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No Depreciation? Really?

Lies, Damn Lies & Statistics.

Blades June 2010 Cover
Blades June 2010 Cover

Yesterday the June issue of “Blades” was on my door mat when I got home.  Blades is one of the aviation magazines I look forward to arriving most as it entirely rotary and edited by the formidable Dennis Kenyon.  I was keen to get it read, so after doing some more CPL revision I took a cup of tea and Blades to bed with me… turns  out on Page 14 that Robinson Helicopter Company have released the Estimated Operating Costs of their forthcoming R66 model.

The R66.

For those of you who don’t know the R66 is RHC’s first turbine helicopter and is due to gain FAA certification later this year with EASA following shortly after.  It it essentially a larger brother for the R44 with the Lycoming Piston Engine replaced by a Rolls Royce RR300 turboshaft, an extra passenger seat and baggage stowage.  It’s widely thought to be a likely successor to the venerable Bell 206 JetRanger which has now finished production.

Although it’s been in development for some time now pricing and technical details are just starting to enter the public domain; so I read this article with interest to see how the estimated operating costs would stack up.  You can get the EOC from Robinson directly, here.  I’m not going to discuss the actual overall EOC here, so to cut to the chase RHC think it will be 287.80 USD per hour.

Calculating EOC.

The point of an Estimated Operating Cost is not to give you an exact amount  per hour that it will cost to fly a given machine, but to give a reasonably estimate for normal use in average circumstances to use as an indicative figure for comparison purposes.  That said it shouldn’t be a million miles out, but will obviously be affected by the type of use, local regulatory maintenance requirements, fuel prices, and currency fluctuations.

The R66
The R66 ( (c) RHC )

EOC is normally expressed as a cost per flight hour and is made up of three costs: fixed costs, direct costs and an overhaul reserve.

Direct costs are normally fuel, oil, periodic maintenance and a reasonable allowance for unscheduled maintenance.

The overhaul reserve takes the total cost of overhauling the aircraft when it reaches the end of its service life and divides that by the service life to give a value per hour.  (Incidentally, service life on R66 is 2,000 hours).

The fixed costs are normally made up of Insurance (hull & 3rd party) and an allowance for depreciation.  This is then divided by the number of hours per year you intend to use the machine.  RHC use 500 in their calculations, this is high for a private owner in the UK, but not uncommon if you lease the machine back to a training school.

Note that no allowance is made in the EOC for the cost of the capital to purchase the aircraft, an important consideration unless you have 770,000 USD lying about (and even then you’d need to make an allowance for the interest you’d no longer receive!).

Depreciation.

The crux of this post.  RHC assume 0 depreciation on a R66.  Yep zero.  They’ve made an aircraft which doesn’t depreciate.  Amazing, isn’t it!  They justify this with the statement:

“Depreciation (Negligible, freshly overhauled R66s are expected to sell for original costs)”

I took exception to this, as it struck me that they were rather over-egging the situation to make things look rosy to potential purchases of an aircraft with no history in the used aircraft market place.  How could they make such an assumption I wondered?  How did this assumption compare to the more established R44.  Well, in the R44 EOC they say:

“Depreciation (Negligible, freshly overhauled R44s typically sell for more than original costs)”

I am sure that RHC would emphasise the word typically here, but it does seem that they are good at making aircraft which just don’t depreciate so long as they are overhauled.  What this statement indicates to me is that provided you put money aside for the overhaul at the end of the service life then the aircraft will be worth the same (or more) when overhauled.

In theory then, the overhaul reserve fund at any point in the aircrafts life plus the aircrafts value should equal the new price.  So I picked, at random,  from Avbuyer a 2004 R44 Raven 2, with 823 hours TT and a fairly standard fit offered for sale at £140,000.   RHC recommend $81 per hour for the overhaul fund, which would mean a “pot” of $66,663 had been accrued over the a/c’s life of 823 hours.  Converted to GBP thats approx £45,000. Meaning the aircraft would be worth £185,000.   Anyone know where I can buy a new R44 for £185,000 + vat?

Of course not.  Doesn’t happen, so don’t believe the hype – it’s not even close for the R44 so I can’t see it’d be close for the R66 given such a massive assumption.  That said, the one glaring floor in my maths which I can see is that I have assumed a linear rate of depreciation – perhaps this is unfair?

Anyone with any real world experience of aircraft depreciation -vs- overhaul costs?

R44 Raven II Hot Starts

A definitive statement.

One of the perpetual discussions amongst R44 pilots (or at least those I talk to) is how awkward the Raven II can be to start if has been recently shut down – referred to as a “hot start”.  Most R44 pilots have come from the R22, which does not have a fuel injected variant; so the starting procedure is somewhat different (although the R44 Raven is the same) – and even following the procedure in the Pilots Operating Handbook will not always result in an easy start if the machine has recently been shut down.

Doing a quick search on Google for the problem results in at least 5 different starting scenario’s, all different – yet all are claimed to be successful.  The thing is you have to be very careful when dealing with failed starting attempts because if you are not then you will end up damaging the starter ring gear – to which end the aircraft I use has the following terms in its Self Fly Hire Agreement:

To protect the R44 starter ring-gear from damage on engagement due to rotation of the starter motor gear, the pilot will wait a minimum of 10 seconds after any attempted engine start before attempting to start the engine again. After 3 failed starts, the pilot will wait a minimum of 3 minutes for the starter motor to cool before attempting a restart.

The PoH even has starting tips; but none of them deal with the specific situation of a hot start.  Well, in this quarters Robinson News (a four page flyer sent to Robinson owners / safety course attendees worldwide), RHC have finally addressed the issue.  Of course, anything printed from RHC is classed as a definitive statement!

It turns out that the poor hot start performance of the Raven 2 is caused, typically, by the fact the resultant heat in the engine compartment causes fuel in the fuel lines to vapourize – and thus there is none to start the engine with again.  Robinsons advice for improved hot starts is:

Pull the mixture control knob full out.

With master switch on, activate the aux fuel pump by turning key to “prime” for 20-30 seconds.

Then proceed with normal start.

Their reasoning for the prime with the mixture out (and thus not really priming) is that since the mixture is at idle cutoff the aux fuel pump will draw cooler fuel from the main fuel tank and pump the hot fuel in the lines through the fuel return line back into the fuel tank instead of the engine.  A scan of RHC’s actual advice is here.

It makes sense when you think about it – hope this helps fellow pilots who’ve had trouble hot starting Raven IIs, especially in hotter climates than the sunny United Kingdom!