Co-Ownership and Fuel Cost

ipengineer

ipengineer

Pre-Flight
Joined
May 28, 2012
Messages
49
Location
Dallas, TX
Display Name
Display name:
ipengineer
Me and a friend are finalizing all of the preliminaries to purchase an 06' SR22 together. I am curious what those that are in co-ownership arrangements are doing about shared fuel cost? We are not planning on setting an "hourly" rate since there is just two of us. All of the maintenance cost we will just split by the amount of hours each one uses the plane. If one partner uses the plane 60% one year and the other 40%; cost will be split that way.

What is easiest way to approach this with fuel? We can't just "fill it up" when we are done. What if the next person only needs half a tank for payload reasons, etc?
 
I think you are making a mistake, what if one guy flies 10 hours one year and the other guy flies it 200 hours. Then then by Feb 15th the next year they both have flown 20 each, and the engine needs an overhaul? You going to split that even?

For fuel cost, just agree upon where to leave it at the tabs, or how it will be reimbursed if you have to buy fuel elsewhere...

Most partnerships rent it dry to each other, to cover maintenance.
 
We rent dry, and expect the last pilot to fill it up, because payload is almost never an issue with our plane (can carry 800+ lbs with full fuel). However, if someone gets back late at night and it is down a few gallons we just write who owes how much fuel in the flight log. We have a very accurate fuel totalizer, so we know exactly how much (within <2%) is in the tanks. The FBO our home field that we often fuel with has running accounts for each of the three partners, and they are cool with splitting the bill between two of us. we've been using them for 10 years, so they know the partners and the plane. 10 years, never had an issue.

Jeff
 
No, when it comes time for overhaul using your example partner A = 30 hours, B = 220. Partner A will pay 7% while partner B pays 93%.. (if my math is right).
 
ipengineer said:
No, when it comes time for overhaul using your example partner A = 30 hours, B = 220. Partner A will pay 7% while partner B pays 93%.. (if my math is right).
Click to expand...

Just try to think of all of the possibilities. You need to think of every in and out, you are assuming partner A and B are both still involved when the rebuild happens and that this goes on forever...

What about when one wants to leave (before or after the rebuild)? how do you extract money out of the now gone partner? What happens when one wants an upgrade and the other doesn't, does it happen? Who pays for it? Is it in writing?

I don't know you or your partner, but if you look at a typical successfull partnership. Either A. everyone flies about the same and it works out for a while, or B. Everyone pays a dry rate to offset the eventual maint related items.
 
Good questions Sam. Don't have an answer for that.. Definitely something to bring up.
 
ipengineer said:
No, when it comes time for overhaul using your example partner A = 30 hours, B = 220. Partner A will pay 7% while partner B pays 93%.. (if my math is right).
Click to expand...

Partner A should have rented instead of thinking about co ownership.;)
 
It's extremely simple. The two of you split the cost of filling the tanks for the ferry trip home and topping off the tanks once it is home. AFTER THAT whichever one of you flies the plane, tops off the tanks when returning it to the hangar. If you are rushed when returning it to the hangar and can't fill it, you are responsible for that fuel bill before it goes out again.

If the next flight requires reduced fuel, maybe that partner needs a bigger airplane. Sorry to be harsh, but it's difficult for me to sympathize about payload in a Cirrus since I fly an overweight 2 place (that's why I call her Miss Piggy.). Unless I taking ups 100 pound lady I can never fly with full tanks.

Easy peasy.
 
Last edited:
MBDiagMan said:
If the next flight requires reduced fuel, maybe that partner needs a bigger airplane. Sorry to be harsh, but i Find it difficult for me to sympathize about payload in a Cirrus

Easy peasy.
Click to expand...

By this logic I should just top off the caravan every flight too. Why not top off every plane in the world each and every evening too ? Sounds like a whole new movement everybody will be on board with.
 
The more complicated the cost sharing the sooner the partnership collapses.

The ones I have seen to work require:
1. the tanks are to always be filled after each flight (no excuses about time) - either to full, or up to the tab, per the agreement.
2. the monthly deposit of money into the engine overhaul fund on a fixed $$ per hour basis by each flying pilot (no excuses about tight money this month) This evens out the low user versus the high user.
You flew 3 hours you deposit $30. He flew 10 hours he deposits $100. ( example numbers)
And have written terms for disbursement of the engine fund if it is not used.
3. ALL other expenses are equal split - and NO whining.
4. Time is based on a Hobbs meter, not the tach.

If there is a huge disparity in use rate, the low rate guy needs to be in a club, not a partnership.
 
Dr. O said:
If there is a huge disparity in use rate, the low rate guy needs to be in a club, not a partnership.
Click to expand...

