Size of school to be profitable

[stol701]

How large would you say a school has to be, and how many hours per airplane a month, before it becomes somewhat likely to make a good revenue/profit?

Let's say "good" is defined as "being able to pay good salaries to everyone in the school and then more than $200,000 on top of that per year"

[photofly]

How large would you say a school has to be, and how many hours per airplane a month, before it becomes somewhat likely to make a good revenue/profit?

Let's say "good" is defined as "being able to pay good salaries to everyone in the school and then more than $200,000 on top of that per year"

What is a "good" salary?
What are the fees to use the airport?
What are the hangar and office rents?
What maintenance facilities are available and at what price?
What arrangements can be made for fuel?
How many flyable weather days are there per year where this flight school is located?
What finance arrangements was the owner able to arrange for the aircraft?

[stol701]

So there is no magic number like 5-6 airplanes at 120+ hours per month per plane?

Let me try one more time and I'll stop (I knew before the first time that the question is borderline idiotic but thought someone here might normalize it with some practical example)... Here's my second try...

You can definitely always manage to be losing money. What would be the minimum it will take to make money?

[stol701]

But more than 1 airplane 1 instructor

[DanWEC]

Make 200k profit a year? That's not an FTU, that's a strip joint.
An optimistic profit for dual time is 20 bucks an hour. That's just the airplane. Now take all fixed and hourly costs out of that. Rent for a small hangar at a major airport might be 10k a month or more.
Way too many other variables to have a "magic number". Not even close. It's a business and needs a plan and model.
Single plane? C'mon. Even if you magically dont pay rent, mx, or insurance, do the elementary math on how many hours that single plane would have to fly in a day to profit 200k a year. There ain't enough.

[trey kule]

In order to determine a "magic" number, it is necessary to use a number of assumptions.
The more assumptions you use, the more inaccurate the estimate becomes as a rule.

So. To reduce the number of assumptions, you need to formalize as many variables as you can.

then make a plan. Then assess it to see if it is going as planned, and reformulate.

Which doesnt answer your question at all except to say there are just to many variable involved.

Profit is typically determined by ROI. or return on investment. a C172, for example can run from about 25k to over 600k for a new one after import and GST. 10% of 25k is 2.5K and no depreciation to speak of. 10% of 600k is 60k and depreciation of the aircraft frame..
Does your target market allow you to fly junkers? Will the maintenance on the old birds end up costing much more than a warrantied new plane.

Dont get caught in the trap of buying the airplanes first. Do a proper market ana;ysis to determine how much it will support, and then work backwards. Otherwise you are simply playing a mind game and any number will work.

The above was a free opinion. Take it for what you paid for it.

[stol701]

Hi DanWEC, thank you.

I'm not sure if your mental model for a strip joint says that strip joints make a lot or a little. The ones I go to (occasionally) must be making more than that per month. So if I compare something (relatively small) to a strip joint it will mean it's close to unattainable. On the other hand if $200,000 is unattainable for a business then how is this to ever grow... I'm not thinking it should start making that much right away... But it got to get to a point where it's making at least that. I actually had it at $500,000 at first but edited that.

And I only added the "1 airplane" because in my second post I asked what is the minimum where you make money... and I'm sure with 1 airplane you can theoretically make money so I didn't want that to come as an option. But otherwise yes, I agree... 1 airplane is nothing... the 1 instructor is even more limiting than the 1 airplane.

trey kule, Thank you.

I do value free opinions and especially in this forum there's a few people who's opinions are worth more than zero, so I find it valuable source of nuggets. The 10% for example is valuable for me even if it's not right. And you do invest your forum time and life experience in this so it gotta be worth more than what I'm paying.

I agree the approximation errors become big when there are many variables. However this works in unexpected ways too because when there are a lot of variables there will be errors in both directions and they will cancel each out.

