Airplane ownership

For you newly-minted pilots who have asked me, “should I buy an airplane?” I offer a quick rule of thumb, based on my ten years in general aviation, four years of ownership, and MBA: No.

Okay, now that we’ve gotten that formality out of the way, here is some insight into the costs of acquisition and ownership, so you can make the inevitable decision.

You have no doubt heard the fairytale that you should consider ownership if you fly more than 100 hours a year because airplanes are an investment. It’s true that my airplane outperformed 11 of my 12 stocks, but if you look at the numbers closely, you’ll notice that buying postage stamps or stuffing the money into a mattress for those four years would have beaten everything.

An airplane is a bad investment. When you’re not busy shoveling money into a hole, you’ll be pouring 100LL on top of the pile to burn the stack down so you can shovel in more money.
Really. I’m just trying to be up front with you because your spouse/parents/children are going to see right through any logic you concoct, and your whole justification will fall through.

My inevitable rationalization of airplane ownership was predicted in a review I wrote over four years ago regarding Aviation Consumer’s Used Aircraft Guide citing the general pattern of ownership denial:

[…]The eighth edition cleans up some of the looser ends of its predecessors and the presentations are more orthogonal. Most major single and twin piston engine aircraft are covered and the format is a tech sheet showing the aircraft — useful load, fuel, speed, basic dimensions and schematic profile — followed by a summary of the model’s history, quirks and foibles. Most models include pricing and all have at least a few owner stories.
[skipping ahead a bit]
Detracting from the usefulness of reviews is the fact that most owners eventually rationalize their decision to own a particular model. I know this will happen to me soon 🙂 The owner comments, on a macro level, tend to look favorably on any given model. You could almost templatize them as this:

I’ve owned my FrogMeister 172 for several years.It’s been a good plane and will carry a decent load over an acceptable distance for a modest amount of fuel. When I bought the plane, it had some problems, but because I take very good care of it, it’s fine now.I would recommend FrogMeister owners join the FrogMeister Appreciation Club for the latest information on modifications. The FAC has been very helpful in finding a mechanic who really knows the nuances and quirks of the FrogMeister. Were I to purchase again, I wouldn’t hesitate to buy a FrogMeister. However, I can’t overemphasize the importance of an adequate pre-flight inspection.

If you’ve narrowed down prospective ownership to a couple of models, you would be better off buying the appropriate back-issues of Aviation Consumer and joining the type club for more specifics. (For example, I know the Cessna Pilot’s Association publishes buyers guides for the 182 and 210.)

If, instead, you’re interested in a general overview of lots of general aviation planes, then this is a fine book for that purpose.

The costs of ownership can be put into four dump trucksbuckets: capital, known fixed, predicted variable, “unplanned variable.”

Capital expenses are what you pay to play. Airplanes vary in cost because of sex appeal (market demand), availability (market supply), time since overhaul, condition (total time, wear & tear, age), quality of documentation (log books – this is a highly regulated endeavor), previous damage history, avionics.

1. Sex appeal

—
Most pilots do their training in either a Cessna 152/172 or, more recently, a Diamond Katana. As trainers, these planes undergo a lot of abuse and represent the low end of the performance scale, but because of familiarity with the brand, prospective owners often look at the next tier. Thus, models such as the Cessna 182 command a premium. To be fair, I’ve flown the C182 and love it, but for the same money, you can get a Grumman Tiger or Piper Arrow and equip it very well, and use a lot less fuel. At the higher end of the scale are Mooneys (known for their speed) and Beech Bonanzas (known for comfort). Surprisingly, very few general aviation planes have cool nose art.

1. Time since overhaul

— the biggest expense of ongoing ownership is the engine. And also the avionics, interior, exterior, propellor, fuselage, annual inspection, — ha ha. Aircraft engines have to be overhauled when they fail the annual inspection, you land with the wheels up, or the minor repairs (like a $1,200 grommet) become annoying enough to impede your use. Before I sold my share of the airplane, we reached this point and did the engine overhaul. I found that the overhaul also involved repeatedly saying “while we have it apart, we might as well preemptively fix …” We ended up way over budget.

1. Condition

— refers to the exterior (paint) and interior (seats, trim). A bogosity of airplane ads is they’ll rate airplane exterior and interior on a 10 point scale. You’ll never find anything rated below a “6.” This is the reality scale:

10	– nice
9	– some blemishes
8	– average
7	– replace soon
6	– “has character” (to borrow the Realtor-speak.) (Sorry, Lynda)

To some extent, the terror level system is the same way. We’ll never see Cookie Monster or Oscar.

1. Quality of log books, previous damage history

– I lump these together because they’re intertwined. Aviation is highly regulated. Anytime maintenance is performed or parts are replaced, that has to be documented. If something is permanently added or removed, the weight and balance for the entire aircraft has to be redone. Log books provide an audit trail on the airplane’s lifespan. If they don’t, you should assume the owner is hiding something. When you look at logbooks, you should have a feel for how the aircraft has been treated and maintained. Most used airplanes are over 25 years old. Imagine if you had a similar diary for your car or home!

