Aircraft B may face that major inspection sooner than Aircraft A. This information is good to know.

Comparing aircraft costs should be done using a fair and consistent method. The timing of major costs should also be considered. While no one method is the best method, the comparison should be done on an “apples-to-apples” basis and then relative differences are what adds meaning to the comparison.

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Aviation Fuel | David Wyndham | Maintenance

Never Run It Dry

by GlobalAir.com 3. August 2012 11:25
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Keeping track of the time/speed/distance equation is only part of fuel management
By Bill Cox
www.planeandpilotmag.com



It was the Christmas holiday, and I was on my way back from the Bahamas to Venice, Fla. Joe Ponte of Piper had graciously loaned me a Cherokee Six 300 in conjunction with a pilot report, and I had elected to take my mom and stepfather on a quick, four-day trek to Freeport and Nassau.

On the trip back, we made a stop in Fort Lauderdale to clear customs, turn in our survival gear and close our international flight plan, then relaunched for the short hop diagonally across the state to Venice on the Gulf Coast.
My parents were luxuriating in the back of the big Six as we cruised 6,500 feet above the swamp when the engine suddenly quit cold.

The immediate silence got everyone's attention, especially mine. I was the number-one son, and mom trusted me implicitly in any airplane. I didn't want to dispel that trust by doing something stupid, though it seemed I already had.

Of course, I had let one of the Cherokee Six's four tanks run dry, and the engine had shut down in a heartbeat, without a telltale tick of the fuel flow or any other forewarning. As calmly as I could, I turned on the fuel pump, then, feigning a casual motion, reached down and switched to a tank with some fuel in it. I turned to Mom and Bob in the back seat, summoned what I hoped would be a reassuring smile and said, "Sorry about that. It's no big problem. I just ran a tank dry. The engine will pick up in a few seconds."

I turned back forward, expecting power to return at any moment. I waited and waited. Nothing happened. We were gliding down toward Lake Okeechobee, and I was beginning to wonder if we were about to discover firsthand that the lake was only five feet deep as I had read.

Finally, after perhaps 20 seconds that seemed more like 20 minutes, I heard some expectant coughs from the Lycoming before it came slowly back online. We continued to Venice, and Mom's only comment after we landed was, "Does that happen often?"

Fortunately, if you're smart enough to plan ahead, it need never happen even once. I obviously wasn't and didn't, so it did

Fuel Management
The AOPA Air Safety Foundation reports that fuel exhaustion or mismanagement are all-too-common causes of accidents, generally fourth behind landing accidents, takeoff incidents and maneuvering flight at low altitude. Fuel exhaustion is exactly what it sounds like—running the tanks dry. Fuel mismanagement relates to landing with fuel still on board but inaccessible because of a system problem, because the pilot didn't know he had it available or simply forgot to change tanks.

Fuel management isn't really that tough these days, considering that totalizers keep almost perfect track of fuel burned and remaining. Even modern aircraft fuel gauges are more reliable than they used to be. In fact, managing fuel use was never that difficult to begin with, provided you knew how much you had on board, how much you were burning and when you departed. Assuming there were no leaks, the answer was a simple problem in elementary math. The difficulties arise when you don't know all three of the items above. Trouble is, many pilots are convinced they do know how much fuel is in the tanks when, in fact, they have only a vague idea.

Let's consider fuel capacity. According to the book, I can carry 64 gallons in my Mooney…or can I? I bought my airplane in 1987 and knew it had never been wrecked, so it was reasonable to assume the tanks were not deformed and still in the original shape. Fortunately, I had my Mooney's tanks resealed a few years ago, so I had the perfect opportunity to determine true capacity. Every ounce of fuel had to be drained in order to reseal the tanks, and that meant I was starting from true empty.

Accordingly, I pushed the airplane out to a level ramp, with no apparent list left or right. It was mid-morning, and the temperature was about 60 degrees F, pretty close to standard, so fuel density wasn't a concern. (Some long-distance flyers, in search of maximum range, have their fuel supercooled and pumped aboard at the last possible minute, then climb quickly to high altitude and burn the top off each tank before the avgas can expand and overflow.)

When the fuel truck arrived, I asked the fueler to pump the 100LL slowly so there would be less chance of an air bubble. While he pumped, I shook the wing at the tip to help any air escape. Then, I watched carefully to make certain the level came to the exact bottom of the filler neck.

