Talking about Leasebacks

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Talking about Leasebacks

Postby designrs » Sat Jun 11, 2016 4:53 am

eyeflygps wrote:how do the finances work out on a lease-back situation such as this? Does the owner pay all expenses and get an hourly rental fee in return? It seems like after covering variable cost, the amount going toward your fixed cost might not be a lot. I'm just curious because I've toyed with the idea of a lease-back, but not very seriously. Thanks.

Leaseback situations vary greatly. Sometimes they are successful and sometimes they are not. A few major factors:

Does the flight school have LSA experience? Do they have make & model experience? Can the flight school properly train and maintain a LSA? Do they have the maintence experience? Who is doing the maintence (it had better be someone ROTAX certified with LSA experience). Does the owner have much maintence oversight experience?

Will the plane be hangared?

Do they have the demand to keep the plane flying? Does the weather at the location allow the plane to fly often?

How involved will the owner be? What type of relationship does the owner have with the flight school? Is the owner leaving the plane at a facility (rarely seeing it) or will the owner be present on an almost daily basis?

Then it's a matter of agreeing who pays for what expenses, and where the revenue points will be. The plane rents for $XXX per hour. The flight school pays insurance. Look at both fixed cost (hangar and insurance) and hourly costs (fuel, maintence, TBO fund, etc.) Expenses are $XX per hour. Owner receives $XX per hour.

Also consider financal objective of the owner.
Reduced cost of ownership, tax strategy, or profit?
If it is for profit the plane needs to fly a significant number of hours.

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Re: Talking about Leasebacks

Postby drseti » Sat Jun 11, 2016 6:18 am

I was on the FBO side if a leaseback arrangement recently. When my new SportStar was down for extended maintenance, the former student who had bought my old one very kindly leased it back to me for the duration. His objective was neither cost sharing nor profit, but rather a most generous desire to keep my flight school operating. I covered hangar, insurance, inspections, fuel, and maintenance labor. He covered parts and materials costs. We split the Hobbs fee 80/20 (I got the 20%), so he ended up with a bit of cash, and I ended up not going bankrupt! I believe it was a win-win.
The opinions posted are those of one CFI, and do not necessarily represent the FAA or its lawyers.
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