While in general this is true, you need to keep in mind that over a long period of a partnership there will be ups and downs in the usage by each partner. Someone may get incredibly busy at work for a year or more, or have a medical issue that takes time to clear up with the FAA, or have kids, get married, etc. A successful partnership (which I'm pleased to say I've been in for 10 years now) is based not only on the details of a written contract, but also on trust and friendship. You need both or it just doesn't work. The contract is just the prenuptial agreement before the marriage.
 
Yeah, you want your exits in writing and well understood. You also want to use a dry rate which basically covers cost of future maintenance.

In one case, I wanted wingtip strobes but my partner wasn't agreeable to the upgrade. So I decided I would pay for them myself and eat the cost. No whining allowed.

We agreed to put $25 per hobbs hour in a shared checking account and I sent out the bill each month. It was kinda fun to manage it and I was sure glad the $$ was there when we found a stripped thru-bolt and split the case to have it helicoiled.
 
iflyvfr said:
Yeah, you want your exits in writing and well understood. You also want to use a dry rate which basically covers cost of future maintenance.

In one case, I wanted wingtip strobes but my partner wasn't agreeable to the upgrade. So I decided I would pay for them myself and eat the cost. No whining allowed.

We agreed to put $25 per hobbs hour in a shared checking account and I sent out the bill each month. It was kinda fun to manage it and I was sure glad the $$ was there when we found a stripped thru-bolt and split the case to have it helicoiled.
Click to expand...

+1 We have a nominal per hour fee that goes into a fund for expenses (tie down, insurance, maintenance, etc.) Solves the problem of finding money from a long-gone partner for the rebuild. We also top it off after we're done flying.
 
I'm curious why not charge an hourly wet rate. I'm in a 4 way partnership, and that's what we do. We have a "fixed" monthly amount which covers hanger, insurance, taxes, and a healthy "bite" out of our annual. (although the past couple of years we've had to kick in a bit). Other than that, we charge ourselves a wet rate based on tach time (no hobbs in the aircraft). At the end of each month, we bill ourselves the fixed, and the hourly. Any fuel purchased comes off the hourly. The hourly covers fuel, plus a small amount for unexpected maintenance. Seems to work pretty well, although I have to admit, we don't charge ourselves enough hourly to cover a catastrophic mechanical issue. We all had to pony up a couple years ago when we found a cracked jug at annual.
 
Dr. O said:
The more complicated the cost sharing the sooner the partnership collapses.

The ones I have seen to work require:
***
4. Time is based on a Hobbs meter, not the tach.
Click to expand...

Why do you say this? Thanks.
 
Dr. O said:
4. Time is based on a Hobbs meter, not the tach.
Click to expand...

This is either irrelevant or counterproductive. Your maintenance will normally be based on tach, not Hobbs, so this creates accounting confusion.

Flying by Hobbs instead of tach may encourage pilots to:

1) rush through ground checks
2) fly the plane harder than needed.
 
My partner and I split all bills 50/50, and each bought our own gas. Because it was easier, we didn't have an airplane bank account or hourly charges. When I bought out his half, there was nothing to split . . . It helps if you know and respect each other. We never had a problem, even when there was an unexpected $1000 "refurb" charge when we had the G430 upgraded to WAAS. We just divided by two and I paid him, since he already had an account t with the avionics guy.
 
ja_user said:
I think you are making a mistake, what if one guy flies 10 hours one year and the other guy flies it 200 hours. Then then by Feb 15th the next year they both have flown 20 each, and the engine needs an overhaul? You going to split that even?

For fuel cost, just agree upon where to leave it at the tabs, or how it will be reimbursed if you have to buy fuel elsewhere...

Most partnerships rent it dry to each other, to cover maintenance.
Click to expand...

Yep, just have a default return to base fuel level.

Split everything 50/50

As for the person A flying a lot and person B not, person B is a sucker for getting into the arrangement and needs to be punished $
 
If you use a Fuel Flow Totalizer, set up a credit card for fuel and record the gallons used for each flight/fueling and reconcile it at the end of the month.
 
One thing I have read before, and agree with, is that all partners should be of approximately the same economic status. Never partner with someone with a lot less, or a lot more, money than you.
 
Our LLC averages the fuel out by the hour. We all fly the 182 at full power and the gallon per hour average hasn't wavered from 11.5 for years. When I flew a bunch of hours near sea level (LNK, with Jesse) I offered to make up the difference since the airplane ran closer to 13 GPH there at full throttle but a) my co owners refused. And b) shooting approach after approach at 90 knots lowers the average.

It's easy to track and no forced fill ups or anything like that. Over the course of a year any discrepancies are probably in the $100 range. Chump change in the grand scheme of airplane bills.