When the fueler was done, the meter suggested I had taken aboard 33.1 gallons in the left tank and 33.4 gallons in the right, a total of 66.5 gallons, 2.5 more than maximum. According to Mooney, that's all usable, so I could assume that figure for flight planning. I don't. I use the standard 64-gallon capacity instead.

A deformed tank can be more common than you might imagine, and any deformation will almost always rob you of fuel capacity. After a friend with a Comanche 260 died of a heart attack many years ago, his widow asked me to maintain his airplane for her, taking it out for a walk every two months or so. She swore she'd never sell it, as it had been her late husband's beloved toy. Finally, reality intervened, and she asked me to sell it for her.

To read the remainder of this article: CLICK HERE

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GlobalAir.com

Keep Those Older Business Jets Flying

by David Wyndham 31. July 2012 10:26
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EAA AirVenture 2012 has just wrapped up. If you were fortunate to have gone this year (sorry to say I was not), and I asked if you saw any antique airplanes, you might mention seeing a Waco, a DC3 or Ford Tri-Motor. But what about a Learjet 35A, Citation II or Hawker 700? Early serial numbers of these venerable business jets are well into their golden years as they all were in production during the late 1970s. These and many other business jets are well past age 30.

In our aircraft cost databases, we assume that all the business aircraft are maintained more or less the same way with new parts replacing old, worn out parts. As many operators of long-out-of-production aircraft are finding out, this is not the most cost effective way to keep these aircraft flying.

First off, availability of new parts for older aircraft is becoming harder to find. Some non-OEM vendors are no longer in business, or they have been acquired and merged into different entities. They do not keep production lines open year round or may only build spares as needed.

Overhauling of serviceable components is also getting harder to accomplish. Sure, you can overhaul a generator multiple times, but what about the holes for the mounting bolts? Over time, you can only use "oversize" bolts so often before the component case is no longer serviceable.

To say that avionics have evolved since the mode 1970s is an understatement! Many of these older aircraft use what we euphemistically call steam gages. And relative to today’s technology, that statement is not too far off. Repairing these older instruments is becoming more costly, as are replacements. Glass cockpit upgrades are available, but at what cost?

Perhaps the toughest choices come with the engines. The first and second-generation business jet engines are all into their second, third or fourth overhaul cycle. Guaranteed engine maintenance program rates reflect this with rates much higher than current generation engines. The cost to overhaul a pair of these engines can run to more than the cost of the aircraft itself. Even with fresh engines, a 35-year old business jet will not double in selling price.

Look at the very popular Citation II. According to the Aircraft Bluebook Price Digest (Summer 2012), the selling price of a 1978 Citation II is $650,000. The basic overhaul price is about $350,000 per engine. Add in some cycle-limited items like rotor disks and impellers and the price jumps to over $500,000 – each!

Overhaul a pair of run-out engines on your 35-year old business jet and you will be lucky to get 50% back if you sell it. There are just too many of theses aircraft available for sale and at very low prices.

I have talked with more than one operator of aircraft like these who will not, and cannot, pay for an engine overhaul. Instead they look for a similar model year aircraft with engines in good condition with maybe 1,500 hours remaining until overhaul. They buy the second airplane, swap engines and part the rest out. This recycling method is more cost effective for many of these older business jets.

I doubt values on these “vintage” jets will ever recover. So it looks like we will see a steady dwindling of whole aircraft as we see two aircraft make one flyable aircraft and so on. Keeping these older business jets flying is becoming more of an exercise of scrounging and cannibalizing versus one of replacing/overhauling.

Maintaining older aircraft in this manner requires time, and decreases the aircraft availability. You need to have two or three aircraft to keep one in flyable condition! It can be done, but it is better suited to a flier that can live with low utilization and decreased availability. So enjoy these aircraft now, because it won't be to many more years at Oshkosh before a Learjet 35 is parked next to the Staggerwing!

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David Wyndham | Maintenance

Sierra Industries receives Mexican government DGAC approval for aircraft inspections, service and modifications

by GlobalAir.com 23. April 2012 09:40
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UVALDE, TX – April 20, 2012 – Joining a select group of approved aircraft service centers in the United States, Sierra Industries has been certified by the Mexican government aviation agency to service Mexican-registered aircraft. The Dirección General de Aeronáutica Civil (DGAC) presented certificate no. CO-038/12 to Sierra Industries representatives on April 4, permitting the company to inspect, repair and modify a wide variety of aircraft from piston singles to cabin-class business jets.

