From: doshay@ursa.arc.nasa.gov (David Doshay)
Subject: Re: Leaseback
Organization: NASA-Ames Biocomputation Center
Date: Mon, 11 Jan 1993 21:42:08 GMT

>> comments about FBO going under and owing you money ...

We were lucky enough to see it comming and got out just in time. We still had 
to talk the bank into making good on some bad checks. They did. 

Far worse can happen. If they should owe somebody else large sums of money,
that party could get a court order impounding the FBO and its property. That
will include the airplanes. In this case you will certainly regain control
of your aircraft, but you will spend a few unpleasant days doing it. If the
problem is IRS leins it may be a few unpleasant weeks.

You really have to have a good feeling about the FBO you do business with.
In my case a wonderful woman ran the FBO for almost 5 years, and then she
sold out. The new owner was trouble from the begining, but I knew him 
previously, so I expected problems. We put up with a few small things and
then went and got the plane and just flew it to a different airport. We
only had a written leaseback agreement with the previous owner, so he did
not try to claim any contractual obligation on my part to let him use the
plane. We no longer have the plane in leaseback.

Summary of 5 years of leaseback, with the plane put in leaseback at purchase:
a 1971 Cessna 172 starting with ~1500 hours, o320-e2d 150 hp engine

Year 1: Lost money big time, even after depreciation on the taxes. Needed
to overhaul the engine 4 months after purchase. Seems that the extremely
low time engine was run so infrequently that the cam lobes got dry between
starts, and the tappetts spalled ( not an H series engine!! ) and then a
handful of cam metal was found in the oilscreen. Lots of expensive repairs
on lots of things. Installed an ADF so the FBO could use the plane for an 
IFR primary trainer.

Year 2: Lost money, but after taxes it was a small amount. Relatively stable
repair bills. Lots of Landing lights and shimmy-dampners. Lots of front tires
and brake shoes.

Year 3: Made $100. came out a bit better after depreciating the plane on my
taxes. The quote of the year: "I went through all that trouble to get $100
for letting people use up my airplane?"

Year 4: I made more money leasing the plane than I did at work, although
I did work part-time for some of the year. One hell of a happy year. It
was a cash cow. I insisted that I be paid an amount of money that I thought
would mean less use of the plane, but at a fair price. When I told the owner
how much I was going to charge, she said that the market would not go that 
high, and I would loose hours (fixed expenses can kill you if you do not fly
the plane enough). Unexpectedly, the plane
flew much more than before (usually over 100 hours a month) so I did well.

Year 5: New owner .... we are out of there.

Just before the end of year 4 the plane was paid off. None of the above
numbers counts the cost of the plane in the profit and loss, although the
interest expense of the loan is counted.

Leaseback is a strange thing: if nobody does it then there are almost no
trainers available, but it seldom turns out well for the owner. I got lucky
for one year out of 5. 

Good Luck to Ya

David		doshay@soma.arc.nasa.gov

The thought police insist I tell you:
my thoughts, not NASA's