Flight school update and questions

[RitterKreuz]

I have worked out the numbers regarding profitability and cost associated with the flight school I'm trying to start up.

My data was based on previous flight school experiences.

I have based my expenses and profits data on 500 hours per year of aircraft use. and i am pleased and comfortable with the results. I was advised to set up my company as an "LLC" and write off all expenses associated with the operation.

I was somewhat surprised to see that the expenses associated with running a flight school make up over 50-60% of the total annual income. But i was not too surprised at this fact.

I will start out at first as the sole instructor, with one employee who will keep up with scheduling and phone calls etc while i am flying.

I will also start out with one airplane.

I have narrowed it down to the following two types

1. Cessna 172
2. Piper Warrior

I considered going the cheaper route with a Cessna 150/152 but i felt that it would be a bit underpowered in the hot Texas sunshine, it might be difficult to find a 150/152 that is IFR certified, and i feel like students would rather rent a 4 place airplane after they get their license rather than rent a two seater.

Do you guys agree with that observation?

I have decided to rent the aircraft for a rate between $95 per hour and $110 per hour wet. and charge a rate of $30 per hour on instruction. i think this is a pretty low average rate for instruction in the USA these days. (of course prices may change depending on fuel costs)

eventually i would like to grow the school to include two instructors, and two airplanes... perhaps one of which will be a complex or high performance. but i have concentrated more on the upstart aspect.

I also have great low cost lease option on a light twin but that is a long ways down the road.

I have not decided what to do about insurance yet... though i have factored in about 8,000 dollars per year in insurance costs.

any guys with experience in this sort of thing? would it be best to cover all students in my own insurance or have them each acquire their own?

feedback?

[Brett_Henderson]

I've been watching for your posts about this.. and think you're about ready for my input. I'm sure you've been talking to others with real experience.. so you can weigh my input against theirs, and even bounce my thoughts off of them. This will no doubt be a long post, and a long thread.. but it's good info to kick around.

First; you cannot make a living running a small club/FBO unless you're ready and able to wear all the hats... and even then, it's tough. Do you have ready, pro-bono help nearby ? A friend, spouse, relative to help you make sure that ALL inquiries are handled quickly ? People have to know, from their first contact, and well into their membership, that they won't have to play phone tag when something's on their mind... whether it be something about a plane's status, or instructor availability, or just about anything you'd imagine. Budding pilots are bundles of nervous questions.

Do you have a good working relationship with on-field maintanence ? The kinda raport that can get your plane bumped ahead in line for some quick attention, late in an afternoon when the vacuum pump fails and the plane is booked for three students the next morning ?

Do you have at least one hangar lined up.. or at least some on-field office/flight-planning/lounge space lined up ?  Since you'll be doing routine maintanence, a hangar is a big plus... at least one that can be borrowed.

Now, without getting too personal... do you have enough cash/credit to operate with no income for six months ?


--continued--

[Brett_Henderson]

OK.. Now I'll try to answer points in order:

500 hours per year is 42 hours per month (months are easier to plan by). "Real" cost to operate a $60,000 IFR C172 is about $60/hour (fuel, engine, 100hours/annuals)... That'll be $40/hour gross income.. or .. $1,700 month.

I don't know your fixed costs (rent, utilites, etc.) but I'll guess at $500/month (assuming a hangar). Insurance isn't as tricky as it looks to factor in.. but it IS tricky when it comes to keeping attracting clients. If you go with a full waiver of subrogation, you'll have to charge more per hour. If you require renters to carry non-owner insurance, you can keep it lower. Personally, I think all parties are better off with the waiver... you just gotta sell it.. as in, "my rates are higher because you're covered". Either way, using your numbers ($8000 for hull replacement and liability (that's probably a little low)), it's $670/month.

You can see that this leaves you with just over $500/month in aircraft income. Let's say that 70% of the rental hours are dual. There's another $880/month of income... for a total of $1650 of "useable" income.. before daily, non-fixed and unforseen expenses.. which ideally, will be coverd by member dues.

Are we on the same page so far ?