In May, the Mexican government is expected to issue a ruling restricting maintenance services for Mexican-registered aircraft to facilities located within Mexico, with the exception of a limited number of DGAC-certified facilities outside the country’s borders. Located some 50 miles from the Mexico-Texas border and less than 250 miles from Monterrey, Sierra’s Uvalde facility is ideally positioned to allow convenient access to Mexican-based aircraft.

Enjoying nearly 30 years of aircraft service and modification experience, Sierra Industries’ location at Uvalde’s Garner Field Airport offers true “one-stop shop” capabilities including PMA parts manufacturing. in-house avionics support and on-field paint and interior specialists. Numerous Sierra employees are bilingual in Spanish and English, helping to facilitate communications with south-of-the-border aircraft owners and operators.

A number of Mexican-registered aircraft already enjoy one or more of Sierra’s well-known Citation performance modifications, such as FJ44 re-engining and Eagle/Longwing airframe upgrades. The DGAC certification ensures that those owners can continue to utilize Sierra’s expert service for their upgraded aircraft and new modification clients can count on after-the-sale support without undue regulatory restrictions.

For more information, please contact me at your convenience.

   Jim Gerrish
   Manager of Creative Marketing
   Sierra Industries, Ltd.
   830-278-4481 ext. 226

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Maintenance | News | Press Release

Complying With A Manufacturer's "Current" Maintenance Instructions

by Greg Reigel 3. May 2011 12:11
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If you own or operate a large airplane (over 12,500 MTOW and to which FAR Part 125 is not applicable), turbojet multiengine airplanes, turbopropeller-powered multiengine airplanes, or turbine-powered rotorcraft, you know that FAR § 91.409(f) requires you to have an FAA approved maintenance/inspection program in place for your aircraft. One option for complying with this requirement is to use a "current inspection program recommended by the manufacturer." In the past, that option had been interpreted to mean that, when a manufacturer updates its maintenance instructions, the aircraft operator is obliged to comply with the new instructions.

That interpretation was questioned when the FAA's Aircraft Maintenance Division requested a legal interpretation from the FAA's Office of Chief Counsel regarding the meaning and application of FAR § 91.409(f)(3). The specific issue that the Chief Counsel was asked to address was: "Whether, if a manufacturer amends its maintenance/inspection instructions, an affected aircraft operator is obliged to comply with the new instructions in order to be in compliance with § 91.409(f)(3)."

The FAA Chief Counsel issued a December 5, 2008 Legal Interpretation addressing this issue. It concluded that an operator is not required to comply with either "current"/"new" maintenance instructions or a "current"/"new" inspection program.

The FAA's Perspective

The Legal Interpretation initially observed that a similar issue had previously been raised, but not answered, regarding whether FAR § 91.9(a), required an operator to comply with a change to an operating limitation in an airplane flight manual if the change had not been made through the notice and comment procedures of 5 U.S.C. 500 et. seq., the Administrative Procedures Act ("APA").  It then concluded that an operator was not obligated to comply for the same reason that an operator is not required to comply with "current", or subsequently issued, changes to maintenance manuals or inspection programs.

According to the Legal Interpretation, "[i]f 'current' in § 91.409(f)(3) and similarly worded regulations could be read to mean an ongoing obligation, manufacturers unilaterally could impose regulatory burdens on individuals through changes to their inspection programs or maintenance manuals. In essence, they would be making rules that members of the public affected by the change would have to follow." However, the FAA does not have the authority to delegate its ability to make rules. Additionally, allowing a manufacturer to issue rules in the form of maintenance instructions or inspection programs, without public notice and comment, would be contrary to the APA.

As a result, the Legal Interpretation concluded that "to comply with § 91.409(f)(3) an operator need only adopt a manufacturer's inspection program that is 'current' as of the time he adopts it, and that program remains 'current' unless the FAA mandates revisions to it." For example, revisions would be required if the FAA issued an applicable airworthiness directive or amended the operating rules applicable to the operator.

