Business Plan

[tradford]

Clueless newbie here looking for some feedback -

 

I've visited a couple of helicopter lease sites and I see that R22s and 44s can be leased for really cheap prices compared to what one pays at a helicopter school / service. I've completed my logbook requirements for a check ride, so I'll soon be faced with the current hourly rental rates to continue the sport (since I have no ambition for pursuing anything beyond a PPL).

 

So here's the question -

Do you think it makes sense to team up with a local CFI, secure a space at a local airport and set up shop with a couple of leased helicopters? I'm thinking that the bulk of the business would be the offering of affordable rental rates to licensed pilots who would have to make block purchases (maybe 10 hours min) in exchange for the reduced rate. The CFI would have access to the birds for commercial purposes. For me - I would simply get access to occasional use at a deep discounted rate over what is currently available. I've spoken to a couple of local licensed pilots who don't fly because of the rental prices. Conventional wisdom (not mine) says that the lease works with a minimum of 50 hrs a month for each ship.

 

One obvious question is whether or not there are enough interested parties in the area to support the plan - but this area is pretty populated. I've looked at the financial analysis that captures the cost elements such as insurance, hanger, maintenance, etc. and I haven't seen anything yet that suggests it's a bad idea. I'm not looking for any return other than affordable access. The profits generated would go to the CFI for services rendered. What do ya'll think? Bad idea?

[Jaybee]

If no other axiom in the world is true, this one is - "If you want to make a small fortune in aviation then start with a large one."

 

The biggest problem you will face is down time. Are you going to have a full-time mechanic on staff ? So if something happens then you have to schedule the mechanic, who will come out and look at it and order some parts, weeks later he might come back and install those parts if he isn't busy doing something else. Seriously, not intended to funny or smart alecky; for General Aviation maintenance it seems to take an inordinate amount of time to have stuff fixed.

 

Take your estimated "billable hours" and cut it by at least half and see if your numbers still work.

[tradford]

Good points Jaybee. There are a couple of "contract" helo mechanics in the immediate area. I have no experience with turn around time since the owner of the school I attend is also a certified mechanic. I'd like to get as many 'show stoppers' on the table as I can. Again - not looking to make money at this point beyond what the CFI needs + overhead. I'm just looking for afordable rental rates. Perhaps the 'co-op' idea is a bad one.

[Dragbrace]

Most of those cheaper leases are Dry, meaning you furnish fuel, maintenance, pilots and Insurance. Check into full coverage Insurance costs before you make this move.

[tradford]

Yes, the couple of lease arangements I've looked at so far are definitely dry. I've tagged some insurance rates. I just purchased a renter's policy to cover me during solo. It seems that what we're really missing is the maintenance costs. That's a hard one to reconcile.

[apiaguy]

If it was cheaper don't you think everyone would do this? Some problems:

Your airport may require a commercial lease to operate that requires all kinds of expensive insurance

The insurance for rental/instruction with full coverage is going to dampen your dreams

People will act all interested and never show you the money

Do you already have a hangar to keep the aircraft in

Do you have a way to move the aircraft around (tug/cart/wheels)

Do you have the cash to survive if the weather is so crappy one month that you don't fly at all?

There is much less mark up in flight instruction that almost any other job a helicopter performs...

 

maintenance... sometimes almost no cost but oil, filter and a few hours labor... othertimes $10000 in parts. Have lots of cash on hand ready to throw.

Edited February 11, 2014 by apiaguy

[cburg]

Seems like an expensive way to get airtime. You would mostly be creating a big headache for yourself.

 

I decided after a few years in the aviation business back in the early 80's, to NEVER mix business and pleasure. The hassles will eat away at your time, money, and enjoyment. You will sleep less too.

 

The "hassle factor" alone will ruin it for you.

 

Also note that unless you are a retired, and maybe you are (lucky guy at 59), you will be competing to schedule time. Forget about flying weekends and holidays...and if you do...you'll be bleeding red ink.

 

Do you ever fly with a passenger?

 

If not, why spend the money on a two-place machine.

[tradford]

Thanks for the comments - most viable. When I saw lease rates starting at $70/hour for an R22 and $150/hour for an R44 for time accumulated on the Hobbs, I couldn't help but think there might be a way to capitalize on low rates - that even after adding overhead, it might still come out significantly cheaper than $250/hour if much of the time was subsidized by commercial activities e.g. flight lessons.

 

Apiaguy - all serious considerations and yes - most everything has been accounted for. A few are TBD. This is more a venture for the CFI than for me. I'd be willing to invest a few bucks to get things started if the risks were nailed down to something manageable. We've been getting a little coaching by a service provider up in the north east that the local CFI used to work for. May end up being a wild goose chase - but I committed to help run it to ground either way.

 

Naysayers are what I need at this point in time. Thanks!

 

And Cburg - I haven't given up on the Mosquito yet. I'm heading down to Trenton for their annual fly in next month and on to Sun 'N Fun from there.