[Brett_Henderson]

An LLC isn't the best way to go. The best situation is for the full isolation of full incorporation, especially if you have a home, or any substantial personal assets. An LLC is just as it implies. It "limits" liability, but we're talking about big boy numbers here.

Another option is to add a layer. Make the club itself a not for profit entity, that hires you (your LLC) as a managing consultant.

THE MOST ideal situation, would be for you to line up your first member as the owner of the airplane. Some guy looking to offset his expenses leasing his plane back to you. Next best option (believe it or not), is to buy a brand new airplane. Newer planes seem to keep people flying more often, and there's only a slight difference between depreciating a new airplane, and maintaining a 5,000 hour head-ache. Your down time for the first couple of years would be almost none.

[Brett_Henderson]

Quick summary and a comparison:

Assuming these numbers are reasonably accurate..Knowing that you'll be working or available 7 days a week.. and nothing goes wrong...  Can you live on less than $20,000/year?

The club where I'm most active has 200 dues paying members ($30/month), 50 of them active, 10 very active...  We have eight airplanes ( 3 172s, 2 PA-28s, a 182, a Libert XL, and a Mooney 201) and 5 instructors (2 full time).. a full-time "clerk" and is run by a retired guy who draws no salary...  It's barely staying afloat flying  150-250 hours per month (1800-3000 hours per year).

[RitterKreuz]

wonderful information - some of it i have heard, some of it i have not.

ill try to answer somewhat in order to the info you provided.

to start with i dont mind telling you that my wife and i purchased a Duplex about  2 years ago. we live in one side, and rent the other side out. when the neighbors/ tenants pay rent i really only have to come up with about $250 to make the payment on this place.

secondly i feel as if i am prepared to "wear all of the hats" so to speak... but one never really knows until they get knee deep into this sort of thing

another point - I do have a couple of excellent leads on workers... my spouse being one, and a couple of friends being the other.

The FBO where i used to work still has all the same staff, but no flight school associated with it, if i can deal with them exclusively on fuel sales, they would be happy to field calls regarding prospective students (and probably scheduling as well).

We have a great on field maintenance team... family owned and operated. One IA and about 5 A&P mechanics who have long and short term projects in their hangar all the time. I have know them routinely rush someone over to your airplane to get you airborne as quickly as possible when it is a "quick fix" small issue that isnt likely to ground you for a day. My soon to be hangar neighbor is the Aviation medical examiner where all my students will be going, he is also an A&P mechanic if i find myself in a pinch.

as far as living income free for six months... that could prove difficult BUT i feel that with my wife working and our current duplex situation giving us such a low cost of living it will help.

now, the 500 hours per year was based on what the owner of the last flight school told me to estimate "Despite the fact that we frequently broke 750 hours per year" and all of that was with one airplane.

the current FBO owner has agreed to "talk" about a fuel deal... some of the workers have advised me that it might be about 75 cents discount per gallon - every bit helps i guess!

im taking notes regarding your insurance advice.

as for a hangar and office/ class room space... My dad and a couple of his aviation friends- looking to supplement their retirement - are going to be pouring concrete soon on a 100X100 hangar with 3 offices along the back wall of the hangar. hangar rent will likely be free for my airplane... or DIRT cheap.

as for the LLC stuff - wheels are still turning on that deal.

and as for living on 20K per year - im doing that right now as a regional FO... some recent changes at work are leading me to believe that i will likely continue living on a low wage for several years to come... question is; why not sleep in my own bed every night in the mean time.

hope this helps expand insight as to my situation.

and thanks a lot for the info!  8-)

[Brett_Henderson]

Wow  :)   I have to say that the realist in me is leary, but you've got quite a bit going for this operation.. more than enough to take a stab at it. The biggest hurdle is a supportive spouse (both that she's working and is understanding and patient about your dream)....

Flourishing clubs/schools do exist.. and they all started small...

You don't seem pie-eyed.. quite the contrary.. if this can be pulled off..it sounds like your situation and plan are quite sound...

I won't bother to research exact numbers re: insurance and the like.. you'll get accurate data soon enough..


