If maitenance costs per hour go up as utilization goes down then those costs
aren't strictly variable.

I would try to set prices so that every plane get reasonable utilization.
If you follow your current philosophy some airplanes may go into a virtuous
cycle where high utilization lowers cost which raises utilization and the
182 enters a vicious cycle where lower utilization results in higher cost
driving even lower utilization.

Mike
MU-2


"Andrew Gideon" wrote in message
gonline.com...

I'd like to acquire the available wisdom on pricing flight time (though
I'll
forgo standing on a single leg for now {8^). This is for a club, but I'm
sure it's the same problem for a partnership or even a single owner. The
only difference is that a club has multiple aircraft, but we price such
that no airplane can subsidize another. So that we've multiple aircraft
shouldn't be much of a difference (at least as far as I can see).

My question: How do you decide what it costs to fly for an hour?

I know the basic idea is to accumulate all the variable costs and fit this
into the price somehow. But, as far as I can tell, this makes an
assumption: that each hour costs the same.

For fuel, this is probably not too far off. But I've some small evidence
that, for maintenance, this can be quite a bad assumption.

The scenario that's raised this in my mind is actually, on the face of it,
a
Good Thing. My club recently went from three to four aircraft. But we
still fly about the same amount of time as before. So aircraft
utilization
rates have gone down.

This is a Good Thing, in that booking an airplane is now far easier.

However, the drop has impacted one particular airplane more than any of
the
others. It's the "middle" airplane: neither a 172 nor a 182RG; "just" a
182.

As I wrote, the change to availability is terrific. But the reduced
utilization has a pricing impact, and I'm afraid that it's going to worsen
the utilization over time.

While variable maintenance costs on this airplane may be lower than in
previous years, they're still higher on a per hour basis because of the
smaller number of hours flown. This will drive the price of the plane up,
causing utilization to drop further. Repeat.

If we were correct in our assumption that all hours cost the same, then
this
wouldn't happen. The cost of maintenance would drop proportionally with
the hours flown, and the aforementioned cycle of rising price and dropping
use wouldn't occur.

But the drop in maintenance cost is not fully proportionate, and the
per-hour maintenance cost is going up.

So...how does one avoid the cycle of rising price and dropping use that
I've
described. One obvious choice is to bring in enough members to drive
utilization up again, but that would cost us our good availability.

Any other possibilities?

- Andrew