I have a quick question on maintenance. Obviously, the first three categories of aircraft are included in your maintenance fees, however, when the fourth category is leased/purchased and used, a 15% increase occurs in maintenance costs. Here is the question, is this spread over all categories, or specifically the fourth.
For instance, let's pretend maintenance on all my aircraft cost $100. With the 15% increase, would my maintenance costs look like::::
Example 1:
Category 1 = $100
Category 2 = $100
Category 3 = $100
Category 4 = $115
OR
Example 2:
Category 1 = $115
Category 2 = $115
Category 3 = $115
Category 4 = $115
I know it seems a little elementary (the question) but after scouring the boards and even having several semi-succesful airlines, I've never really had a concrete answer to this question.
Thats why I try to avoid having more than 3 categories in one airline under all circumstances. And keep in mind: The older the planes, the grater the impact on total maint. costs expressed in absolute numbers!
Thats why I try to avoid having more than 3 categories in one airline under all circumstances. And keep in mind: The older the planes, the grater the impact on total maint. costs expressed in absolute numbers!
Well, that depends on your margin.
For me maintenance makes 3,33% of my total expenditures. So a raise of 15% (if I had a 4th category) would basically increase the maintenance share of my expenditures from 3,33% to 3,8%. No big deal if your margin isn't so insanely low that this would already drive you into the red.
Oh, and since the age of your fleet and your maintenance contractor play a role in this matter too, I wouldn't generally say a 4th or even 5th and 6th category are to be avoided at all costs.
Following your example, with each category costing $100, the right way to calculate it is:
3 categories: total maintenance $300
4 categories: total maintenance $460 (total cost of categories plus 15%)
5 categories: total maintenance $661,25 (total cost of 5 categories plus 32,25%, which is 15% plus 15%)
6 categories: total maintenance $912,53 (total cost of 6 categories plus 52,0875% which is 15% plus 15% plus 15%)
and so on...
I don't think this is correct in the terms that plane's actual maintenance cost (as displayed on bank account) is a sum of 3 or more categories and surcharges.
Let's assume JFK-ORD, a new (0~5 years old) Boeing 737-700 BGW would cost you in maintenance, per flight:
AS$ 1583 with Default maintenance provider, while having 3 maintenance categories.
Let's assume JFK-ORD, a new (0~5 years old) Boeing 737-700 BGW would cost you in maintenance, per flight:
AS$ 1583 with Default maintenance provider, while having 3 maintenance categories.
Having 4 maintenance categories it would cost
AS$ 1820 in maintenance per flight
Having 5 maintenance categories it would cost
AS$ 2057 in maintenance per flight
With your numbers, the maintenance cost would be:
AS$ 1583 per flight on three categories
AS$ 2427 per flight on four categories
AS$ 3490 per flight on five categories
which is not correct
No, with my numbers: $1583 with 3 categories, $1820,45 with 4 categories, $2093,5175 with 5 categories.
In my post above I was speaking of TOTAL maintenance cost, that is the weekly cost. Per flight cost is just adding 15% for each new maintenance category to the base cost
So you see, often another type is 20k/week cheaper to lease than a similar other airplane you already operate,
as a result often it makes sense to add new types provided you operate them in a reasonable number !
I think the ‘reasonable number’ is a key aspect for deciding whether you go with another maintenance category. Basically if the savings of the targeted number of aircraft in this new category are higher than the additional over all maintenance cost, then it might make sense.
While considering this, one should keep future growth in mind (and its impact on probably more mainstream categories). So if you double your total fleet, you would have to grow additional categories within a reasonable ratio, Further, new categories add complexity (i.e. you have to manage another aircraft type including its configuration).
From my point of view, running a niche / local market business it’s really worth to accept a higher number of categories. Running a global airline, more than three or probably four categories are less profitable, as you won’t be able to lever the advantages of another category. Further, with a growing network, outsourcing the 4th category to another airline is far more cost effective.