Iowa Public Television

Challenge Question Number 1 for Flying Instructor / Director #1033

Clearly describe what you expect from the students:
Calculate the break even cost of flying a 1975 Piper Chieftain. Based on the information provided, and at an average speed of 185 miles per hour, how many hours are required each month to break even?
Operating expenses:
Purchase price: $200,000 financed over 10 years at 9% interest.
Monthly payment: $2534;
Fuel: 40 gph at $2 per gallon;
Maintenance: $25 per hour;
Hanger: $375 per month;
Pilot: $25 per hour;
Engine & prop overhaul: $50,000 every 1800 hours;
Insurance: $750 per month

In order to give the teacher some guidance in evaluating the student's project(s); list some tips that may help to assess the student's work:
Hourly costs:
Fuel (40 gph at $2 per gal) = $80 per hour;
Maintenance = $25 per hour;
Pilot = $25 per hour;
Eng/prop overhaul = $27.78 per hour;
Total variable costs: $157.78 per hour.

Monthly costs:
Hangar = $375 per month;
Insurance = $750 per month;
Principal & interest = $2,534 per month;
Total fixed costs: $3,659 per month.

To solve:
185 mph at $2.25 per mile (Total Revenue) = $416.25 per hour;
Minus hourly costs = $157.78 per hour;
Available revenue = $258.47 per hour;
Monthly costs divided by available revenue ($3659 per month/$258.47) = $14.16 per hour per month.