Life is short and it's not a practice life...   Go for it !

[Brett_Henderson]

One more thing...  I was saving the deal breaker, in case we agreed that this was a marginal plan at best, but you were still gung-ho.

Using a $60,000 172 for reference... there's another $400/month in either loan interest, or interest not being earned by the money being tied up in a paid for plane...  But I think your situation can even cover that  8-)

[RitterKreuz]

hope so... we are still a few months away from even setting the ball in motion... but i remain cautiously optimistic.

I doubt that this flight school idea will ever generate enough money to replace a typical 9 to 5 job, but i enjoy aviation and my wife does too (even though she is not a pilot) and we can sure try like hell  ;D

when i was there instructing in 2005 i licensed 20 pilots that year as the sole instructor with only one airplane and no advertisement other than word of mouth... and i have a lot of friends at the airport.

hopefully it will turn out that i have enough things going in my favor to make this work, even if just a little bit.  :)

[beaky]

I know far less about how these operations work than most, but I know a few things:
You cannot place a dollar value on passion and willingness to work... your creditors won't accept passion, but if indulging your passion means more to you than comfort or security, you'll be OK as far as that goes.

And: don't discount the humble 150/152. There are a lot of IFR-certified ones out there, and they serve well enough in all climates.
I think a student who learns to do holds and approaches in a 150 will have an advantage in more stable aircraft... don't have my IR yet, but I started my PP in a 150 and it helped me build a solid foundation.

I'd also suggest offering LSA instruction- there are really cheap aircraft that fit the bill, and that certificate is becoming very popular. Your overhead would be lower, and your chances of keeping students until they're finished would be better.
Might be a good way to start out; then you can add pricier ships to the fleet once you get the bugs out of your operation.
I could be completely wrong, but have you looked into this?

[Brett_Henderson]

Enyone who reads this forum knows how I feel about Light Sport. Not only not a good idea.. it's a solution to a problem that doesn't exist. Believe

[RitterKreuz]

on the other side of the coin i know several retired airline pilots, commercial pilots and private pilots of various skill levels who have lost their medicals due to diabetes or certain types of un-approved medications.

LSA is a good way for them to go around the pattern a few times a month - legally - without the hassel of dealing with medical issues.

I have mixed feelings on the LSA deal... i think there are some old crows out there who could benefit from it but i also think there are a lot of people who view it as a quickie rating

[Brett_Henderson]

Yeah.. the medical issue is an ever looming threat to ground a pilot. And it has to be that way. I'm glad I'm not responisble for drawing the line that has to be drawn. Diabetes is a no-brainer though. Light-headed-ness and disorientation are the mildest symptoms when blood suger is off... Blurred-vision unconsciouness and seizures are the extreme... and the stress brought on knowing that it's happening, aggravates it all.

With age, comes heart, blood-pressure and vision issues.. and of course metnal accuity and motor skills. As I near fifty; I know my last medical is coming in the not too distant future. Right now, I have to time my eye-exams around my FAA physicals, because my eyes are that bad. I've already conceded that this is my last, second-class certificate and won't even try for anything above third-class, next year. Diabetes runs in my family, and I have had glucose issues, when I was 250lbs (I'm 215 right now). I'll probably ground myself, before I'm sixty.

The medication stuff is touchy... but you gotta fault on the side of caution. I had a potential student on Zanax. There was no "narcotic" effect. I honestly believe that a person's motor-skills are relatively unaffected by these drugs. But, if you need drugs to function on the ground, for whatever reason, you probably shouldn't be flying airplanes.

Is Light Sport, as a way for people just under the bar to keep flying, a good idea ? If you ask me right after I've surrendered my medical certificate, I'll probably say, "yes".

[Hagar]

This is all very interesting. I realise your opposition to this Light Sport licence Brett & that I'm unlikely to change your mind. However, I think there might be some misconceptions about the actual requirements. I know how stubborn some of these old-time aviators can be & some don't like change. I admit to knowing very little about pilot training in the US but this Light Sport category seems very similar to the NPPL we have in the UK. There are some obvious differences as a medical is not required for a UK private driving licence. The medical requirement for an NPPL is the same as for a professional bus or truck driver.

