Aircraft Ownership: Your Aircraft Variable Costs

Costs
Getty/Chris Ryan

Definition:

Variable costs, like fixed costs, are important to determine before buying or operating an airplane. But unlike fixed costs — financing, insurance, hangar rental, etc. —  variable costs can be a bit harder to determine. Determining both fixed and variable costs ahead of time is essential for aircraft owners, and for determining your potential budget as a potential aircraft owner, so let's dive in and see what variable costs consist of.

Variable costs are defined as costs that go up or down with the usage of the airplane. As the aircraft usage hours increase, for example, the variable cost will increase, too, while the cost per unit stays the same. For example, the more an airplane flies, the higher the total fuel cost will be. Therefore, fuel is a variable cost.

 

Examples:

Common examples of variable costs include:

  • Fuel
  • Oil
  • Landing Fees
  • Catering
  • Crew Expenses, such as travel, hotel and per diem when on trips
  • Crew salaries, if paid per flight hour. (When crew members are paid hourly, the cost incurred is a variable cost. Many crew members are paid an annual salary, in which case the cost is considered a fixed cost.)
  • Maintenance – most organizations consider all maintenance costs as variable costs. Some, however, consider certain aspects of aircraft maintenance as fixed costs. Annual inspections, for example, are typically scheduled and must be completed whether the airplane flies ten hours or 1,000 hours per year, which leads some operators to consider this type of maintenance a fixed cost. The same can be true of scheduled overhauls and avionics updates. These costs can be considered fixed costs since they don’t necessarily change with aircraft usage. Usually, though, regular or unscheduled maintenance costs are variable due to the fixed cost per unit (the hourly rate a maintenance facility might charge), but the variable usage rate. The more an airplane flies, the more maintenance hours will be required to maintain it. 

     

    It's important to note that the more hours you fly an airplane, the less you'll be paying per hour for your variable costs. There's another variable to measure, too, and that's the cost per nautical mile. A jet, for example, will have a much higher cost per hour than a piston aircraft, but it can also deliver you much farther in far fewer hours, so you'll spend fewer hours in the air for the same trip.

     

    If you're in the market for a new airplane, it would be wise to talk to current owners of the same aircraft to get an idea of their planned costs, actual costs, and usage. In addition, an aviation consultant company like Conklin & de Decker can help, as can aircraft owner industry groups such as AOPA or EAA.