I agree, everyone has their own strategies. Aside from "purchase budget" I haven't heard any of my 15 managed clients factor in CAPEX with their operating budget.

CAPEX is important but not to be mingled in with OPEX.

Mike has me excited. Just didn't realize how stupid I was

But I am so excited. I have been running some numbers. I am going to talk to my wife about trading in her G on this 1984 Winnebago.

The carrying capacity and range on this beauty is unreal. Can carry 10 people with more range than the G. Gets 5 miles to the gallon, but what I am saving on Capex with the G, I can buy 6000 gallons of gas per year. Parts are hard to come by, but there is a guy in Wisconsin that has lots of parts and still works on these things.

I can even put some new paint on it, and shine the tires!!!!





Now I going to run some numbers on our home. I could probably buy a whole trailer park and live in a different trailer every day of the week

It is a form of willful blindness that exists in aviation to ignore the cost of money.

The total economic impact of having or not having an airplane has to factor both CAPEX and OPEX. Discounting one or the other distorts the result.

It isn't just the purchase price that matters, hull value drives up taxes, insurance, and can even lead to more limitations on operation due to insurance requirements.

Mike C.

I gotta agree with Mike - you can pretend CAPEX is not the same as OPEX, or ignore it, or whatever… but at the end of the day it costs some amount per year to own the airplane and fly it some number of hours. Capex is part of that.

Now, the only true, correct answer to that is - “I find it worth it.”

And it is a very difficult argument to overcome.

"I find it worth it" is the most honest answer.

The issue with Mike C's arguments that I have is he is only focused on costs, it's his money, great. But, some folks are cost conscious differently and therefore CAPEX means less than OPEX. Mike C thinks to seem if we all don't see it his way, you're wrong.

I have a very very good friend who flies a CJ3+, he's very successful. As he told me, I could do it cheaper with older, or longer with less $'s, or .....(fill in the blank). But I like going high and fast and comfortable and with the latest and greatest, and so do my friends and family.

Oh, and he says, "I can f8k'ing afford it and I don't care how much it costs."

Pretty sure that’s what I said. Minor difference in phrasing.

This is hard to believe given my experience with the TBM. Was the expense related to a certain item or part of a phase inspection? All of our annuals have been straightforward and no surprises (we just finished the last warranty annual so hopefully this continues). Also we have had zero AOG in over 4 years of ownership (again hopefully continues).

For some reason I had in my mind that the CJ3+ was the smallest jet that fits the bill. I did not realize the CJ2 / M2 had 6 seats in the back. This will require more investigation.

As far as CAPEX vs OPEX.... An airplane is an asset, no? So it is subject to depreciation (typical market) or appreciation (crazy post covid world). All compared to the risk free rate of the cash value this is the cost of ownership. Right now I am confident I could sell the TBM for what I paid for it. The Bonanza I sold before the TBM also brought more than it was purchased for. Maybe I should buy a big Gulfstream next and make it worth my time! In all seriousness, this is a personal airplane with no tax benefits. It will probably not be my best investment ever and hopefully not my worst either.

The maintenance dollars are the hard ones to pay. You get what you pay for with the CAPEX and a nice airplane. High OPEX makes it less fun to go jump in the plane and burn $$, but again, I'm getting something for it. Maintaining an older AC sounds like (a) a headache to manage (b) disappointment of unscheduled AOG (c) I don't get anything directly for the money spent other than to keep using what I bought. Plus there is something oh so special about that "new plane smell".

That's the willful blindness part, they don't feel CAPEX like they feel a fuel bill. But the impact is there regardless.


Being aware of what it actually costs and doing it anyway is just fine. That's how these decisions SHOULD be made.

I still find it weird when somebody with a $5M airplane says my Citation V costs too much to operate. That's being blind to the true cost of CAPEX.

Mike C.

Lowly piston flier here.

