Selling An Aircraft, A
Posted on Apr 27 2023
A decision that you will have to make if purchasing a jet aircraft Is whether to enroll it on an engine program or if it is already in such a program, whether to continue with it.
Now, if you have never owned an aircraft previously, or if your experience is with pistons and turboprops, you may reasonably ask,” what is an engine program?”.
Simply put, an engine program can be thought of as insurance for your engine. Now, you may already have (actually, I hope you two have) insurance for your airplane as a whole. If you took a loan to help with the purchase you almost certainly will require insurance as most lenders will require it. However, a jet engine is very expensive to purchase and repair, and typically will require two expensive maintenance events that certain hourly intervals. These are the hot section inspection and the engine overhaul. For a typical small turbofan engine, an overhaul could cost several hundred thousand dollars.
An engine program allows you to have an account set up to pay for these expenses. For every hour that you operate the engine, you will be billed a certain amount which goes into your account. The advantage of setting up such an account is that even if you have not paid in enough money to cover any unscheduled repairs that may arise, the administrator of the program will pay for the repair in full. This provides a degree of stability with regard to expenses, as long as the regular payments are made the expenses are predictable.
There are some potential disadvantages, with any such program you may be paying money for a service that you will never need. Since a major overhaul typically occurs after 3500 hours of engine use, if you only fly $100 per year it would take 35 years of payments before you get to use all the money accumulated in the account to pay for the overhaul. Additionally, if at some point in time you quit the program, for example, if you sell the airplane, you don't typically get the money back. If on the other hand you have set the money aside in a separate bank account that you control and earmark the money towards an overhaul, even when you sell the airplane you get to keep the money, and additionally, you can get interested on it, which you typically do not with an engine program. But if you have a large unscheduled maintenance event you may not have put aside enough money to cover that.
Obviously, such a program works well for some but not for others. It all depends on your specific situation, if you need advice regarding your specific circumstances, we would be happy to discuss it with you.