Daily rental minimums. A thought

[genna]

Most rental places charge wet rates. I don't really know how that rate breaks down in terms of covering fuel and mx vs profit vs other overhead. But let's assume 60% is fuel and mx.

So, how come most rental places charge daily minimums at full wet rate? It seems to me that the reason for this is to prevent ac from sitting idly and not making any profit. Yet only maybe 30%(may even be less) of the rate is the profit. Shouldn't this lower rate(+ a little more) be charged as minimum(difference)? Let's say 40% of wet. The plane is just sitting and making money(still more than if it were flying).

This would encourage people to rent long term while being really easy on AC. The FBO can then have more planes to cover increased demand with probably about the same mx costs...

Any thoughts?

Thankfully, the place i rent from has really liberal daily minimum policy. Really encourages to travel, but i know this is a major problem for most renters

 

[Bonchie]

Rental places can be their own worst enemies.

High daily minimums (I've seen as high as 6 hours a day) probably cost many outfits more money than if they were just willing to rent them out for 2-3 days at low minimums (say 2 hours a day). Especially outfits that have multiple planes available. There's almost always one not being used anyway.

Your idea of charging a lower rate (just what they are losing in profit) for non-flown hours is also a good one and might get more hours put on the plane in the long term.

 

[Bobanna]

Your assumptions and calculations neglect the "opportunity" cost of a non-flying rental: what's to say that airplane would not have been flown rather than parked at some out-of-town destination. Rentals aren't what they used to be, and it's important that the rental service remain (somewhat) profitable to the renting FBO. Enjoy the really liberal daily minimum and pray that it lasts.

 

[luvflyin]

That is my pet peeve with renting. I've brought that up to FBO's. Just take the gas part out of it but go ahead and add back in the margin your missing on the gas sales that you'd be getting if the plane was home and being rented out. They dont wanna talk about it.

 

[genna]

Your assumptions and calculations neglect the "opportunity" cost of a non-flying rental: what's to say that airplane would not have been flown rather than parked at some out-of-town destination. Rentals aren't what they used to be, and it's important that the rental service remain (somewhat) profitable to the renting FBO. Enjoy the really liberal daily minimum and pray that it lasts.

Parked making free money. Yes, i'm making some assumptions and I don't know the exact numbers with regards to oportunities. But schools that have operated for a while know these numbers and can predict them very well. Those numbers and not 100% rate. Planes do not fly 100% of each day. Especially true when you don't have enough instructors and/or multiple planes. They don't fly at all when the weather is bad at home airport, but really nice a few hours away at the beach where someone could have flown it and have the plane sit there and make money(reasonable) doing nothing.

After certain point charging more does not create more revenue, it simply diminishes demand.

 

[neilw2]

When I was renting if you didn't meet the mins then they charged a fee per hour not flown. It wasn't the full hourly wet rate, it was about 30-40% of the full rate. Sort of like what you propose. Felt fair to me.

 

[Zeldman]

Years ago when I rented and a person wanted a plane for more than a day, they charged a minimum hour per day. Say I wanted to take the plane for three days they expected 2 hours per day on the plane, a total of 6 hours for the three days. If I flew only 5 hours they billed me for 6. If I flew 7 hours then they just billed for the 7 hours. Even if the plane sat all day on day 2.

 

[genna]

When I was renting if you didn't meet the mins then they charged a fee per hour not flown. It wasn't the full hourly wet rate, it was about 30-40% of the full rate. Sort of like what you propose. Felt fair to me.

exactly what i propose. good smart people.

Personally, feeling "being fair to me" is probably one of the most important financial consideration for me. I understand paying money, but if i feel cheated, i'm not sticking around long

 

[asicer]

I would think that if the plane is on lease back then one could negotiate with the owner if you don't anticipate meeting daily minimums.

Wait, don't we have a lease back owner on this board, @arnoha?

 

[Omalley1537]

Daily minimums on rentals were a large part of why I decided to buy. Most of my flying is burning holes in the sky and hamburger runs with one or two pals. But at least three times per year I want to take a 3-4 day trip with family that only has an hour or two of flying (at most) each way. The only rental option for family plus bags etc would be the 205, so with three trips a year plus more frequent 172 rentals I am not that far from owning, with none of the benefits of owning.