I'll be doing market analysis for sure. And I unfortunately don't have the money to fall in the trap of buying the airplanes first so I'm safe on that side. If anyone here is willing to help out with guidance on how to properly approach such a market analysis please add to this thread or send me a PM.

[DanWEC]

If you are seriously looking into running an FTU, that's a commendable endeavor. I've thought about it, but just not the right time for me. Tough business to make money in. Tiny margins, but the potential is there if managed properly.
As a disclaimer, I haven't operated one, but have had enough interest to dig into my previous employers quite a bit before putting it in the shelf. I'm sure some people can chime in with more experience.
There are many variables, but there are a few things I'd stick to if "I" were running the school.
-KISS!!! It can be enough of a headache. Don't intentionally complicate anything.
-Fleet consolidation, while a bunch of interesting, different airplanes might sound attractive from a marketing perspective, It could just murder you on Mx and logistics. Keep it simple.
Same philosophy goes for a twin- don't get a Seneca when a Seminole will fit the bill. Some schools have picked up PA34's or c310's with the idea of doing charters as well. Seems too complicated for me, might have worked for some, but your market analysis and feasibility studies would determine that.

I'd want to be a class 1, in-house examiner.
I'd want to work towards having my own AMO.

The rest, all depends on your market, model, target demographic, etc. Applying simple SWOT assessment will help you make decisions related to the other variables.
Large airport vs small? Rent can be insane but relates to client base, accessibility, etc. Also, a big revenue stream is overseas students. Many are more apt to be attracted to a larger city, but one bad month and your sky high fixed costs are suddenly putting you deep into red. I'd talk to a CMA to help you out with the basics like SWOT tests, etc to determine where you want to position yourself in these repects. Thinking of partnering? Thinking of collaborations with nearby colleges for aviation programs? Regional weather? Lots to wade through and pare down.
Best of luck if you pull the trigger!

[stol701]

Thank you again. This validates some of what I've been thinking. Yes, nothing other than C172 and probably a Seminole. I like other airplanes better than the C172 but even a Pipper seems too exotic for a flight school. The Class-1 in-house examiner and the AMO are also on the (wish)list...

I had not however considered the absolute must that a hangar is in Canada... Is it even theoretically possible to run without a hangar?... with covers... at least when starting and not enough income for a hangar? With this "global warming" I like it how it is this year... but of course I know it will not be like that every year. On my way to work today I was thinking to come up with a sticker for my car "I Global Warming!"

I don't think there will be a trigger. I think this will be prolonged and painful experience that will most likely fail miserably. But I'm considering to attempt a few nibbles and see. It's very much unreal for me right now. I have not been blessed with many years of aviation experience so it's definitely on the wishful side for now. There are a few variables that are in my favour but by and large it's all vapour still.

[5x5]

Starting from scratch can be very difficult as you have the additional challenges of establishing a new business and the reputation that goes with it. A better plan may be to talk to existing school(s) in your area and see about the possibility of buying in. Then you not only limit the initial investment but also have the opportunity to learn from the current owner/operator. With a phased-in buyout you eventually wind up with the company and all the experience and mentoring you gain from the current staff.

There is a tremendous amount of overhead managing a flight school, both from the daily business operations themselves plus the overhead from TC and all the regulations. It would be a daunting task for anyone not already experienced in operating an aviation company, and a flight school in particular, to start up a new one.

If you are going to try and start from scratch, look around for a partner or partners that do have the experience you lack. Perhaps you can provide more money and time/energy and get a more seasoned partner that has the knowledge and experience you lack but may want to participate on a lesser scale time-wise.

Good luck whatever path you choose.

And remember, while it's not an absolute truism, the old joke - "How do you make a small fortune in aviation? Start with a big one." - is true more often than than you'd like to think.

[stol701]

That's a great idea. I'll look into the "buying out" option.

