Welcome to GlobalAir.com | 888-236-4309    Please Register or Login
Aviation Articles
Home Aircraft For Sale  | Aviation Directory  |  Airport Resource  |   Blog  | My Flight Department
Aviation Articles

Measuring the Cost of Operating an Aircraft

by David Wyndham 1. June 2008 00:00
Share on Facebook

Fuel accounts for about 70% of the hourly operating costs of a turbine aircraft. Sounds plausible, but what are the hourly operating costs? Maintenance? Hangar? Insurance? It depends on how you measure the costs. What you need for your own operation is different from others' needs, but I hope the below gives you some "fuel" for thought.

Measuring costs involves knowing how they behave. Then you can allocate costs to appropriate categories. This will help in understanding and thus, controlling costs. Cost behavior is typically referred to as either "variable" or "fixed."

Variable Costs

A variable cost will vary in proportion to the level of activity. As activity increases, the total cost will increase but the cost per unit will remain constant. An example of this can be fuel. An increase in utilization will have a corresponding increase in fuel consumed. However, the cost per unit (gallon of fuel) will not be affected by a change in utilization. Here is a list of some variable costs:

  • Engine - Overhaul
  • Fuel
  • Landing & Parking Fees
  • Maintenance - Component Overhauls
  • Maintenance - Labor
  • Maintenance - Parts
  • Propellers - Overhaul

Fixed Costs

A fixed cost as the name implies, remains essentially constant for a given period or level of activity. Hangar and insurance are fixed costs. Whether I fly today or not, I need to pay my hangar and insurance costs. Here is a list of some fixed costs:

  • Aircraft Lease or Loan Payments (or Interest)
  • Aircraft Modernization/Upgrades
  • Aircraft Property Tax, Registration or User Fees
  • Computerized Maintenance Tracking
  • Hangar Rent/Lease
  • Insurance
  • Navigation Chart Service
  • Recurrent Training

Your situation will dictate what cost categories you need. If you are interested in seeing a general set up of aviation cost accounts, e-mail me and I'll forward one example to you. Once you collect and understand these costs, then maybe my statement above makes more sense.

Comparing Costs

When comparing costs between different aircraft, there's even more work to do. Let's compare a twin turboprop and a light jet. Keeping life easy, assume both operators collected and allocated their costs in the same way. The turboprop has a total cost (variable and fixed) of $1,350 per hour and the light jet operator reports $1,950 per hour. There you have it; the jet costs $600 per hour more! What's missing?

Cost per Nautical Mile. Neither operator simply files their aircraft around for an hour or two and then lands. They are used to transport persons from one location to another, and back again. The aircraft's job isn't to fly hours, it's to fly miles. When you compare costs, you need to look at what the job is. Aircraft costs should be compared using at least a cost per mile basis.

If the above turboprop averages 250 nautical miles each hour, its total cost per mile is $5.40. If the light jet averages 370 nautical miles each hour, its total cost per mile is $5.27 per mile. A 475 NM trip in the turboprop will cost $2,565. The same trip in the light jet is $2,503, $62 less. So while the light jet has a higher cost per hour, it is really 2.4% less costly per mile, or per trip compared to the turboprop. Some aircraft take longer than others to do the job, so even if they are less costly per hour; the cost to do the job may be wind up being more. If you were hauling passengers, you might even look at cost per passenger-mile. Cargo haulers use cost per ton-mile. Helicopters may use cost per trip on short trips, or cost per "lift" on heli-lift operations.

So when comparing aircraft costs, remember, not only do you need to know what the costs include and exclude, and when those costs occurred, don't forget the last step is to compare cost per mile, i.e. the cost to get the job done. Otherwise, you end up with incomplete or inaccurate information. If you don't understand that, you can end up making decisions based on the wrong set of information.

Document for Download:
Benchmarking Cost Categories - Corporate Aviation


GlobalAir.com on Twitter