 

Tony

[Whistlerpilot]

Hey tradford, I did lease an R22 from one of the larger lease companies on the West Coast. I had a special arrangement and did 6 months, flew about 400 hours. It cost around $180. per hour including fuel oil hangar maintenance and insurance.

 

The owner provided all scheduled maintenance provided I brought the helicopter to him. I was not able to find students for every ferry for maintenance so I ate about 25 hours or so. Most leases do not cover any maintenance, so just the 100 hour inspections alone would add $10 to $15 per hour. Any unscheduled maintenance would be above that. I was lucky and able to deal with some minor problems which were not costly.

 

I was a CFI and spent months beforehand lining up students and time builders. After several white knuckle situations I stopped doing auto's with anyone, and farmed out that training to an established school. The risk of an overspeed was not worth it for me after several close calls.

 

I had to put up front 15 grand just to get the lease started. The owner provided insurance under their umbrella. If I had any damage I would've likely lost that deposit since it was close to the insurance deductible. I had little confidence in recovering any insurance money from a student or timebuilder after an incident.

 

Realistically the cost is closer to $200. per hour if nothing goes unexpected. Like someone mentioned one slow month will make the cost per hour of all the other flights go way way up.

 

It was quite an experience but I have to say the stress was over the top. I had a hard time sleeping and it was a huge relief when it was all done and I was no longer responsible for the helicopter.

 

You can find some really cheap time building opportunities with some research. Why not do that instead and let someone else shoulder all the financial risk?

 

I'm glad I did the lease because it worked for me, but honestly I would advise against it for you unless you are a CFI with min 300 hours and prepared to walk away from 20 grand.

[tradford]

Thanks WP. Nothing like real life experiences to put things into perspective. Your numbers of course make perfect sense and I'm sure they're better than I would experience with my plan. Your adjusted hourly rate comes pretty close to what I pay at my school with no headaches at all and I have an insurance policy to bridge my liability with the owner's policy (covers deductible plus a little) for an even greater peace of mind. Yep, makes the Mosquito look even better.

 

See? In less than a day - consulting you pros has perhaps saved me a fortune in wasted time and bad investments. I LOVE FORUMS!!

 

Thanks all.

[cburg]

Thanks for the comments - most viable. When I saw lease rates starting at $70/hour for an R22 and $150/hour for an R44 for time accumulated on the Hobbs, I couldn't help but think there might be a way to capitalize on low rates - that even after adding overhead, it might still come out significantly cheaper than $250/hour if much of the time was subsidized by commercial activities e.g. flight lessons.

 

Apiaguy - all serious considerations and yes - most everything has been accounted for. A few are TBD. This is more a venture for the CFI than for me. I'd be willing to invest a few bucks to get things started if the risks were nailed down to something manageable. We've been getting a little coaching by a service provider up in the north east that the local CFI used to work for. May end up being a wild goose chase - but I committed to help run it to ground either way.

 

Naysayers are what I need at this point in time. Thanks!

 

And Cburg - I haven't given up on the Mosquito yet. I'm heading down to Trenton for their annual fly in next month and on to Sun 'N Fun from there.

 

Tony

Looking forward to their new two-place, twin engine...she's a beaut from the photos. If you see one in Trenton please post some photos.

[adam32]

Don't forget most leases also have a 40hr a month minimum so plan on flying a lot. I leased an R22 that didn't have a min because it was after SSH ruined flight instruction so birds were laying around in hangars all over the country.

[cburg]

Don't forget most leases also have a 40hr a month minimum so plan on flying a lot. I leased an R22 that didn't have a min because it was after SSH ruined flight instruction so birds were laying around in hangars all over the country.

http://en.wikipedia.org/wiki/Silver_State_Helicopters

 

The company websites were all removed by February 6, 2008. On February 26, 2008 a special website for the Trustee for Silver State Helicopters Bankruptcy was launched. It listed 194 helicopters and five fixed wing aircraft for disposal.^[11

 

^{Senator Nelson said:[15][16][17]}

^{“ "What Silver State was doing was taking the $70,000 up front and then it was using it immediately and they were trying to go out and recruit more students to get more $70,000 per student and therefore pay expenses as they went along with the money they were collecting from the students. Now if that's what this investigation ends up being, what that is a ponzi scheme."[17] ”}

^{Writing in Rotor and Wing magazine in March 2009, Ernie Stephens concluded:}

^{“ It’s been a little more than a year since Silver State Helicopters (SSH) abruptly shut its doors on Feb. 3, 2008 and went out of business. That day also marked the last time that approx. 2,000 of its flight academy students saw any hope of getting the training they had paid nearly $70,000 for in advance.}

^{The perceived – and very probably factual - scam has been the talk of the helicopter industry every since. In fact, it has become a verb in some places: "If I sign up for lessons, you’d better not do a Silver State on me!"}

[pilot#476398]

I've been renting for a while, so I can relate to how its sucks. Its like a monthly payment on a midsize car that you only get to drive one hour a month!

 

Since he's talking about leasing a 22, should the figures be in monthly cost not per flight hour? I mean if I were to lease one it wouldn't matter if the hourly cost was lower than renting if I couldn't afford the monthly lease rate.