 

[Caramon13]

Years ago when I rented and a person wanted a plane for more than a day, they charged a minimum hour per day. Say I wanted to take the plane for three days they expected 2 hours per day on the plane, a total of 6 hours for the three days. If I flew only 5 hours they billed me for 6. If I flew 7 hours then they just billed for the 7 hours. Even if the plane sat all day on day 2.

That's the way they do it where I live. Only one outfit billed by what it flies and I don't know if they do that anymore. Everywhere else it's at LEAST 3 hours per day at the full wet hourly rate, which equates to (for the cheapest plane) about $567/day. I don't know about you, but it REALLY doesn't make sense to pay almost $3K for 5 days worth of a rental at 3 hours per day if I was going to take a vacation for example and travel two days.

Its even more outrageous when looking at the schedule they have a big fat empty space for 5 days. The plane wasn't gonna fly anyway..even if someone came up and took it up for an hour or two that certainly doesn't justify billing me 15 hours worth of time when I need less than half of that.

But that's why I'm not wasting my money on anymore rentals..saving up for a plane of my own eventually..again .

 

[Tantalum]

Your assumptions and calculations neglect the "opportunity" cost of a non-flying rental: what's to say that airplane would not have been flown rather than parked at some out-of-town destination. Rentals aren't what they used to be, and it's important that the rental service remain (somewhat) profitable to the renting FBO. Enjoy the really liberal daily minimum and pray that it lasts.

I was recently thinking about this, luckily around here the daily minimums are very lenient, around 1hr or 2hrs. If you are taking the plane for 2-3 days you're probably flying far enough away that you'll hit the minimum anyway. But I honestly think these minimums at our club are too low considering how busy our club is. It is not uncommon I will see a plane booked from 7am to 7pm with a generic note on the file "training; cross country; vfr" <- I doubt that plane will get 12 hours on the hobbs... they just reserve the plane for the day, which can be annoying when all the other planes are chock full of two hour blocks all day

If I ran a rental club I would have it be demand dependent. I would look at historical usage figures and plan around that on a monthly and weekend/weekday basis. For example, in February during the week, I might not even have a daily minimum at all. But a 75 degree sunny weekend in September when historically my planes get 8-10 hrs on the hobbs each, yeah I'll be charging a 6hr minimum daily usage

**The other idea I had, was to allow people to buy some kind of exclusivity at a monthly rate. Let's say $500 per month waves your daily hour requirements and you can book for up to a week at a time...

 

[Tantalum]

Its even more outrageous when looking at the schedule they have a big fat empty space for 5 days. The plane wasn't gonna fly anyway..even if someone came up and took it up for an hour or two that certainly doesn't justify billing me 15 hours worth of time when I need less than half of that.

It would be nice if the clubs were pragmatic... to your point indeed if I was the owner I'd let the guy take it for a week and at least make *some* money than nothing... I think the risk for the owner there is that it sets a precedent and may eventually upset other club members, etc. Politics are an unfortunate part of life but business do need to keep up positive impressions.

I just wish there were more clubs that were geared towards pilots and not strictly training. You could have your fleet of 172's and Warriors but how about some non trainers in the fleet too that had different and more lenient rules.. someone here mentioned they rent a 177RG at their club, since it's not part of the trainer fleet he (or she) gets very good usage out of it

Keep your 172/Warrior fleet at the 6 hr daily minimum and you could build your costs around some package pricing, etc. Really gear it towards instruction

Than have a few 182s on the line and an SR20, or 22 for your renter fleet. Give these folks keys, an online booking portal, maybe a monthly rate, and let them have at it

^that would also make a good transition course through your students and some extra money there, could include a Cirrus transition program

 

[eman1200]

if it's a busy, heavily rented place, prob not TOO much u can do. 'round these neck of the woods, if I start renting from a new place, I try to build up a lil 'trust' factor, where I'll rent a plane for 24 hours and meet the daily minimums. at least this way you're not known as someone who rents a plane for 3 days to fly 45 minutes away. doesn't guarantee u anything, but it might help if they go back and look up your history.

