Airframe Parts Programs... Good Deal/Bad Deal?
by Jay Mesinger

That is one of those questions that will get you as many positive responses as negative responses. How does one weigh the answers if they are so divided? Here is how we help clients understand this important choice. First, just as a matter of clarification, an airframe parts program is a fixed fee, hourly or annually calculated insurance type coverage for the airframe parts. It could be a Bombardier Smart Parts, or Citation ProParts, or a JSSI Tip to Tail type plan that covers avionics and airframe parts.

Since I mention the word insurance, I must also say one never buys insurance when they need it, so they always curse it when they pay for it. When you need it is when you can really assess its’ value. One clear way to evaluate any program's worth would be to calculate if you have paid less or more on a per-hour basis than the actual costs for parts purchased during the period evaluated.

Several things may cause an owner to be enrolled in one of these parts programs. Budgeting is the main reason that is often stated as a justification for program enrollment. One knows that every hour, the cost of parts and avionics is set and fixed. This allows for an owner to take all the guesswork out of budgeting and planning. This is especially helpful for the first time buyer. There is so much to learn in new aircraft ownership that equalizing the parts costs can be very helpful.

Older aircraft with higher parts failure expectations are another reason to fix the per-hour or annual parts costs. Parts programs do not really vest or accumulate pass-along value. Consequently, the ongoing value of a program does not pass along to a new owner. The aircraft may qualify for a program based on past enrollment, but there is no vested value that accrues to the new owner.

If you were to sell the plane prior to the end of the three or four-year parts program contract, the negative balance if one exists must be paid by the owner (seller). This negative balance occurs if what has been paid hourly over the course of enrollment is less than the amount actually used in parts placed on the aircraft.

Additionally, if you cancel a program mid-year the program can also assess you the balance of the contracted peryear hourly commitment compared with actual hours flown. For instance, if the contract calls for you to fly and pay for 300 hours a year and you cancel after flying only 100 hours, that year the fee to cancel could cost you the additional per-hour cost of the 200 hours not flown! If, however, the contract runs to term and you have a surplus in your account that was created by paying more in than you used, you will only get back 50-60% of the surplus.

You see, in the end you either used more parts than you paid for, creating a deficit, or the parts you have used costs you 40 to 50% more than if you were not on a program. The real message here is about managing maintenance.

I once had a first-time owner go on a parts program. They hired a management company to oversee the operation. I told the client and the management company that they shouldn't stop managing the maintenance just because they were on a parts program. The owner of the aircraft did not understand my comment. When he sold his aircraft before the parts program contract was up and received the deficit bill from the program he began to see what I meant. His parts purchase through the program included, for example, a ridiculous amount of new avionics black boxes and new actuators, etc. There was example after example of no real thought or management with respect to maintenance. Every time the plane broke the management company just called the program and ordered a new part. They stopped managing and just worked to make their job easy.

A little troubleshooting and common sense could have solved many of the problems for considerably less money. More often than not, just replacing a part with a new one did not solve the problem. To the management company it was like free parts. Big mistake!

There are of course no free rides with an aircraft. It is ‘pay me now, or pay me later’ in aviation. Engine programs often tend to have different outcomes due to the pass along value of the program. Unlike the parts programs, these engine programs stay with the aircraft and there is never a deficit.

Having one of these programs on your plane can really add go-forward value to the plane. In fact the 100% programs like MSP and Corporate Care and some JSSI programs make the plane seem as if the engines are always "0" time.

A buyer of a plane that sees it is on Smart Parts or Pro Parts should be very careful to not assess added value to the plane. This is a very different mind-set to evaluating an airplane that is on a 100% engine program. That program participation is real hard value. As always, understand the issues and approach aviation with your eyes and ears open.
 

Jay Mesinger is the CEO of J. Mesinger Corporate Jet Sales, Inc. He is on the NBAA Board of Directors and is Vice Chairman of the AMAC. Additionally, he served on the Duncan Aviation Customer Advisory Board for two terms, is a member of MEBAA, EBAA and is associated with IBAC.