When I page through log books, I look for recurring things or any radical changes in maintenance. For example, if a plane has 100 hour inspections and frequent brake repairs, it’s probably served as a rental. (This, in my opinion, is bad. Think of student drivers learning to drive a stick shift.) If you see recurring work on the engine, this would be a concern you’d better factor into your purchase price. If you see an entry repairing the bottom, that could be a gear-up landing: pay extra special attention to the prop and engine as the owner may be trying to sneak one by.Many ads will claim a plane has “no damage history.” This is much like saying a car is “always garaged” or telling your SO “I’m not looking at that cute girl’s butt,” e.g., a lie. The reality is a mechanical device of 25+ years (average age of a GA plane) of use is going to have some kind of ding or part failing. For example, my plane had a landing gear collapse on taxi back in 1997. It was a freak occurrence and, in the grand scheme of the universe, a relatively small repair. A form was filed with the FAA, it was documented in the log books, and then nothing else related to that occured. Something broke, it was fixed, and fixed well.

1. Avionics

are how you get from here to there in style. The include radios, gages, navigation devices and the intercom. The longer, more sophisticated flying in crappy weather you do, the better avionics you’ll want to have.Most buyers look for a plane that’s “IFR certified.” This is a very squishy term that varies on location. For example, the theoretical minimum would be an airplane with an encoding transponder and an NDB. On the other extreme, I’ve seen Piper Cherokee 140s with StormScopes, HSI, and three-axis auto-pilot. For the non-airplane owners reading this far, that’s like putting a $25,000 stereo system in a Chevy Geo.

Upgrades are something you do special assessments for when you want (and agree to) them, but they technically fall under capital expenses. For example, the two of us who wash the plane were getting tired of having to scrub oil off the underside. (A lot of this oil comes from a certain member who insists on topping off the engine at 8 quarts instead of 7. At altitude, the engine just spits out the oil until it’s down to 7, then it stops. Keith would know this if he got off his lazy ass and washed the plane. (Oops, didn’t know the microphone was on. (ahem)) For $520, we installed an oil separator that will put the oil back in the engine and, we believe, keep the bottom clean.Suffice to say, you can get really fancy on the upgrades: HSI, slaved autopilot, second moving map GPS.

Fixed expenses cover things that are relatively predictable:

• Insurance — the corporation insures all the owners for liability purposes. You really should set up a corporation as the owner, since it becomes easier to swap people in and out without having to pay “use tax” each time.
• Tie-down — a place to put the plane when we’re done flying. Hangars are not readily available in the closer airports, and are obscenely expensive if they are.
• Annual registration — much like your auto registration, paid to the state. (And yes, we had to pay an 8.8% “use tax” when we bought the plane.)
• Customs sticker — because we like to bring the plane back from Canada
• IFR updates for the GPS
• Annual inspection

Pilots reading this may be surprised by the last one, however in practice, the annual is relatively constistent. (An “annual inspection” is required by the FAA and ensures the plane meets airworthiness standards. It typically involves removing all the access panels and peeking inside, jacking the plane up to make sure the landing gear retracts, looking for cracks, and changing the oil. With an older plane, you can assume about $1,000 of miscellaneous stuff that wore out or needed replacing. After the second annual you just shrug it off.Variable expenses attempt to anticipate future repairs so the airplane is kept up and assign it based on usage. For example, our airplane engine is rated for 1,800 hours before needing an overhaul. (Like other illustrative physics problems with frictionless planes or spherical cows, we’ll assume that the engine doesn’t break down before then.) If the engine overhaul costs $36,000, then you simply divide the 1,800 hours into $36,000 and come up with $20/hour that gets tucked into a fund for the future overhaul.
There are similar allotments for avionics, oil changes, oil usage, hardware (e.g., glass, tires, brakes), the exterior paint, and interior refurbishment.

Because we don’t have sufficient historical insight, we ended up estimating, and doing so poorly. It’s like owning a home — except no one plans for a new roof ten years in advance. (To be more precise, when you need a roof for your house, you often refinance and take advantage of the equity in your home. With an airplane, there is no equity.)
Another totally annoying aspect is we have to pay sales tax on the variable portion, then pay sales tax again when we buy anything for the plane.

Unplanned variable expenses are all over the map. For example, while on the ground at Gold Beach, OR, a gust of wind caught the door and snapped the little limiter doohickey that keeps it from opening 180 degrees. The mechanic fixed it for $100 (most of which is his time). You can’t really do anything about that small stuff and just absorb it as it comes. Larger stuff is scarier, though. For example, when we bought the plane, we had a lot of problems with the original issue avionics. We hoped we didn’t have to do that again.