another lil thang I do, which I'm sure FBO's wouldn't appreciate so I'll only mention it here on the internet.....check your scheduling app. most of the ones I use you can check historically on the scheduling calendar. you might be able to look back for the prior year for a certain airplane, then go to them and say "this plane only rents an average of x hours per month" and maybe that will give u a little leverage.

it also helps if you are good looking. and we all know I am good looking. then u can flirt with the college girl working behind the desk at the fbo and hope to get a lower daily minimum. or maybe a date. and sometimes a restraining order. but then again, maybe lower daily minimums. or there could be a dude behind the desk. then you are on your own.

 

[genna]

But a 75 degree sunny weekend in September when historically my planes get 8-10 hrs on the hobbs each, yeah I'll be charging a 6hr minimum daily usage

6h minimum(with only 3h hobbs) will then likely bring more money(profit) than 10h hobbs time... Seems kind of dumb. I don't mind the minimums, i just mind them at full rate

 

[Caramon13]

@Tantalum well, to your point about pricing, these mom and pop shops don't even think about the seasonality of pricing, nor do they take the time to calculate ways to increase profit based on the time the plane is rented instead of the time it actually flies.

I think one solution would be two rates: ground rate and air rate. Plane flies and gets billed on hobbs time. If I rent it for a day and I fly 2 hours, that's 6 hours the plane just sat on the ground. Now as a renter I'm getting that time for free, but if they billed let says...1/4 of the flight rate for that time, people may actually CARE about paying attention to how much time they rent the plane for when they block it off.

The multi-rate may also encourage folks to do multi-day rentals as well since the costs wouldn't be excessive.

If the FBO was smart, there wouldn't even be a dual-rate charge, it would just be bundled into the cost based on a number of factors.

The thing is most places are just too stupid to make things more profitable and they'd rather do the lazy thing of saying "3 hours per day" then actually figure out a way to make the same amount of money more often with better incentives and pricing..

 

[mtnflyr]

My school uses a monthly membership rate, and then a wet rental fee. It's a little expensive but we're a cirrus only school and have all the options check 2014 sr20/22t, with a g6 22t on the way.

Plus a redbird simulator with unlimited use no charge. If we want to fly across the US they say have fun. We can rent it for a week and only fly 6 hours and won't get a minimum charge and there is no overnight fee.

Only issue because at the moment we only have one sr20, you need to book about a week out at least. But If you watch the schedule you can find 2-3 hour gaps that you can sneak into and go for a ride. Thankfully our booking is all online so it's pretty nice.

 

[Tantalum]

i just mind them at full rate

ground rate and air rate. Plane flies and gets billed on hobbs time.

Very good ideas!

 

[Harold Rutila]

It's like any other small business in GA: They created one policy 10 years ago and haven't revisited it since.

That said, you'd be surprised what kind of deals you can work out with the owners/presidents of the rental outfits if you catch them at the right time. Just present the arguments as you did here, and you could come away with a much more favorable deal, especially if you're as frequent of a customer as you describe.

 

[Caramon13]

I mean consider this situation...you fly a plane out to some location for lunch with an instructor.

It's .6 hobbs both ways..for a total amount of flight time of 1.2. You paid the instructor for sitting with you for an hour lunch (he/she isn't off the clock) but the plane is just sitting there.

If you billed 1/4 of the wet rate for the plane the total cost (assuming the plane is $150 an hour) is something around $180 for just the air time (not including the instructor's fee) and if you include the ground time you bill $217.50. That's a 21% difference right there. And that's just a SIMPLE example...now account for seasonality, when people fly more often, throw in some multi-day incentives, discount the instructor rates (because you are getting some more income from the ground rates) and you start to look like a hero.

There are SO many opportunities and I weep for the poor rental management folks who can't see these...

 

[wayne]

Yep, one of the things that annoy me about traveling when renting. Easily half of the cost is fuel and engine reserves. Some rental/club places can be more lenient for regular renters. Stop in every now and then and take the plane for a week and they'll go for the full minimum per day. Rent from them regularly, and do other training (HP, complex, IR) and they may ignore a little bit of time. The other thing is if more of your days are weekdays, as weekends tend to be busy rental times.

