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Author Topic: Maintenance budgeting  (Read 1105 times)

Offline Name_Omitted

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Maintenance budgeting
« on: December 01, 2010, 10:46:39 PM »
Presumably, our accountants know how much we are going to spend a month on "B" checks.  I would like a check-off under Airline Settings that would allow our accountants to deduct the cost of "B" checks over the course of the month, so the maintenance cost "hit" would be distributed evenly across all four weeks.

I would also like this available for "C" checks, but that is less of a priority.
« Last Edit: October 18, 2011, 09:19:20 PM by sami »

Jps

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Re: Accounting option for "B" Checks.
« Reply #1 on: December 02, 2010, 08:33:26 AM »
I think just the other way around; Since B checks usually cost under 100k, I don't see why such small sums should be reserved. You lose a lot more money when the planes aren't flying for a day than for the check itself.
However, for a C check this might be a good option, so you could still perform it if necessary even if you have low cash balance. Also real companies (not sure of airlines, though) do this for their bigger investments: they put money each month/year aside to spend on future investments, and can deduct that money from their profit, thus paying less taxes.

Offline Sami

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Re: Accounting option for "B" Checks.
« Reply #2 on: January 04, 2011, 06:05:54 PM »
B checks are so small in terms of required cash that separate accounting for them is not needed.

However pre-funding the C/D checks is common practise and should be included here too.

Offline Sami

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« Last Edit: October 18, 2011, 09:30:21 PM by sami »

oswegobag

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Re: Maintenance budgeting
« Reply #4 on: November 07, 2011, 01:14:15 AM »
Any update on this feature request?

Thanks!

AndyS10

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Re: Maintenance budgeting
« Reply #5 on: August 09, 2013, 12:19:27 PM »
Just to add to this thread, IRL airlines and lessors agree not just the monthly lease rate but also the “Maintenance Reserves” for the aircraft which (vary by aircraft, its MPD and the Lessor) generally include the following charges:

1.   A Charge per Flight Hour. This is mainly used to overhaul the engines, but can also include contributions to overhauling the APU and C/D Checks. If the aircraft is a Prop, this would also include Prop Overhauls.
2.   A Charge per Cycle. This is mainly used to replace the Life Limited Parts of the engine (LLPs) which is basically the very expensive turbine and compressor blades. It can also cover Landing Gear overhauls and other miscellaneous items.
3.   A Charge per calendar month. This is where the main costs of C-Checks and D-Checks are recovered although in certain cases an airline more likely to have its C-Checks driven by utilisation might negotiate this into an hourly cost. It would also be how an airline budgets for making general repairs to the interior or structure of the aircraft although this is not normally mandated in the lease agreements.

The principle is that these funds are paid by the airline to the Lessor of the aircraft on a monthly basis and when the various items become due for overhaul, the Lessor releases back the accrued funds to the airline to help pay for the maintenance. In this way an airline cannot simply keep “stiffing” the Lessor by handling back aircraft as soon as the heavy checks become due, leaving the lessor with big out of pocket expenses. This system has the advantage of assisting some less than prudent airlines in ensuring that the bulk of their heavy maintenance costs are provisioned for. An airline which owns its own fleet can of course account for its heavy maintenance any way it pleases.

For AWS having a set of costs associated with a lease would help prospective airlines evaluate competing types. I would envisage that there is the lease cost and in addition a cost per flight hour and a cost per week/month to account for elements of the A to D Checks.

IRL the maintenance reserves rarely cover the full cost of the maintenance required and so individual airlines often include a contingency cost in addition to the contractual lessor reserves in order to avoid too many nasty shocks to their books.

Offline Name_Omitted

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Re: Maintenance budgeting
« Reply #6 on: January 26, 2015, 05:47:23 PM »
A simpler option for this might be to give us a separate maintenance account that we can set to fill with an auto draft from the main account every week, and have maintenance costs come out of that account first, before touching the cash account.  This would allow us to use a hybrid accrual accounting system.

 

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