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National Flight Simulator
On the other hand, if the owner self- funded their engine maintenance and invested the $150 per hour at 5 percent annual rate of return, they would have amassed $388,000 (before taxes), less any engine maintenance that would have been incurred. At 2,000 hours, when the hot section inspection was due, the owner would have a $100,000 expense. Assuming $20,000 in unscheduled maintenance, not including periodic service, they would have amassed $268,000 in their reserve.
Continuing to the next phase in the en- gine’s life, overhaul, assume the same 10 years and the reserve balance of $268,000. At 4,000 hours and 20 years of total engine life, their reserve balance would $829,000 with the same investment assumptions and before taxes. After they pay for the overhaul cost of $500,000 and $30,000 in non-covered repairs they are still ahead by $299,000. Who says you can’t make money flying airplanes?
So, you ask the question what hap- pens if the operator flies 400 hours per year? The time value of the self-funded investment is compressed, however, the monthly payment doubles. The self-fund- ed owner would have accrued $340,000 and netted $220,000 after HSI and mis- cellaneous expenses after five years of operation. At overhaul, they would have accrued $622,000. After paying for the overhaul, and another $30,000 in main-
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the owner would be left with $92,000. The next question is: What is the value proposition for engine programs when selling, or purchasing, a used jet aircraft? It is impossible to cover all potential purchase combinations, so I’ll present one that is common and can give you ideas on how it might impact your sale
or purchase.
Purchasing a Used Jet
You are now in the market for a pre- owned turbine. You are looking at jets with 1,000 hours on the engines. You are now presented with multiple available aircraft, some on engine programs while others are not. The question is how much do engine programs affect the value of these similar airplanes?
In purchasing the used jet with an existing (and assumable) engine service contract, the new owner would be taking advantage of equity accrued for mainte- nance. With HSI at 2,000 hours, the new
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tenance outside of the scheduled events,
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March 2019