Granted of you're flung something where you'll see people fly it at different performance levels regularly, do the forced fill up thing. But a 182 that won't run LOP is pretty much going to burn the same fuel for me and both of my co owners.

If our budget was that tight that we cared about $100 error in a year, we'd sell it. Don't sweat the small stuff.
 
James331 said:
Yep, just have a default return to base fuel level.

Split everything 50/50

As for the person A flying a lot and person B not, person B is a sucker for getting into the arrangement and needs to be punished $
Click to expand...

This is the way we do it. Plane has 100 gal capacity but the agreement is to always leave it at 50 gals. Annuals etc are split 50/50. Anything else and it would be a lot of wasted energy.

That being said, Ralph has an interesting point and it's true in our case.
 
Just agree to leave it at a certain level. Most use full, because it's easy. You can agree to leave it with 10 gals aside (example only). This way, you can fill it based on payload verses range.



ipengineer said:
Me and a friend are finalizing all of the preliminaries to purchase an 06' SR22 together. I am curious what those that are in co-ownership arrangements are doing about shared fuel cost? We are not planning on setting an "hourly" rate since there is just two of us. All of the maintenance cost we will just split by the amount of hours each one uses the plane. If one partner uses the plane 60% one year and the other 40%; cost will be split that way.

What is easiest way to approach this with fuel? We can't just "fill it up" when we are done. What if the next person only needs half a tank for payload reasons, etc?
Click to expand...
 
James331 said:
Yep, just have a default return to base fuel level.

Split everything 50/50

As for the person A flying a lot and person B not, person B is a sucker for getting into the arrangement and needs to be punished $
Click to expand...

The engine and maintainence are always interesting discussions. Is maintainence a fixed expense (the annual inspection, age related issues, or corrosion) or a variable expense (wear)? Is the engine a wear (by the hour) item or a fixed cost (engine rusts out or time based overhaul)?

I had a Cessna 310 that we just split down the middle.
 
I'm in 3 ways partnership in V35 Bonanza and we leave fuel to tabs (54 gallons). Full tanks are 74. All 3 of us are flying LOP and its 12 gal/hour meaning 3.5 hours plus one hour reserves. Fuel at our home field is expensive $6.50-7/gal. Fuel around is cheaper $5-5.25/gal. That mean we can refuel with cheap fuel somewhere and land with fuel at tabs. No need to refuel at home. We also pay monthly dues to cover fixed expenses such as hangar, insurance and annual. We charge ourselves hourly rate (tach) so if something happen we have some funds stashed in partnership account.
I've been in this partnership for only one year and so far that wa as great experience.
BTW Usage patterns between the partners has changed over last year quite a lot. Things are changing in our life's and that's expected.
One thing I do not agree with previous posters is about relationships between partners. It doesn't matter as long as there is an agreement in place(written or verbal) and partners share the same view at maintenence and upgrades which should be discussed prior establishing/joining the partnership.
 
Terry L in KY said:
I'm curious why not charge an hourly wet rate. I'm in a 4 way partnership, and that's what we do.
Click to expand...

That's probably fine if the only use of the aircraft is pattern and local practice flying.
Brings in consternation if the aircraft is used as transportation and varying fuel prices (or brand preferences).

I second the motion to go dry and let each pilot bear the cost of the fuel he puts in.
 
Have a 172 with 1 partner . Have joint account with 2 debit cards ,all plane gas purchases go on these cards and for every hour on Hobbs we deposit a predetermined hourly rate into account. In our case we put in 90 per hour which allows for the account to build over time . Keeping it simple is important , and this works well for us.
 
N64543 said:
Have a 172 with 1 partner . Have joint account with 2 debit cards ,all plane gas purchases go on these cards and for every hour on Hobbs we deposit a predetermined hourly rate into account. In our case we put in 90 per hour which allows for the account to build over time . Keeping it simple is important , and this works well for us.
Click to expand...

That's as good of a way as any. Keeping it simple is key unless someone is an OCD-CPA and wishes to take care of it.
 
jonnyjetprop said:
The engine and maintainence are always interesting discussions ... Is the engine a wear (by the hour) item or a fixed cost (engine rusts out or time based overhaul)?
Click to expand...

Rust is a big cost. For some planes it probably dominates the long-term cost of engine maintenance. But it's hard to put a number on it.

I'd favor a cost structure that rewarded rather than penalized a co-owner for flying the plane at least an hour per month. Maybe by excluding the first hour each month, when dividing the MX costs according to flight time. But of course that would make things more complicated.
 
ja_user said:
Just try to think of all of the possibilities. You need to think of every in and out, you are assuming partner A and B are both still involved when the rebuild happens and that this goes on forever...

