We have a 50/50 partnership and we contribute a fixed monthly amount for maintenance and other fixed costs. We are discussing a annual maintenance assessment for the partner that uses the plane more. (We would charge only for the excess hours/cycles of the partner using the plane more) Do any of you have something like this in place or do you use a straight hourly $ amount that covers engine reserve and maintenance?
Thanks in advance!

I have always thought that the shared costs should be insurance, hangar, and base cost of all mandatory inspections, including calendar limited items. Any other things, discrepancies, repairs, etc should be considered part of the flying marginal cost.

I think of it as - if I keep my airplane airworthy for the whole year, but never fly it, what should I expect to pay.

Let's say your partner flies 50 hrs more than you annually. He then advances the calendar maintenance times accordingly, which increase maintenance costs for that calendar year. By adding some hourly maintenance assessment for those extra hours at the end of the year would seem fair?
I wouldn't split hairs over a few hours but tens of hours is significant

Im confused. How does he advance calendar maintenance Items?

In a partnership the fixed costs should be split equally. An hourly cost is attached to each hour flown. You can settle that monthly, quarterly, or yearly. The partner not flying the plane isn't liable for anything other than the fixed costs,(Hangar, Calendar Items, Insurance, ect...)

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If you have say a 200 hr inspection and the partner that flies more flies 150 of those hours and the other 50, the inspection creeps up faster, hence causing more early maintenance costs for the pilot flying less. If both flew 50 hours a year then this inspection would be every 2 years, now it could be annual with 200 flight hours. Maybe I'm overthinking it but it seems to make sense?

You are in for some math and a hopefully a friendly discussion with the partner.
You are right, an few hours is not a problem. but when it brings forward inspections and time/cycle limited items it can get huge. And possibly have an impact should you sell the aircraft also.

Seems that if you're not all paying an hourly rate for the airplane to cover engine reserve/maintenance costs/etc., then your agreement is lacking a key provision that would cover this situation.

We're covering the engine reserve on an hourly basis

I can sort of see what you're asking, but also not fully clear.

For clarity, you are currently splitting the fixed costs 50/50 and the variable costs are estimated and covered your hourly charge, right?

The concern (presumably from the lower utilization partner) is that the fixed costs are subsidizing the variable costs? Because some of the repairs that happen during the Phase/annual inspection are hourly/cycle/landing related and not calendar related?

In a perfect world, I could see that anything calendar related would be split based on ownership percentage basis, that priority usage would be allocated on a weekly basis aligned with the ownership percentage, and anything else would be covered either directly by the user (fuel, fees) or apportioned by usage. That might mean that things like carpet wearing out get put in the hourly bucket, ELT batteries get in the calendar bucket, but ship's batteries get put, hell, I don't know which.

Imagine that the high utilization partner flies 200 hours and the low utilization partner 50 hours a year. Did the tires wear based on hours (or landings, but I'd recommend choosing only one variable metric)? I'd say hours. GPS database is calendar. Radio repair work is hourly. You can really drive yourself cray if you're trying to split it within a gnat's ass of perfect.

A contrary point of view is that the higher utilization partner is also subsidizing the lower utilization partner by virtue of the fact that no one could reasonably afford to keep a C441 for 50 hours of usage per year. This is the fundamental partnership math working in favor of the 50 hour guy. In return, he might be partially subsidizing the 200 hour guy.

In most partnership cases, there is a good bit of consumer surplus created by the partnership and each partner is better off no matter how that surplus is divided. The checks are bigger when burning Jet-A, and I wonder/worry that the real underlying issue is that one partner is struggling to justify the 441 and that's causing him to start thinking about whether the division of surplus is fair or not. In such a situation, the other partner might have to yield more of the surplus to keep the partnership intact (provided that they agree that receiving part of the surplus is better than having no partnership).

Jim,

Thanks, good insight. Our situation is merely a discussion, and the differential in usage may be 25-35 hours a year. What we need to do is add some $ onto the hourly engine reserve and see how the chips fall. I wanted to see if others had a similar arrangement. It is nice to be able to split everything in half

Pros and cons for each method. We split almost everything by ownership percentage. Actual hours we fly is close to that percentage anyway, so, we just divide all by percent ownership except fuel where we each pay for out own. However, if ownership didn't accurately reflect percentage of hours, I could certainly adjusting variable costs for that. We'd probably keep fixed costs based on percent of ownership.

Has to be fair to each party and this this has worked very well for us. I've been in other partnerships where it was done differently. Each can work if you look at it and it's equitable for everyone. One can spend a lot of time on this; you just have to reach a reasonable understanding that is mutually acceptable.