The "plan" (it's not really a plan yet) is to start this in concert with an existing school in US and to get some students from the get go. However, I understand this is the main problem in business... finding customers. Even TC problems are somewhat easier to deal with than this. So I am going to go into this only if there will be enough people to prime it... and of course if all the stars align and there are airplanes and an obtainable location.

[digits_]

The easiest way to estimate on how to get 200k profit a year would be the following:
- You write of your airplanes over 5 years
- 200k profit a year would mean 1 million of profit after 5 years
- You need to have a rentable fleet that is worth 1 million dollars
- You will run with almost no profit while paying off your airplanes
- Once the planes are paid off, you sell them, or pay yourself out
- A plane should probably fly around 400 hours a year
- Check out the rental rates in your area. You won't get more.

1 million dollars: that is 3 twins and 14 C172.

Good luck !

So there you go.

[stol701]

The easiest way to estimate on how to get 200k profit a year would be the following:...

This sounds good to me although I don't exactly follow all of it. But it gives a very good idea of the size that will produce certain outcome. Thank you very much

[radubc]

@STOL701. I am an accountant (CGA) and also a pilot. If you need help with calculations or estimates, feel free to send me a message.

[photofly]

The easiest way to estimate on how to get 200k profit a year would be the following:
- You write of your airplanes over 5 years
- 200k profit a year would mean 1 million of profit after 5 years
- You need to have a rentable fleet that is worth 1 million dollars
- You will run with almost no profit while paying off your airplanes
- Once the planes are paid off, you sell them, or pay yourself out
- A plane should probably fly around 400 hours a year
- Check out the rental rates in your area. You won't get more.

1 million dollars: that is 3 twins and 14 C172.

Good luck !

So there you go.

$1m only buys you 5 reasonable 172s.

[DanWEC]

Wha? I haven't price out airplanes in a couple of years but I would think that much only for some nice R or S's.
Also, I mentioned fleet consolidation- I left out that I would likely have a 152 or two in there as well. Cheaper, enough similarities to a 172 for mx and good for time building and dual.

[photofly]

Wha? I haven't price out airplanes in a couple of years but I would think that much only for some nice R or S's.

Yeah, that's what I had in mind; but do you really want to start a flight school with 14 clapped-out 40 year old 172s and a couple of hangar-queen twins? The maintenance headache of finding them, then getting them and keeping them in shape...

[digits_]

Wha? I haven't price out airplanes in a couple of years but I would think that much only for some nice R or S's.

Yeah, that's what I had in mind; but do you really want to start a flight school with 14 clapped-out 40 year old 172s and a couple of hangar-queen twins? The maintenance headache of finding them, then getting them and keeping them in shape...

With the money you save on buying 200k C172 vs 50k C172, you can pay a lot of AME's. Especially if you buy 14 of them. You can even buy some extra spare planes. Buy 14 and operate 11. Perfect !

[Broken Slinky]

Wha? I haven't price out airplanes in a couple of years but I would think that much only for some nice R or S's.

Yeah, that's what I had in mind; but do you really want to start a flight school with 14 clapped-out 40 year old 172s and a couple of hangar-queen twins? The maintenance headache of finding them, then getting them and keeping them in shape...

+1, You're looking at $100K-$150K for a 172R. Probably closer to $150K with the lovely exchange rate right now. You're then going to spend another $10K-$30K to get it commercial certified. If you're going to have to leave them outside year-round you'll need engine heaters, cowl, windscreen and wing covers. Aircraft insurance each year is going to be silly money just because it is a flight school. They know you're guaranteed to be filing a claim. Best guess would be in the neighbourhood of $10K per 172.

[photofly]

I'm not sure you're right about the insurance. Most flight schools don't file large claims for third party losses (they don't, typically, wipe out the breadwinners of families of 5 children) and serious hull damage is unusual. I don't think TC likes schools writing off airplanes, for example. Small amounts of damage would be within the excess, and so not claimable.

Whereas some private owners I know are into their third 5-figure claim within six months...