What about when one wants to leave (before or after the rebuild)? how do you extract money out of the now gone partner? What happens when one wants an upgrade and the other doesn't, does it happen? Who pays for it? Is it in writing?

I don't know you or your partner, but if you look at a typical successfull partnership. Either A. everyone flies about the same and it works out for a while, or B. Everyone pays a dry rate to offset the eventual maint related items.
Click to expand...

My partners...wayyyy...before I was in the plane set it up as a LLC with the plane as the asset. They have by-laws, etc... and essentially every owner (4 of us) owns 1/4 shares with voting rights. So, if someone is jacking the plane up (they had a dude running it too lean and they had to replace 2 cans within 200 hours of the last overhaul...) the other 3 can vote and if it's a 3/4 majority then they win and in this case kicked the dude to the curb and bought him out.

We pay $15/hr for the overhaul. So, if someone leaves then at least we have their $$ while they were in to cover their hours.

If we want new stuff then we talk about it and discuss and realistically we could vote and just do it but there have been a couple instances where one guy who hardly flies and has no IFR aspirations has balked on some avionics upgrades because he doesn't need them.

We also leave the tanks full. We fly a Cherokee 235 with 17 gallon tips and frankly I wish we'd leave them empty. Most of my flights I don't need them but they have always left the plane full in the barn for the next guy for the last 15 years and it's not going to change. It's not a huge deal as I haven't run into any issues - even with passengers and bags - with weight but I'd like the option of being able to fill it up when I need it.

Good luck!
 
I'd agree with leaving the plane at a predetermined fill level. Figure out what that is (half tanks is probably a good rough number) and then just fill it to that point after landing. Obviously this requires some fuel planning to make sure you don't take off with so much that you'll land with more than needed, but that should also be workable if you pick a good level. Don't worry if it takes a few tries to figure out.

I agree that just leaving it full all the time is likely not that wise of an idea from a payload perspective. Heavy is never good in an airplane. That said, you may also want to evaluate what your missions end up being. I don't put fuel in the 310 every time I land, but if my airport has a fuel discount (which it does from time to time) I'll typically top off then. I've found that my typical missions require full fuel or more anyway (I tend to fly far) so I'll end up topping the thing off before taking off anyway.
 
I write two checks to the partnership each month:
- one to cover my even share of insurance, hangar, annual inspection fee, property tax, databases.
- one to cover my dry rate that includes engine reserve, general maintenance reserve, oil.

If i fly, I fill back to 54gallons (tabs) on my account with the FBO.

So far, this has worked for 19 years.
 
Ted DuPuis said:
I'd agree with leaving the plane at a predetermined fill level.
Click to expand...

Works for us. Tanks at the tabs, 50g. Gives 4+ hours, 600+nm, and 564 useful left over for pax/bags. With our small families, it works well.

If one wants less than 50g for a flight, we just text each other so we know to leave the tanks at that level.

Aint' hard!
 
upstateny said:
+1 We have a nominal per hour fee that goes into a fund for expenses (tie down, insurance, maintenance, etc.) Solves the problem of finding money from a long-gone partner for the rebuild. We also top it off after we're done flying.
Click to expand...

Wouldn't fixed costs like tie down and insurance be a fixed monthly assessment? That's what has worked well for the partnerships I've been in. We split all fixed costs, including base annual charge (the inspection part), with the remainder coming out of the maintenance fund which was funded by an hourly surcharge. Any maintenance not covered by that fund was split equally between the partners. That provided the incentive to keep the hourly rate at an appropriate level without risking dinging one partner who happened to be flying a bit more with a big hit that might not be related to usage at all.
 
Terry L in KY said:
I'm curious why not charge an hourly wet rate. I'm in a 4 way partnership, and that's what we do. We have a "fixed" monthly amount which covers hanger, insurance, taxes, and a healthy "bite" out of our annual. (although the past couple of years we've had to kick in a bit). Other than that, we charge ourselves a wet rate based on tach time (no hobbs in the aircraft). At the end of each month, we bill ourselves the fixed, and the hourly. Any fuel purchased comes off the hourly. The hourly covers fuel, plus a small amount for unexpected maintenance. Seems to work pretty well, although I have to admit, we don't charge ourselves enough hourly to cover a catastrophic mechanical issue. We all had to pony up a couple years ago when we found a cracked jug at annual.
Click to expand...

No incentive to be frugal on either fuel burn (read "run her hard") or fuel costs "$8 a gallon? No problem!") in that scenario. But if it works for you, keep doing what works.
 
You must log in or register to reply here.
Back
Top