Finally, the Legal Interpretation noted that, although not required, operators could, and typically do, incorporate subsequent changes issued by manufacturers. It also suggested that the FAA should initiate a rulemaking change to clarify the meaning of § 91.409(f)(3), and associated regulations, to remove the ambiguity associated with the term "current".

The Litigation Perspective

This Legal Interpretation clarifies that FAR § 91.409(f)(3) does not require compliance with subsequently issued changes to maintenance manuals or inspection programs, absent an airworthiness directive or other regulatory requirement. Thus, from a regulatory perspective, compliance is not mandatory. Yet, simply because the FARs do not specifically require an operator to comply with subsequently issued changes to maintenance manuals or inspection programs, does this mean an aircraft owner or operator can ignore these changes?

We know now that an FAR Part 91 aircraft operator will not invoke the wrath of the FAA if the operator does not comply with subsequently issued changes to maintenance manuals or inspection programs (unless, of course, an airworthiness directive or other regulatory requirement mandates compliance). However, before "current" changes are ignored or rejected, compliance must also be evaluated from a tort perspective in order to accurately assess the risks of non-compliance.

Under tort law, and specifically the law of negligence, we all have a duty to use reasonable care. The standard of care is established by determining what a reasonable person would do under a set of given circumstances. In recent years, plaintiffs in aircraft crash cases have been using subsequently issued changes to maintenance manuals or inspection programs to establish the standard of care with respect to aircraft ownership, operation and maintenance.

Specifically, in a post-aircraft accident scenario, plaintiffs’ experts will scour the aircraft’s logbooks in an attempt to identify subsequently issued changes with which the aircraft owner, operator, or maintenance provider has not complied. They then try and argue a causal connection between that lack of compliance and the aircraft accident.

At trial, the plaintiffs argue that the manufacturer issues the changes because it believes compliance will make the aircraft or its components safer and that compliance with the "current" change's recommendations, issued by the manufacturer who should know best, establishes the duty owed by the aircraft owner, operator or maintenance provider. They will direct attention to the “mandatory” nature of the issued changes, so designated by the manufacturer. Plaintiffs will also argue that deferred or rejected compliance improperly placed financial savings over safety.

In response, the defense will argue that the aircraft is still safe without compliance with the changes, pointing out that the changes are not issued by the agency responsible for safety and certification of aircraft and aircraft components. After all, unless the FAA has issued an airworthiness directive based upon the manufacturer's changes or otherwise mandated compliance under some other operating rule; the FAA apparently does not deem the manufacturer’s recommendations to be necessary or mandatory to protect the public’s interest in aviation safety. So why should the aircraft owner, operator, or maintenance provider comply when the FAA doesn't think it is necessary or mandatory? And why should the owner or operator spend additional money for parts or maintenance that may or may not actually make the aircraft safer?

All of these arguments are made to, and allowed by, the courts, in spite of the fact that compliance with the subsequently issued changes is not mandated by FAR § 91.409(f)(3). Additionally, juries have heard evidence regarding the absence of compliance and returned verdicts in favor of plaintiffs based upon that evidence. The higher standard of care argued in the tort context has yet to be pre-empted by the regulatory standard of care established by the FARs.

What Should You Do?

So how should an aircraft owner or operator deal with subsequently issued changes to maintenance instructions or an inspection program? First, you will need to be aware of applicable changes to the manufacturer's maintenance instructions or inspection program and to discuss the information with the aircraft owner and/or operator. This means making sure that you are aware of all applicable changes issued by the manufacturer.

Next, you need to specifically identify, in writing, the maintenance instructions or inspection program that have been adopted for your aircraft: Is it current as of the date the aircraft's type certificate was issued or is it current as of some later date? Unfortunately, the Legal Interpretation doesn't provide any guidance in this regard. This is necessary to later prove the version of instructions or program with which you complied.

Conclusion

The Legal Interpretation appears to raise more questions than it answers. And, unfortunately, these questions will only be answered by further legal interpretations or by changes to the regulations. In the meantime, you need to be aware of the regulatory requirements of compliance, to the extent that it is possible given the existing confusion. You will also need to understand the costs and benefits of compliance from a tort perspective. Only then can you make an informed decision as to how the regulations apply and what you should do with "current" maintenance instructions.

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Greg Reigel





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