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Reducing Your Aviation Costs

by David Wyndham 1. November 2004 00:00
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It is nearing the end of the year, and for business and commercial operators, you know what that means! No, not updating your fantasy football team, it means budgeting for next year! While the overall economy is turning around and many companies are doing better financially, there is still a lot of pressure (and with good reason) to keep costs under control. Here are a few ideas.

First off, you can't control what you can't measure. How do you track your costs? We've worked with operators who only have a few categories of costs. They typically find it hard to manage their costs effectively with a few large-dollar categories. Those we've helped set up with more detailed accounts find it easier to manage and control their costs as they have the detail needed to understand their costs. Once you know where your dollars are flowing, then you can begin to examine ways to reduce those costs.

I'll hit the easy one first. Fuel. Even though when adjusted for inflation, fuel is still a relative bargain, it amounts to somewhere around half of your variable operating cost. Work with your FBO's to arrange for fuel discounts. If you don't ask for a discount, you won't get one! Shop around for prices and take advantage of fuel discount programs when they make sense for your operation. Even five cents per gallon savings will add up.

If you can get a good price at home, tankering fuel is an option. Be careful and do your home work. Carrying extra fuel increases your weight. At a higher weight, it takes longer to climb to your cruise altitude and requires higher fuel burns at altitude. Thus, your average fuel consumption will increase. As an example, tankering an extra 1,000 pounds of fuel in a mid-size business jet will consume about 250 pounds more fuel for a three-hour trip. Make sure the cost saved exceeds the cost of carrying the extra fuel.

Flying at reduced power settings and selecting fuel efficient altitudes will also reduce the amount of fuel consumed. Get out the old performance charts and run a few different calculations. You may find a reduced power setting adds only a few minutes per trip but consumes far less fuel.

Reduce the amount of deadhead, or unoccupied trips. Combine trips when able. This may mean opening up the business aircraft to more than just the top executives. If it doesn't affect your mission, the savings can be significant.

Maintenance is the other area where the aviation manager has the most influence. What is your maintenance concept? Is the aircraft maintenance done during the same work day as when the passengers need the aircraft? If the work week is Monday through Friday from 8 AM to 6 PM, is that when you also work on the aircraft? If you maintain the aircraft on the same schedule as when your passengers need to fly, you are wasting money! Your passengers don't stop traveling while the aircraft is in the shop. They charter or fly the airlines. If you maintain the aircraft during the hours when it is not needed to fly (like nights and weekends), then availability is increased and you spend less money on outside travel.

What sort of maintenance plan is the aircraft on? Many aircraft have progressive maintenance plans available. Rather than putting the aircraft into maintenance for a 120 labor-hour inspection every six months, that same inspection is broken into fifteen 8-hour blocks and accomplished during that same six month period. Do this on nights and weekends when the aircraft is not needed for flight. You are increasing availability thus enabling more hours to be flown without increasing the fleet or using outside transportation resources. Progressive maintenance isn't for everyone, but unless the aircraft is on the road for weeks at a time, it may be worth evaluating.

Evaluate how you do your repairs and overhauls. Using loaner parts while yours are repaired may be less costly than exchanging for new. As you get your own part returned, you'll know the history of that part.

Inventory management. We had one client who had hundreds of thousands of dollars in spare parts for an aircraft they no longer owned! Even at fifty cents on the dollar in liquidation, that was a lot of extra cash lying around doing nothing. As a rule, inventory will cost 15% to 25% of its value in carrying costs - storage, insurance, loss, etc. How much inventory do you really need for your aircraft? What are your most frequently replaced parts? How good is the manufacturer's AOG dispatch? Careful management of your inventory can save thousands.

Also speaking of spare parts, what about warranty? On a new aircraft, we all keep very careful track of what repairs are in warranty. But even older aircraft have many new parts installed. Those parts typically carry some sort of warranty. Tracking their ages/hours/cycles can result in savings should they need replacement.

Replace your aircraft with a newer one. OK, I know we are talking of saving money so how can getting a new aircraft save money? If the newer aircraft requires a lot less time in maintenance than your current one, then you (a) save in maintenance costs and (b) get increased utilization due to increased availability. We did a study for a fleet operator and we showed that replacing their five old aircraft with three new ones not only gave them MORE availability and more capability, it cost less to do so. This can be a tough sell, so you'd better have your reliability and availability data together, plus do your homework on costs before even bringing it up.

Notice I haven't mentioned cutting salaries or reducing staffing. This should be done as a last resort (just short of closing the doors) and requires a lot more space and time than this short article allows. Your staffing should be matched to your mission and provided the mission doesn't change, the staffing shouldn't.

Saving money requires a team effort. The flight crew, maintenance, staff and yes, management, must all agree on the benefits and must all share the responsibility. It is best to be proactive and have a plan. Communicate your objectives with your team and monitor your costs along the way. Effectively managing your aviation costs can have a big benefit – job security!

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David Wyndham


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