I was in one club that rented the planes dry and had a 2 hour / day minimum for overnights. That was great. Yeah, the engine reserve was still in there, but with only 2 hrs/day it was fine.

My last two arrangements have been non-equity partnerships. No minimum hours for over nights. More fixed monthly costs though. But great for traveling, especially longer time away from home.

Now I'm looking into getting an equity partnership set-up.

 

[genna]

Just want to be clear. I'm not complaining about my situation. My rental place is really quite awesome. Took them a little while to get there. And yes, they have some issues.. who doesn't? But they are very accommodating, have lots of planes and always encourage you to travel places, explore the new locations. Hell, they give away prizes and even free time as rewards for you doing multi-day, multi-destination travel... Probably at a loss occasionally. There is a minimum daily policy, but I have never seen it enforced and with how "day" is calculated, you really have to go for 4-5 days to even worry about.

Last I flew was 5.7h over 4 days(holiday weekend) while they had a potential of a shortage of planes(mx)... They went out of their way to make sure i had a plane available even with other planes scheduled for checkrides and training. No daily minimums were charged. Apparently, this is in a stark contrast with that "FBO imposing crazy rules" thread that is only about 40 min drive from where i am

Guess what? I'm now spending good money to be the first taker for that "new" SR22 on the line.

 

[RussR]

I think one solution would be two rates: ground rate and air rate. Plane flies and gets billed on hobbs time. If I rent it for a day and I fly 2 hours, that's 6 hours the plane just sat on the ground. Now as a renter I'm getting that time for free, but if they billed let says...1/4 of the flight rate for that time, people may actually CARE about paying attention to how much time they rent the plane for when they block it off.

This is something that always confuses new students and new passengers alike, because we price airplane rental so much different than other things we rent. I have had this question numerous times - "So we're not billed if the engine is off, but we still have the plane?"

Go rent a car. You pay by the day (usually). It doesn't matter if you actually drive anywhere or not. There's no "hours meter" on the engine. In the past you used to get billed by the mile (and sometimes still might, especially for more specialized equipment like moving trucks), but largely it's by the day.

Rent a rowboat or powerboat or paddleboat or jet ski at the local marina. It's by the hour (or half hour) every time I've done it recently. That's from getting the keys to handing them back, even if you just left it tied up at the dock.

Heck, rent a refrigerator. Monthly charge, no additional "hourly" charge or anything like that.

So, @Caramon13 , it's an interesting suggestion. Some formula to account for charging when it's not in use. While us pilots who having been flying a while would revolt at the idea, most of the public would likely find nothing unusual about it at all.

 

[luvflyin]

When I was renting if you didn't meet the mins then they charged a fee per hour not flown. It wasn't the full hourly wet rate, it was about 30-40% of the full rate. Sort of like what you propose. Felt fair to me.

Glad to hear there's at least one place out there that gets it

 

[luvflyin]

Another scheme I've thought of is getting credit for hours paid for but not flown. You fly somewhere and are gone3 days. Their minimum is 4 hours a day so 12 hours is owed. You put 10 on the airplane. Pay the 12 and you have 2 on account for future rentals

 

[Caramon13]

Another scheme I've thought of is getting credit for hours paid for but not flown. You fly somewhere and are gone3 days. Their minimum is 4 hours a day so 12 hours is owed. You put 10 on the airplane. Pay the 12 and you have 2 on account for future rentals

The round down/up idea may work but it makes me think of "store credit". Maybe I didn't like the plane, now I have 2 hours on account for a plane that I don't really want to use again. Or if the credit is for any plane that's better, but what if I hated the rental place? Now I have 2 hours tied up in a place I never want to go back to renting from.

Are the credits forever or do they expire?

 

[Clip4]

Most rental places charge wet rates. I don't really know how that rate breaks down in terms of covering fuel and mx vs profit vs other overhead. But let's assume 60% is fuel and mx.

