All Aviation Articles By David Wyndham

Time to Make A Budget

Do you remember the Dunkin Donuts commercial “Time To Make The Donuts” from way back in 1983? The donut maker gets woken up early in the morning so he can make today's donuts. With two months left in the year, grab a box of Joe and some donuts, because its time to make the budget!

 

It is important to state that budgeting is a very important tool for planning an organization’s use of its most limited resource - cash. Managing the cash is critical for any business, or individual. Here are a couple tips.

 

A budget is an estimate of the future showing the peaks and valleys of cash flow.  A budget can also serve as a benchmark for evaluating actual versus planned for expenses.  Every organization must budget whether it goes through a formal or an informal process. Like any tool, used correctly it can be an asset in managing your aviation cash rather than a once and done exercise.

 

The budget should be more than just filling a square for your upper management reporting. It is a very useful tool that can enable you to track the effectiveness of your aviation operation. It can also alert you to the future peaks in expenses, such as scheduled major maintenance or an aircraft upgrade. Planning for your maintenance may take the most time in your budget preparation.

 

As part of your budgeting process, I’d like to offer three tips to help you get started.

 

Tip 1. Ask for Information. This information flows two ways. Ask upper management about their intended aircraft usage for the next year, or ideally, several years. Will there be more or less flying, any new destinations, etc. If you are budgeting any optional maintenance items or upgrades, ask if next year or the year after works better for the financial goals of the company. 

 

If you have a plan in place for the eventual replacement of the aircraft, that part of the budgeting process may well run out several years. Due to your company’s finances, they may wish to accelerate, or delay the aircraft replacement. 

 

Tip 2. Document Your Assumptions. Your budget is a best-estimate of the future costs for your aviation operation. There will be changes as you go through the year.  By documenting your assumptions, it will refresh your memory when the actual costs do not equal what was predicted. If and when conditions change, these recorded assumptions will better guide you on revising the budget better than relying on your memory.

 

Tip 3. Explain the Cyclical Nature of Maintenance Costs. These costs can occur in significant amounts (engine overhaul) and be unpredictable (unscheduled maintenance). These two behaviors of maintenance costs are often difficult for a non-aviation person understand. Financial professionals favor stable, predictable cash flows. 

 

You may not be able to change the behavior of your maintenance costs, but you can explain how the C-Check expense took 2,400 hours over six years to accrue. Remember, most non-aviation people have automobile maintenance as their reference point. Let them in on the issues well before they occur. Budgeting a 175% increase in maintenance for next year may never go over well, but communication is key.

 

As a bonus tip, try to visit with the person that you submit your budget to. Try to understand how your aviation budget fits in with the overall corporate budget. Help them to also understand the process that you went through to come up with the budget. As questions and ask for advice. By letting senior management know that you take the budget seriously, you will let them know that you have the organization’s best interests at heart. 

 

Budgeting is important to the health of your organization. However, to be truly useful, all parties involved need to understand the process. Best of luck to you!


Do You Know What You Don't Know?

Within aviation, there are a lot of specific disciplines with highly specialized knowledge: pilot, A&P Mechanic, scheduler/dispatcher, medical examiner, air traffic controller. All these folks have significant education and depth of knowledge within their specialties. But, if you take us outside our area of specialization, it is amazing how much we don't know. 

 

How does a zipper work?

 

While we all use them quite successfully, do you understand the mechanics of it?  It is the same with buzz words and jargon. We may use them regularly, but when you dig into it, we me not all have the same understanding. 

 

"NextGen" may make sense to many as it describes our future airspace navigation and control. But when you ask what getting ready for NextGen really means, we differ in our depth of knowledge.

Psychologists call this the illusion of explanatory depth. We think we know what we know, but we really don't have the depth of knowledge that leads to understanding. This can lead to difficulties when recommending and evaluating aircraft.

 

The pilot is quite skilled at looking at the performance parameters of the various aircraft. What is the range and payload that we need to carry? Can this aircraft handle icing conditions? How much runway do we need?

