Want to save money on flight training or time building? A leaseback with The Flight School at Colorado Springs may be a great option. Over time, a student time-builder may see the entire cost of training and time-building paid for by an aircraft leaseback. Aircraft management agreements, or aircraft leasebacks, come with risk and require adequate up-front capital or credit, but those who undertake them often find these arrangements well-worth the benefit.
Through The Flight School’s management, a leased-back aircraft can allow other students to train in and build time in your airplane. While only for students with the up-front capital and credit to make the investment, this sort of arrangement can help reduce the cost of aircraft ownership and help pay for training.
Disclaimer: No one with The Flight School at Colorado Springs is a financial advisor. Consult your financial advisor before making large financial decisions, such as purchasing an aircraft.
What is an Aircraft Leaseback?
Under a leaseback agreement, The Flight School at Colorado Springs manages an aircraft for a private owner while renting the aircraft to its students and time-builders. The Flight School handles marketing, scheduling, maintenance, regulatory compliance and revenue collection. The aircraft owner simply collects the profit (or pays the bill) at the end of each month.
How does an airplane leaseback work?
A leaseback agreement is fundamentally a management agreement involving an aircraft. The owner provides the airplane and The Flight School at Colorado Springs collects revenue generated by its use, pays all the expenses associated with the aircraft’s upkeep and then cuts the owner a check at the end of the month if revenue exceeds expenses. If the aircraft doesn’t fly as much or requires a substantial amount of maintenance and expenses exceed revenue, the aircraft owner receives a bill.
One major advantage of leaseback for many aircraft owners is the reduced hassle—The Flight School at Colorado Springs handles all the exhausting details, including all the paperwork. The Flight School collects a percentage of the aircraft’s revenue as a management fee. This way, if the aircraft doesn’t make money, the owner doesn’t pay a fee.
Is a Leaseback Profitable?
Short answer: sort of. Longer answer: it depends on your goals. For most private investors seeking to maximize value on an investment, purchasing an aircraft is not going to be the most stable investment. For aviators, however, the return is different.
Students and time-builders who plan on spending substantial amounts on aircraft rental costs might find that an aircraft leaseback eliminates paying a higher margin overall on aircraft rental. In other words: owning the aircraft you train in saves you money on training.
Those building time or learning to fly may also see that a leaseback allows an opportunity to save on cost while learning about airplanes, maintenance and aviation business in general—a great additional educational return.
For many aircraft owners, the appeal isn’t about education: it’s about the pride and freedom of aircraft ownership. Fly where you want and largely, when you want. (Yes, I hear the owners in the back snickering at the idea of an aircraft in the shop meaning “freedom.”)
How can I make a leaseback more profitable?
Choose an aircraft others will want to fly. How much an aircraft owner makes from a leaseback depends on the aircraft and its expenses. How much is the aircraft flown? Do students enjoy flying the aircraft? Is the cost to the student affordable enough to beat the market? Do students feel safe in the aircraft?
At The Flight School at Colorado Springs, we typically only agree to leaseback aircraft we believe will fly consistently and aircraft we are certain are safe. Our goal is to innovate with regard to how aircraft are scheduled and used in order to keep prices lower than the competition while still maximizing revenue, and so far we’ve seen great success.
Do I have to already own an aircraft?
Not at all. In fact, it’s sometimes better if you don’t. The Flight School at Colorado Springs can help you through the complex process of aircraft purchase. Call us today to schedule a discussion of how to find the right aircraft for you.
Pros & Cons to Aircraft Leasebacks
Aircraft leasebacks can generate substantial gains for aviators who want to invest in the assets used for their own training and time-building, but they do also involve risks and present a number of drawbacks—especially barriers to entry.
Pros to Aircraft Leasebacks
- Owner cost of flying the aircraft is much lower than renting.
- Fix costs of aircraft ownership (hangar & insurance) is often covered by revenue.
- Many owners find they can pay off their insurance.
- Maintenance is performed at cost by The Flight School.
- Leasebacks can often generate positive cashflow—even after all expenses have been paid!
- Some owners find substantial tax benefits to leaseback arrangements
- If profitable, proceeds from a leaseback can cover the other costs of training
- Guided aircraft ownership with The Flight School at Colorado Springs can be a great educational opportunity!
Cons to Aircraft Leasebacks
- If you purchase an older aircraft for leaseback, poor previous maintenance may lead to unwelcome financial surprises
- Purchasing an aircraft to leaseback requires upfront capital investment and/or the ability to borrow against an aircraft
- Higher rate of use compared to keeping a personal aircraft means more maintenance costs and faster overall wear
- Leasebacks are typically not great investments unless you’re training and/or time-building
How Much Can I Save On Training With a Leaseback?
Leasebacks offer an opportunity to put funds you might otherwise use for training to work for you. Leasebacks with the flight school can, of course, save no money if your aircraft doesn’t fly at all. Generally, the more your plane flies, the more it saves you. The obvious exception to this rule is when your airplane flies so much it breaks, but that’s just part of the risk.
At The Flight School at Meadow Lake, we price aircraft such that at breakeven, or the point at which the owner breaks even on fixed costs each month, the owner saves 20 to 25% on the overall cost of training and 80 to 90% on the cost of time-building. We’ve found this balanced price structure brings the most benefit to all involved: the school, the customer and the aircraft owner.
Are leasebacks good investments?
No. Typically, investing in training aircraft is not a good financial investment unless you’re training or time-building. The return on investment is not the same (and not typically good) if you are not otherwise spending the money on training or time-building.
Is a leaseback a good idea?
Sometimes. A leaseback can be a good idea for students, time-builders or pilots who want to reduce the cost of aircraft ownership. Seeking an aircraft leaseback as a cash flow investment, however, will likely lead to disappointment.
Do aircraft retain their value?
Some aircraft retain value well, while others don’t. Typically, aircraft do not retain value well, but over the last few years, many aircraft (especially training aircraft) have, in fact, sold for more than they were purchased for. This isn’t always the case, but some owners have been pleasantly surprised with the unexpected appreciation.
What are the risks to an aircraft leaseback?
Aircraft are like boats—except they sink faster. Aircraft ownership risk is only somewhat mitigated by insurance, and risk still abounds. If something breaks and the plane needs to go into the shop for a month, not much will protect against the loss of revenue—or the bill. Demand for training can plummet or fuel prices could spike. The risks of aircraft ownership can be somewhat mitigated, but the reality is that an aircraft is not so much a sound investment as a way to accomplish a goal or set of goals.
