Maintaining a business aircraft requires careful planning and a watchful eye on upcoming hurdles but even with that, there are occasional surprises. Airworthiness Directives, malfunctioning equipment, bird strikes and more can lead to un-expected costs that threaten to upset the aviation department’s budget.
Recently, I was asked by a relatively new aircraft owner about what can be done to insulate them from these types of surprise expenses. That lead me to introduce subscription based maintenance programs.
Maintenance programs are designed to help operators smooth out their budget by offering maintenance coverage for a fixed hourly premium. For example, in the case of Cessna’s ProParts, if a windshield fails, the program will cover the parts cost of the replacement (upwards of $50,000) while the operator continues to pay the hourly premium and all is well. This sounds a lot like insurance, and it’s similar, except that these programs are generally transferrable and can represent substantial value added for the aircraft.
Types of Programs
Effectively there are two categories of maintenance programs; the first is made up of accrual programs that build toward major engine & propeller maintenance events (i.e. overhauls and hot section inspections), the second includes shorter term contracts that cover things like parts, labor, avionics etc. Both types of programs are premium based on per-hours flown, usually with annual minimums between 100-200 hours.
Engine and propeller programs provide partial or complete coverage for the costs of mid-life and overhauls, depending on the program. They are also helpful in covering some costs related to line maintenance and manufacturer bulletins between major maintenance events.
Parts, labor and avionics programs are a bit different in that they don’t accumulate high balances in the same way engine programs do and are generally shorter terms. For example, Cessna’s ProParts program is based on 3 year terms and covers only airframe parts. At the end of the term, the owner can usually choose to renew, or walk away with nothing owed.
Why don’t we just set money aside ourselves?
Of course you can do that. But these programs (and their balances) are generally transferrable in a sale. If you purchase an aircraft that is already enrolled in a program, you are receiving the benefit of whatever has been paid by previous owners up to that point. Engine and propeller programs bring much greater residual value into a sale than other types due to their high balances and longer terms.
Of course, you will need to negotiate in the transaction that the program will be transferred along with the airplane.
Will it cost us more in the long run?
It depends. Here are two examples:
If you purchased an airplane that isn’t on engine programs and is 75% of the way toward overhaul, you’re going to absorb the entire cost of the overhaul having enjoyed only 25% of the interval life. Hopefully, you will have negotiated a lower sale price to account for the engine life but you will still face the unknowns of an overhaul which can swing by as much as $250,000 per engine depending on what defects are found.
When it comes to parts programs, it’s a toss of the dice. If during a three year contract, nothing major happens like a windshield or bird strike, you might have spent more in premiums than you would have on parts. With that said, it doesn’t take too many medium-big ticket items to surpass the value of the premiums for the same period. This is an area where an operator’s risk appetite and desire for strict budgeting come into play.
I will say this, I have seen the look on owner’s faces who do and don’t have these programs when they hear the news that something needs repair and I’ve noticed a distinct difference in how it affects their day.
My suggestion is to embrace the maintenance programs for two reasons; first, you can rest easier knowing you’ve minimized the likelihood of expensive surprises, and second, when you go to sell your aircraft, buyers will recognize that it’s on programs and likely has been well maintained because the coverage was there for it. At the end of the day though, these programs bring out the personality in aircraft owners and there simply are no “right” answers. – BH