 

The A&P can go into depth about a progressive maintenance schedule and how it might impact your flight schedule. What sort of tooling does the aircraft require? What do you need to stock for spares? 

 

The scheduler/dispatcher will have a good understanding of what the executives like and don’t like, Will the 6 foot 3 inch CEO will feel claustrophobic in a small jet? Which infrequent traveler still expects to carry a steamer trunk full of clothes on an overnight trip?

 

Now add in the senior executives, legal and tax folks. How do we acquire the aircraft? What about taxes, depreciation, maintaining trade-in value, leases, management agreements...

 

In the case for business aircraft, there isn't room enough to go into every instance of how we in aviation misunderstand the Senior Executives and them, us. But, when communicating about the aircraft, its capabilities, and costs, we need to have an understanding of the fact that we may not have all the information about the business to understand why they make the decision that they do. And they don't understand the aircraft as much as we might believe. So we need to do our best to explore the gaps in knowledge and be open to new concepts. Do not assume just because the CEO had an aircraft at their former company that they understand crew rest, maximum range, and sales and use taxes on the plane.

To properly go through the acquisition of an aircraft will require folks with many disciplines. And it would help if you have at lease one person on the team who knows what they (and others) don’t know. 

 

When we are working with a client regarding their options for an aircraft, or with the aviation department in their justification for a replacement of the current aircraft, it helps to understand not only their measurable requirements such as payload, trip length, etc. but to also understand their culture and depth of knowledge about business aviation.

Oh, how does a zipper work?


Time to make the Budget!

Unfortunately, many of us see budgeting as a fruitless exercise and a waste of time. But, budgeting is a very important tool for planning an organizations use of its most limited resource - cash. Managing the cash is critical for any business, or individual. (Please, no replies about governments!) Failure to plan for the incoming and outgoing cash has ruined many a business. And it can negatively impact your flight department.

 

A budget is just estimate of the future showing the peaks and valleys of cash flow.  A budget can also serve as a benchmark for evaluating actual versus planned for expenses.  Every organization must budget whether it goes through a formal or an informal process.

 

As an aviation manager, the budget is more than just filling a square for your upper management reporting. It is a very useful tool that can enable you to track the effectiveness of your aviation operation. It can also alert you to the future peaks in expenses, such as scheduled major maintenance or an aircraft upgrade.In fact, for an aviation operation, maintenance is one of the largest expenses, and one in which the aviation organization can have the most control.

 

As part of your budgeting process, I’d like to offer three tips to help you get started.

 

Tip 1. Ask for Information. This information flows two ways. Ask upper management about their intended aircraft usage for the next year, or ideally, several years. Will there be more or less flying, any new destinations, etc. If you are budgeting any optional maintenance items or upgrades, ask if next year or the year after works better for the financial goals of the company. 

 

Tip 2. Document Your Assumptions. Things are different in January than they were the previous September and they will be changes as you go through the year.  Your budget is a best-estimate of the future costs for your aviation operation. As flight activity occurs, are you ahead or behind in the hours flown? How will that change when major maintenance is due? Did you correctly anticipate the magnitude of parts price increases, fuel costs, training costs, etc?

 

By documenting your assumptions, it will refresh your memory when the actual costs do not equal what was predicted. If and when conditions change, these recorded assumptions will better guide you on revising the budget better than relying on your memory.

 

Tip 3. Explain the Nature of Maintenance Costs. These costs can occur in significant amounts (engine overhaul) and be unpredictable (unscheduled maintenance). These are often difficult for a financial manager or CFO to understand. These folks tend to favor stable, predictable cash flows - hence the popularity of a guaranteed maintenance program. You may not be bale to change the behavior of your maintenance costs, but you can explain how the engine overhaul expense took 2,500 hours over five years to accrue. Remember, most non-aviation people have automobile maintenance as their reference point.

 

As a bonus tip, try to visit with the person that you submit your budget to. Try to understand how your aviation budget fits in with the overall corporate budget. Help them to also understand the process that you went through to come up with the budget. 