So, how come most rental places charge daily minimums at full wet rate? It seems to me that the reason for this is to prevent ac from sitting idly and not making any profit. Yet only maybe 30%(may even be less) of the rate is the profit. Shouldn't this lower rate(+ a little more) be charged as minimum(difference)? Let's say 40% of wet. The plane is just sitting and making money(still more than if it were flying).

This would encourage people to rent long term while being really easy on AC. The FBO can then have more planes to cover increased demand with probably about the same mx costs...

Any thoughts

Thankfully, the place i rent from has really liberal daily minimum policy. Really encourages to travel, but i know this is a major problem for most renters

Expect while you are letting the plane sit all day, there are also lost profits from instruction, both flight and ground, because a student can't fly the plane with a CFI that day.

 

[luvflyin]

The round down/up idea may work but it makes me think of "store credit". Maybe I didn't like the plane, now I have 2 hours on account for a plane that I don't really want to use again. Or if the credit is for any plane that's better, but what if I hated the rental place? Now I have 2 hours tied up in a place I never want to go back to renting from.

Are the credits forever or do they expire?

The credit would be in dollars. That way when you use it, it can apply to any plane you rent from them. That would cover rates changing in the future also. As far as you never come back and use it goes it's a no loss situation for you. You're paying the 12 hours anyway.

 

[Bonchie]

Expect while you are letting the plane sit all day, there are also lost profits from instruction, both flight and ground, because a student can't fly the plane with a CFI that day.

Maybe, or just as likely, the outfit has 2-3 planes and this one was going to sit there doing nothing all week anyway.

Lowering the price for non-flown overnight hours might get the plane flying more and make more money overall.

There used to be an Arrow at my field that was literally flown like 3-4 times a month, if that. If rental outfits would customize their billing for planes that typically sit, allowing shorter overnights (say 2-3 days) with a minimum of 2-3 hours billed for the span, those planes would almost certainly fly more.

You see the same thing with twin rentals. Make them viable for non-training uses and you could make more money.

But I digress. I don't really care as I own.

 

[Ravioli]

The minimums are set by the individual operator to cover the expected "loss of service."

I wanted to fly to an airshow 45 mins away. That was a whopping 2 hours of hobbs time that was going to take the plane off-line for 8 hours. The operator and I agreed to 4 hours. A fair deal since I could have driven to the show faster than flying.

So, it all depends. Many operators will work with you if you only ask. Some are too busy to care.


Eventually it comes down to fair value for both parties.

 

[eman1200]

it also helps if you are good looking. and we all know I am good looking. then u can flirt with the college girl working behind the desk at the fbo and hope to get a lower daily minimum. or maybe a date. and sometimes a restraining order. but then again, maybe lower daily minimums. or there could be a dude behind the desk. then you are on your own.

Do you think this would be something I could do?[/QUOTE]

यह लिखा है

Maktub, Bobanna.

 

[MauleSkinner]

Most rental places charge wet rates. I don't really know how that rate breaks down in terms of covering fuel and mx vs profit...

I think this lack of knowledge regarding the specifics of somebody else's business is probably key to the discussion...you don't know the profit margin (the airplane isn't the only cost rolled into the rental rate), you don't know how many hours of lost revenue they assume vs how many they charge for, or how much of it is simply making the math easier for people who aren't smart enough to get a good paying job at McDonald's instead of choosing a career in aviation.

As has been stated, though, there's no harm in asking (someone authorized) for a discounted rate, or taking your business elsewhere. One or both of those are probably factored in somehow as well.

 

[rocketflyer84]

It's exactly this sort of nonsensical sillyness around "daily minimums" that encouraged me to no longer be a renter. Came back from an IFR flight once on an IFR day (when the vast majority of people renting at this outfit are not IFR rated) and am told I didn't fly enough and didn't hit the minimum. The idea that I did them a favor by flying on a day when the plane would have almost certainly sat idle on the ramp (few other planes went out that day) was lost on them.

 

[unsafervguy]

Don't forget to add in the cost to recover aircraft left somewhere do to weather or mechanical issues. I had to go to California to bring a plane back to Texas that a couple of our german renters left there due to weather and their visa running out.