I get asked all the time "how much does it cost to fly to dallas"
If I say it's a couple hundred bucks in gas I always get oohs and aah that's cheap!
But that's not even close to the whole story is it? We all know that.

When someone asks you how much it costs you to operate your jet you can certainly say "well at 200gal/hr at 4 bucks a gallon it costs about 800 bucks an hour"
But we all know that's not the truth because there are so many other costs that you're leaving out. Same thing if you don't consider the cost of money in the cost of operating, you're just lying to yourself.

That said, if you can afford it without financial strain who cares?

Mike wants to convince everyone that his way is the smartest method for owning a jet. I tend to agree with him, but he never seems to be willing to accept the fact that for the majority of jet owners (or airplane owners in general if we're being honest) it has little to do with the making smart money choices. And those that continue to argue with him while trying to find ways to justify the expense aren't going to ever find a way to convince him that you're right, because at the end of the day his math is sound and the only reason to own a new jet over an older jet with similar specs is because you want to and you can.

In inflation adjusted dollars?

Just getting the same number back isn't actually breaking even versus what the money was worth or its potential return in another investment.


That's the prevailing wisdom but there are a lot of things that undermine that philosophy. One is that the new planes tend to be on expensive programs, particularly the jets, which are serious buckets of money per hour. These programs are profit centers for the OEMs, so on average, you don't win. They trade low cost for predicable cost.

Another issue is that newer planes have more onerous inspection schedules. The OEMs are always increasing those schedules and the newer the plane, the more there is to do. The older airplanes often have less onerous schedules.

My plane is an a low use program which greatly extends my intervals. I basically do a half annual every 3 years and a full one every 6 years in terms of scope. I am working on the Citation significantly less often than my prior planes. For all of 2023, my plane has been in the shop for about 14 hours (6 hours for transponder/RVSM checks, 6 hours for some 10,000 hour inspections, 2 hours for a phase 18 safety inspection). All events were single day events. Next year, no 10,000 hour check, no transponder checks, it could be even less!


That's true and that's one reason you should be aware of the CAPEX cost. Maybe that $2K fuel bill sticks in your craw, but what about the $15K of interest or lost investment income each month that your CAPEX is costing? Out of sight, out of mind, but it is there.

For my plane, I have to become emotionally compatible with what it costs to put fuel in it. Some people can't do that but can buy something significantly more expensive that burns less (like a TBM or PC-12). They got past the CAPEX event and now feel better about OPEX. I would have trouble with the CAPEX, all that sunk money at risk, not earning investment income.

In my case, I could choose to buy a CJ3 for $5M, finance $4M at 8%, or a Citation V at $1M. Same $1M initial outlay. But then I am paying $27K PER MONTH on the aircraft interest. I am not emotionally compatible with that. It is more than I spend on fuel IN TOTAL.


My plane was a bit of headache at the start due to latent issues left from its service center maintenance history. Now that those are addressed, it isn't a headache at all. Indeed, the long inspection intervals are fantastic. I spend a lot less time on the Citation than I did on the MU2 due to this. I always fix things for the long haul, what will stay working the longest period of time.

I had one AOG event, hydraulic line leaked. Expensive, annoying, cost me 36 hours delay. Other than that, very reliable. The avionics refit probably helped a lot.

Even new airplanes require maintenance and can have AOG events.


If you want that smell, pay for it and be happy.

But it isn't the cheapest way to fly.

I'm all about getting the most airplane I can for the money. Others have different motivations.

Mike C.

Pretty sure that’s what I said. Minor difference in phrasing.

CAPEX and OPEX are evaluated separately. You can add them together when you choose to. Some owner/operators aren't as concerned about CAPEX as you are.

I was just in your exact position. I was flying a 2015 TBM 900, but with two kids under two and two dogs, it wasn't cutting it. And if I'm flying, add a nanny.

I presumed the PC-12 was the answer. I arranged a test flight and literally brought my checkbook. After one flight, I passed. The thing handles like a minivan and I felt like a soccer mom flying it. Didn't love the avionics. Thankfully my wife said, "you fly because you love it. Don't buy a plane you don't want to fly!"