 

Budgeting is important to the health of your organization. However, to be truly useful, all parties involved need to understand the process. Best of luck to you!

 

Keep Those Older Business Jets Flying

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!

Real World Impact on Aircraft Performance

Falcon 900EX Easy

The aircraft OEMs and sellers always seem to haver a war of words going on over “maximums.” Who has the fasted aircraft, the most range, the biggest cabin, the most headroom, etc?  When evaluating aircraft, you need to take the maximums into account, but critical is understanding the real world limits on those maximums.

Aircraft performance maximums can be very useful in comparing aircraft. Especially if you know the conditions they were assuming for the calculation. But be wary of translating the maximum to the "real world." This is especially true of range. Too many buyers get an aircraft that they believe can do the trip nonstop only to discover that "nonstop" has restrictions. They get quite upset when they end up with a fuel stop en route.

As pilots, we know and understand these restrictions, but many of the folks in the back fail to understand these, until after the sale. Better to educate them upfront than be accused of backpedaling after the fact.

The first thing that impacts the real world range is winds. In the Northern Hemisphere, prevailing headwinds run on a West-to-East pattern. So trips from Europe to the US have headwinds while trips from California to New York have tailwinds. Those winds vary seasonally and by altitude. 

Boeing publishes wind probability data for many of the common air routes in the US and worldwide. A common wind data point is the 85% Probable Wind. That means that the wind on that route will be no worse than that value 85% of the time. Here in the US, flying from the East Coast to the West Coast can have an 85% probable headwind of around 70 knots at 39,000 feet. So flying east to west, you should have 70 knots or less headwind 85% of the time for example.

Hawker 900XP


Last winter on an airline trip, we hit 135 knots on the nose for much of the Baltimore to Phoenix trip. Not sure, but think that was a 99.9% “Probable” wind leg. No aircraft can do the trip 100% of the time, but make sure the maximum range is suitable for your typical maximum trips. Here is a conservative shortcut that gets the job done.

When looking for that non-stop airplane, you factor in those probable winds as a reduction in cruise speed. If the route is 2,100 Nautical Miles (NM), that is across the ground. Headwinds effectively increase that required distance. If the aircraft cruises at 430 knots in a 70 knot headwind, its ground speed will only be 360 knots. Fly into this headwind for five hours and your trip has effectively increased by 350 miles - almost an hours' flight time. Looking at this another way, to fly that 2,100 NM trip in a 70 knot headwind requires an aircraft with about 2,450 NM range (with no wind).

Other things that reduce the fuel efficiency and thus maximum range of the aircraft:

  • Payload - heavier aircraft burn more fuel at a given speed and may require a lower initial cruise altitude until they burn off enough fuel to reach a higher, more fuel-efficient altitude. How many bags does the boss bring?
  • Temperature - on very warm days the aircraft may take longer to climb to altitude, or even require a lower initial altitude. Temperature may also effect engine-out departure restrictions.
  • Circuitous air routes - while airways routes typically add no more than about 3% to the straight-line distance, some routes may add more due to airspace restrictions or transoceanic routings.
  • Long, over-water trips may require alternate airports that are a significant distance away from your destination. This will reduce the available fuel load for the trip.
  • Poor weather over a large area may mean a circuitous route and may also require an alternate airport a significant distance away.


Factor in headwinds, heavy passenger loads, and a warm day and that 2,100 NM trip may not be non-stop anymore. So if you are looking for 2,100 NM nonstop trip with high-probability, you may be looking for an aircraft that has 2,600 NM range with your anticipated payload. In this case, a 2,600 NM maximum range is a valid requirement. 3,000 NM range is nice, but 2,600 NM will do the trip 99% of the time.

When evaluating aircraft, the maximum ranges, maximum speeds, payload capability, etc. can all be important considerations. But when you are looking at specific trips, you need to factor in some real world considerations appropriate for your trip conditions.

 

Gulfstream G450

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