Many aspects are exactly the same as for a full PPL & the main difference (& objection in some quarters) seems to be the minimum requirement, & I repeat minimum, of 32 hours. You will know from experience that most pupils will take far longer than the minimum number of hours to gain their wings whether it's a full PPL or restricted Light Sport licence. This will be affected by aptitude & how often they take lessons. I know an 18 year-old girl at Shoreham who has just gone solo in a helicopter after less than 5 hours instruction. http://www.loop.aero/features/features/2006/May/3
This is in a scholarship situation where concentrated training is possible. The famous cricketer Ian Botham got his PPL(H) some years ago in something like 3 weeks. Not only could he afford to purchase the helicopter & a course of private flying lessons but he had the spare time to be available every day for as long as it took. I forget what it was called but back in the 1960s there was a similar 30-hour syllabus for a full PPL providing it was done within a stated period, something like 6 months. If the pupil took longer the full 40 hours applied. The Air Cadet Flying Scholarship scheme took advantage of this & most cadets got their PPL in the 30 hours, many of whom went on to fly in the RAF or commercially.

As for age, I know some pilots well into their eighties who still fly regularly & still pass the full JAR medical. This does not mean that they could not be taken ill without warning.

[Brett_Henderson]

I agree with you Hagar, mostly. Nobody is kidding anybody about a U.S. third class medical examine as being anything more than; showing up.. proving that you can see.. having your blood-pressure checked.. giving some urine to prove you're not on drugs or diabetic.. and letting an aviation-minded doctor SEE you up close. And that sounds like what's required for your NPPL. Over here, that's not the case for Light Sport Pilot. The only examination for a drivers license is for your vision... and that immediately qualifies you for Light Sport training. You can be a drug addicted, diabetic, with high-blood pressure and a heart condition, and get your Light Sport Pilot license. Insurance companies know this... and they'll tell a club as much when you try to add a Light Sport Plane and Light Sport Training to your club's roster and curriculum.

The silly thing is (like you point out)... few people will get signed off by an instructor after only minimum training. Most will end up with the same amount of hours, and dual instruction, as a regular pilot, taking regular training. They'll end up with nearly the same commitment of time and money, anyway. And actually it will end up costing more when they realize this.. as the training is not 100% transferable. When you consider the big picture; how much time and money flying will absorb; that difference twixt a Light Sport license and a regular PPL, is nothing. The only way you're going to be able to fly a Light Sport airplane, often enough to do it safely, is if you buy one. That kinda shoots the "money saving" aspect down... Just get a regular PPL, and put this Light Sport gremlin to rest... *ugh*.

Anyway...This thread is about running a flight-school. Anybody associated with that type of flying wouldn't be satisfied with only being able to fly out of un-controlled fields, in good weather, during daylight hours. And no flight-school will stay afloat under those restrictions. Flight-schools have insurance companies to answer to and rely on pilot/members who pursue advanced ratings (instrument/complex/multi-engine), and end up actually flying places, with passengers on board.. in and out of complex airspace... etc, etc...

Having an economical, Light Sport airplane or two on the roster would be a bonus. I'd LOVE to have one of these gems at my disposal, when all I want to do is go fly for an hour or two. There's a reason; after all these years; there's still no Light Sport rental fleet. As long as there's still the possibility of under-trained, medically-unqualified pilots hopping into these things; they aren't viable, flight school airplanes.

As for statistical anomalies ? (80 year-old pilots, or 5-hour solo helo-pilots)(I already know I won't be flying past 60 for health reasons).. that's exactly what they are.. Not the norm.. and not a reference for setting the standards.

Bottom line... in order to fly safely, you have to do it often. For most, that means renting. For the guy who can afford to buy a Light Sport... getting a regular pilot's license is no big deal. And the only way an FBO will have a Light Sport airplane available for rent, will be to a pilot holding a regular pilot's license. Their insurance will see to that..