Engine Reserve $$$$

Tom-D

Tom-D

Taxi to Parking
Joined
Feb 23, 2005
Messages
34,740
Display Name
Display name:
Tom-D
How many owners actually set money aside per hour, to over haul their engines. or do you simply dip into saving to get it done?
 
For a single owner, I'm not sure what the difference is, other than an accounting mechanism. A partnership or corporate ownership might be different.

No.
 
I don't. Engine might last another 2 hours might last another 2000. Oooooh, I'll put away $15/hr for an engine reserve. Yay! I have $30 saved up when it blew. It's pointless.
 
To me, it kind of depends on how I'm using the plane. I don't withold anything for an engine reserve on my 170, but that is because I bought it with a low time engine and plan to sell it well before it needs an overhaul. If something really bad happens, it is like Ed said. A few hours of a reserve isn't going to matter much.

Now, if I owned an airplane that was heavily used and I knew I was going to have to overhaul it, I would more than likely include the engine reserve in my budget. If the plane was going to be a lease-back, then you better believe an engine reserve would be factored into the rate.
 
I do set aside money.

I had $5k set aside when an AD required me to have a top overhaul done that cost me about $7k.

18 months later another AD required me to replace three of those cylinders and I instead did another top with OAM cylinders. I had $11k set aside and the top was about $8k

I now have $30k set aside for a new engine that will cost me about $20k. So I am not setting aside any more money for the time being.
 
Last edited:
EdFred said:
I don't. Engine might last another 2 hours might last another 2000. Oooooh, I'll put away $15/hr for an engine reserve. Yay! I have $30 saved up when it blew. It's pointless.
Click to expand...

You might die in 2 hours or live to be 115 years old. Should you save for retirement or is it pointless because you might die at any time?
 
ScottM said:
I do set aside money.

I had $5k set aside when an AD required me to have a top overhaul done that cost me about $7k.

18 months later another AD required me to replace three of those cylinders and I instead did another top with OAM cylinders. I had $11k set aside and the top was about $8k

I know have $30k set aside for a new engine that will cost me about $20k. So I am not setting aside any more money for the time being.
Click to expand...

During my second annual my A&P told me I needed to start budgeting for a rebuild, probably by the next annual. He estimated $23k for the whole job. 6 flight hours later, the engine blew at 1,00 feet and 5 miles from a landing strip. The crankshaft, Core and everything else was toast so no core credit. That $23K turned into $34k and the new hurricane windows for the house got put back another year.
 
JOhnH said:
During my second annual my A&P told me I needed to start budgeting for a rebuild, probably by the next annual. He estimated $23k for the whole job. 6 flight hours later, the engine blew at 1,00 feet and 5 miles from a landing strip. The crankshaft, Core and everything else was toast so no core credit. That $23K turned into $34k and the new hurricane windows for the house got put back another year.
Click to expand...
I'll save some more then.

Your story, is a good one. The pictures are worth a thousand words on how to fly an airplane after major inflight problem.
 
Club aircraft, we set aside hourly rate to have estimated cost "in the bank" if we make it to TBO. Over 1/2 way there now.
 
BillTIZ said:
Club aircraft, we set aside hourly rate to have estimated cost "in the bank" if we make it to TBO. Over 1/2 way there now.
Click to expand...
Typical of a club, would you, if you owned the aircraft and was not renting it out to others?
 
Hard to save for a moving target. I'll deal with the engine overhaul when it comes. Last time, I went 500 hours over manufacturer's TBO. Solid engine all the way.
 
Fearless Tower said:
To me, it kind of depends on how I'm using the plane. I don't withold anything for an engine reserve on my 170, but that is because I bought it with a low time engine and plan to sell it well before it needs an overhaul. If something really bad happens, it is like Ed said. A few hours of a reserve isn't going to matter much.

Now, if I owned an airplane that was heavily used and I knew I was going to have to overhaul it, I would more than likely include the engine reserve in my budget. If the plane was going to be a lease-back, then you better believe an engine reserve would be factored into the rate.
Click to expand...

That's not the question. Would you set the cash aside in a separate fund?
 
If you can keep on working to support your lifestyle after you die, even if you need to borrow some money for a while, why would you need to save for retirement?

Jim Logajan said:
You might die in 2 hours or live to be 115 years old. Should you save for retirement or is it pointless because you might die at any time?
Click to expand...
 
wabower said:
That's not the question. Would you set the cash aside in a separate fund?
Click to expand...

I know clubs, rental agencies and part 141 schools, do it as a matter of survival, But I see almost every time we have a question about buying an aircraft somebody says the new buyer must run a engine reserve.

I was wondering how many owners actually do charge themselves a set fee per hour, and place that in a reserve account.
 
I think it is good to know the realistic cost and to have a plan to cover that cost but saving for it? Damned near impossible since they seem to fail just when you need them the most.
 
I am confident that I could buy an engine as-needed. I do not set a separate fund aside.
 
Clubs do it because they typically own their own planes. The schools and rental companies often lease rather than buy, and don't fund their reserves.

Tom-D said:
I know clubs, rental agencies and part 141 schools, do it as a matter of survival, But I see almost every time we have a question about buying an aircraft somebody says the new buyer must run a engine reserve.

I was wondering how many owners actually do charge themselves a set fee per hour, and place that in a reserve account.
Click to expand...
 
wabower said:
That's not the question. Would you set the cash aside in a separate fund?
Click to expand...