For a busy school, weekend rentals are always a loser even with minimums. A lot of our planes would fly 8hrs a day on good weekends.

 

[MauleSkinner]

It's exactly this sort of nonsensical sillyness around "daily minimums" that encouraged me to no longer be a renter. Came back from an IFR flight once on an IFR day (when the vast majority of people renting at this outfit are not IFR rated) and am told I didn't fly enough and didn't hit the minimum. The idea that I did them a favor by flying on a day when the plane would have almost certainly sat idle on the ramp (few other planes went out that day) was lost on them.

You didn't do them a favor...you rented the airplane at the agreed-upon rates and tried to get them to change your agreement after the fact.

 

[rocketflyer84]

You didn't do them a favor...you rented the airplane at the agreed-upon rates and tried to get them to change your agreement after the fact.

Well now I don't rent anymore and that plane sits idle on many such days now so ultimately a bit penny wise and pound foolish on their part (which seems to be a theme with many outfits and their thinking here).

 

[MauleSkinner]

Well now I don't rent anymore and that plane sits idle on many such days now so ultimately a bit penny wise and pound foolish on their part (which seems to be a theme with many outfits and their thinking here).

I'm sure if it had been a nice day, and when you came back they'd have said "we got a couple of calls for this airplane today, so even though you flew the minimum we're going to charge you a couple of extra hours' rental," you'd have been fine with that.

 

[flyingron]

For the 172 class a 2 day (wet) minimum is more than gracious. They're likely losing on that (especially on the weekends).

 

[GRG55]

LOL. To those that think they know better how to run someone else's business...go buy a plane or three and rent them out. I'm sure your pricing and service model will drive the others out of business and make you wealthy.

 

[arnoha]

I would think that if the plane is on lease back then one could negotiate with the owner if you don't anticipate meeting daily minimums.

Wait, don't we have a lease back owner on this board, @arnoha?

There are a few leaseback owners here. The club handling my plane charges a 2 hour minimum on weekdays and a 3 hour minimum on weekend days when taken for more than 24 hours. It used to be up to the owner of the aircraft to note the extended out time and ask the club to do the upcharge. That was recently changed to automatic. Before the change went in, the minimum was routinely ignored. When I was renting, I was only hit with the minimum once, despite going too long several times.

It really depended on the plane. If you took a 172S out for too long, especially on a weekend, that is going to get noticed not just by the owner, but also by other renters. These are mostly training aircraft and are booked solid on nice weekends in neat two to three hour blocks. My plane is usually booked solid every weekend. On the other hand, when I rented the now gone Cherokee Six, no one cared about the minimums. It sat 90%+ of the time, so the owner was thrilled when anyone flew it at all. And that's the key: negotiate with the owner. If you're leaving for days, it's probably not a spur-of-the-moment type thing. You had time to send an email to the club or the owner and negotiate something. If someone came to me, I'd negotiate something reasonable.

I like the idea presented of on/off charges. However, I'll note that simplicity in pricing is highly valued by customers. Things that renters have demonstrated they hate, even though the total cost is the same: fuel surcharges, multi-level pricing schemes, charge-by-tach, and block rates. People say they like getting a deal, but the actual behavior noted is that all of these result in lower hours flown. Fuel surcharges were a particular annoyance and I hated them when I rented. Now that I own the plane, I'm happy they're hated: I get more money without them when fuel prices are stable, like they are now.

The other thing is that long cross-countries are generally more expensive for the owner per hour. You're at max tach time and max fuel usage for nearly the entire flight. You're often buying and being reimbursed for fuel that is much more expensive than the fuel at home. And the costs of a mechanical failure away from home always result in more mx charges and by A&P you don't know. Failures often involve paying people to ferry your airplane home.

I've been lucky. I've only had an away-from-home incident once when someone was renting. I'm based at KPAO and the incident was not on a long xc...it was next door at KHAF. It was a simple thing: a blown tire that wasn't due to the renter's landing. New tire, new tube, drive time for my mechanic to head out to KHAF and fix it. Then Uber + ferry time for a CFI to fly it home. (I was too busy that day to do it myself.)