Next up I flew a CJ3+ briefly. Fun to fly. But at that time, a friend with a Phenom 300 offered to dry lease it to me. I got about 25 hrs in the plane. Much more capable than the CJ3+, though I thought less fun to hand fly. But importantly, my wife felt it was too cramped to chase toddlers and dogs around.

So I bought a Piaggio. Luckily, I was able to buy a 2004 with ~2900TT. I Garmined it and added all the bells and whistles: adsb-diversity, tcas2, gogo, and haven't looked back. I have just under 100 hours in the plane now (incl trans-Atlantic). The 5'9" x 6'1" cabin is fully stand-up for my wife. I find it very fun to fly. It's fantastically capable. It sips gas. And it has thrust reverse, which none of the light jets have, which is a really nice safety feature on a contaminated runway. It is crazy quiet (quieter than the Phenom). It is a rock in turbulence: despite the the 125 kias vref, I frankly find the thing easier to land than the TBM in gusty conditions. And it has an effective ceiling of FL390-410, which helps you get over a lot of weather where the TBM and PC-12 get stuck inside.

On cost:
(1) the combined cost of a TBM and Piaggio is less than a CJ3+. (I haven't sold my TBM... yet, at least).
(2) The value of your Piaggio could fall by 50% over two years and you'll breakeven vs just the capital opportunity cost of a Phenom 300.
(3) Low hull value = low property taxes = low insurance costs. There are real advantages.

I am actually pretty optimistic Piaggio will end up in the hands of a new owner (note the news article this week that the Porsche family and an Indian-Italian businessman are the key final suitors), and this presents a very asymmetric value outcome. The price of the aircraft already assume the failure of Piaggio Aerospace. If a well capitalized owner buys it, the value of a Piaggio could double overnight. Find me another plane with that possibility!

Finally, my understanding is that the RVSM data is now available to Garmin and that a Garmin autopilot and EIS system could be available as early as next year, though I'm not 100% confident there.

The transition to the Piaggio from the TBM is also made easier by the fact they both have -66 PT6s, so engine management is basically identical.

(edit) Two final thoughts:
(1) Since certification in 1990, the Piaggio has had one fatal accident. That's pretty remarkable I think.
(2) In Q4 2022, I did some real due diligence on the state of Piaggio Aerospace, and the results were quite positive.

Anyway, pm me if you want to discuss further. Or, if you are a member of tbmopa, check out my post over there wrt the Piaggio. Good luck on your journey otherwise!

Ed

Great advice. You only live once, so enjoy it.


My V isn't a light jet? I have thrust reverse and it really does help. I can land with no brakes at all.


The Piaggio does have a lot of nice qualities.


Well, my V did that in the span of a few months, so it wasn't just a possibility, it actually did happen.


I've become disillusioned as to Garmin statements about autopilots, particularly in turbine airplanes. I hope your are right, but I would be very skeptical until they actually have it for sale.

Mike C.

It is pretty easy to evaluate the cost of capex.

The S&P 500 has a long-term return of about 10%. So, if I take $10 million and put it in the S&P, in 10 years, I'd expect it to be worth $26 million.

If I put $10 million into an aircraft, and do it well, it's probably worth $6 million after 10 years.

So the true "capital cost" of my airplane over 10 years is $20 million-- that's how much poorer I am after 10 years.

Now, you could debt finance your aircraft, but even doing so at a cost of 10-year Treasuries + 250 bps, you're at 7%.... which isn't a lot better than 10%. But it helps.

To put real numbers to this, my TBM is probably worth 9% more than I paid for it in Aug 2020. Given aircraft values generally decline, that's a pretty good outcome. But had I invested that money in the S&P 500, today it'd be worth 33% more. That difference is about $700k, or $230k per year, or in my case more than half the total cost of ownership.