Of course - if the plane is on the rental line, I'll have a separate account for it, so the additional reserve factored into the rate will continue to build up.
 
So, what we are saying is, in general aviation private ownership engine reserves, don't exist?
 
Tom-D said:
So, what we are saying is, in general aviation private ownership engine reserves, don't exist?
Click to expand...

For me? - no, I don't keep an engine reserve. Would only move bits of money from one pot to another. When the time comes, just have to pay for it.

Gary
 
Tom-D said:
So, what we are saying is, in general aviation private ownership engine reserves, don't exist?
Click to expand...

I simply used my home equity line of credit for the engine overhaul on my cherokee 140 (no primary mortage).
 
I'd guess that's the correct answer in a high majority of cases. If the cost of the airplane represents only a very small percentage of the owner's tangible net worth (as I believed it should) then the cost of an engine represents an even smaller percentage and shouldn't be difficult to fund whenver it becomes necessary.

The reason that co-ownership and flying clubs are such logical choices for many owners is that both the investment and the potential exposure to expensive repairs is significantly reduced.
Tom-D said:
So, what we are saying is, in general aviation private ownership engine reserves, don't exist?
Click to expand...
 
Depends. For a personal aircraft, it's just another accounting mechanism. If I don't have the money for major expenses, I should be very careful flying.

For the business aircraft, I factor that into the amount of money we attempt to receive per hour of flight time, and do keep a separate bank account towards engine overhauls and other big expenses (props, etc.).

It is a good idea to have reserves set aside, because even if your engine goes past TBO, your props might not. Or (our current issue with the 310) you could have an avionics failure. Right now we're working on raising money to replace the Flight Director and HSI that went out. I suppose after 25 years they earned the right to die...
 
wabower said:
If you can keep on working to support your lifestyle after you die, even if you need to borrow some money for a while, why would you need to save for retirement?
Click to expand...
I'm wondering what kind of lifestyle you are planning to have after you die. Isn't that an oxymoron? :rofl:
 
My guess is fewer than 5% of individual, non-comm owners have a reserve.
-most of us are optimists 'that old engine will surely last another 5 years at least'
-most of us are poor at long term planning. Planning for tomorrow's flight, sure - but for repairs years hence? Not too likely.
-engine o/h can be pretty difficult to predict. Its not like they all need it at the book numbers.
-say I have $10K free right now and need to chose to either put it in the bank at 0%, or maybe an investment at 4%.........vs paying off my mortgage at 7% -- I'd think most are going to pay down the note and hope they don't need the money for an o/h this year.
-if the engine craters, it's not going to interfere with anything really important like a job/business. It's going to mess with leisure/hobby. So most don't see any urgency in saving for it.
-Or, if you are sitting pretty you really aren't worried about finding $ to fix the motor. No reserve needed as you are typically in good enough position to take care of it at any time.
 
Dave, that's probably pretty accurate. The other thing with private owners is that if you can afford the engine overhaul, then you probably don't care about specifically saving up and having a separate bank account. For businesses (especially ones that can bill out the use of the plane), it's a different matter.
 
And for clubs/group ownership......they might have to have an ongoing reserve, otherwise, people might bail as soon as the asset loses considerable value.
 
It's hard to discern one from the other if you live in Cincinnati.

Everskyward said:
I'm wondering what kind of lifestyle you are planning to have after you die. Isn't that an oxymoron? :rofl:
Click to expand...
 
I think it's more likely that they recognize that some ongoing change in membership is inevitable, and are simply doing as much as possible to match costs and revenues.

Let'sgoflying! said:
And for clubs/group ownership......they might have to have an ongoing reserve, otherwise, people might bail as soon as the asset loses considerable value.
Click to expand...
 
Am I going to still own my current aircraft 1000 hours from now? At my current use rate we are talking 20 to 50 years from now. Trying to save $xx.xx per hour for an overhaul at the recommended TBO seems silly. On the other hand, it could blow up on the next flight. Any money saved up at $xx.xx per hour would not make much of a dent in the cost.

I just pay as I go.
 
I have a bunch of large oak trees in my yard. I could have a reserve fund in case one of them falls on the roof.

And I might also have a reserve fund in case my A/C dies.

Or if we have a flood or a tornado,

My car is paid for. If it suddenly has a major problem and I need a new car, well, another fund.

So I just have one reserve fund and hope that I don't have more than one or two things happen at the same time. If something worse happens then I raid my investment account or draw down a home equity line of credit. But having specific reserve funds for each possibility doesn't make too much sense to me. And if I was living that close to the edge, I probably wouldn't have an airplane anyway.
 
We debated this pretty good in our LLC. All three of us are probably solvent enough to deal with an overhaul even though we don't expect to need one for a while.

We eventually decided to run a $25/Hr reserve that we could vote to use for just about anything at any time. This tended to make things "more fair" since I'm putting 50% of the hours on the aircraft right now. Thus, I pay a heavier share of MX costs.

Otherwise we all hate to see capital sitting around making bupkis on return, so it was a tough decision.
 
$12 hr goes into OH fund for my plane
 
I don't have a plane but if I were fortunate enough to get one I do think I'd pay in to a engine fund. Your not loosing use of the money its still there and earning a paltry interest rate for you. Currently I rent and have a separate flying account
 
well there is always ol' blue to worry about...it has been 170K miles since its last overhaul
 
You must log in or register to reply here.
Back
Top