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Aviation History
1920
1920 - 1037.PDF
SEPTEMBER 30, 1920 AIRCRAFT DEPRECIATION* IT IS a •well-known fact that auditors now accept as an axiom that in commercial life as many firms fail through not knowing their cost price as from any other single cause. If this is true of ordinary everyday business life, it is going to be very greatly accentuated in commercial aviation. At the present moment it is probably safe to say that of the various firms engaged in the operation of aircraft com- mercially, not one knows with any degree of certainty their cost. This item, as every one is aware, is made of various factors, which might be tabulated as cost of operation, interest on investment, and depreciation. It is a compara- tively simple matter to arrive at an exact total for the first '. two. but the third is always difficult to determine. Experience in operating of aircraft on anything like a large scale dates entirely from the outbreak of war. So very little was done in aviation prior to 1914 that the know- ledge gained of aircraft as a commercial proposition was negligible. War experience is, unfortunately, of such a nature as to be of little use when considering the operating of aircraft from a commercial point of view. The result is that today all aviation companies are more or less in the dark and merely waiting the results of their first year's operations to determine with some degree of certainty the various figures which will go to show them whether or not they have madg a loss or a profit. A typical state of affairs might be mentioned when the writer called upon the managing director of one of England's greatest aircraft concerns for the express purpose of finding-out how this company estimated depreciation. The statement given was: " We have very little idea what our depreciation is. but we are accepting as an arbitrary figure 100 per cent, per annum per machine." Further enquiry amongst the various commercial concerns in England elucidated the fact that each one was as much in the dark as the one quoted. The inference is obvious. These very large concerns are operating, hoping they are making a profit, but totally unable to say definitely that they are. The airj' way in which the average pilot dismisses the question of costs from his mind may have been well enough during the War. when all efforts had to be concentrated upon winning the War irrespective of whether it was won at a price of ^8,000,000 per day or ^80,000,000, but this state of affairs, of course, cannot continue, and business-men demand figures, not theories. A close study of the question, combined with details gleaned from records kept during four years of aerial warfare, such information as has been gained by conversation with those interested in commercial aviation in England, and the study of figures compiled in the States, has resulted in the following estimate of that major portion of the cost of aerial operations, depreciation. For purposes of reducing depreciation to a percentage basis this factor has been divided into two portions, A and B. A.—Constant Depreciation. B.—Depreciation due to flight, (i) Crash risk, (ii) De- terioration. I will now endeavour to explain these items. A.—Constant Depreciation. Every one who has been connected with aircraft knows that if an aeroplane or seaplane is placed in a hangar and left there for a period of years, despite reasonable care being taken of it, at the end of a certain period of time the machine will have lost a great portion of its former value. In the first place the fabric will have become soggy, and certain parts of the woodwork will in all probability have warped. This depreciation would in time entail a very thorough complete overhauling. A still more serious factor that has to be considered, however, is the fact that in a period of years, due to obsolescence, the machine will have lost practically all of its former value. It is reasonably safe to say that the machine of today will not be flown in general use four years hence. Type and kind are constantly in a state of evolution, and of this fact one must not lose sight. This is particularly true at the present time, when practically all machines on the market have been built for war purposes with the lowest possible factor of safety and the greatest possible speed and climb. One might instance the case of the various types of training machines on which many of the readers of this article learned to fly. It is almost ludicrous to cast one's mind back to even such a recent date as 1915, and think of the Maurice Farman Long Horns and Short Horns, the Grahame-White Henries and the Henri Farmans, on which we used to make * Issued by theJAir Board of Canada." our earliest efforts. These machines have long ago become obsolete for all purposes and if any service today their market value is practically nil owing to this factor of obsolescence. It is difficult to estimate this constant depreciation accurately, but if one accepts a maximum of three years as being the usual period of time during which a war-type of machine may be expected to serve a useful purpose, then we get a figure 01 approximately 3 per cent, per month constant depreciation. It is emphasised that this estimate must be taken mto account vhether the machine is flown or not. B.—Deterioration Due to Flight. (i) Crash risk, (ii) Deterioration-. (i) Crash risk.—Everyone who has had any experience ot flying knows of the large crash risk that was incurred during the War in the operating of aircraft. One had only to stand on a busy aerodrome any day. when machines were constantly landing or taking off, to see how large this factor is in the percentage of costs. No matter how skilful the pilot, accidents will happen even in peace, and the resulting expense involved in repairing the aircraft will be considerable. Difficulty, is again experienced in estimating the usual amount of time a machine can in peace be flown without being crashed. Practically all we have to guide us is the War experience ot War pilots. In this connection one can recall the very-con- siderable publicity given to a young gentleman in the R.r •<--•• who was heralded by the illustrated Daily Press as the " Crasher King," having survived no fewer than seventy- eight crashes. History does not relate why he was permitted to continue on his career of vandalism. One can also recall a very senior officer of the R.N.A.S., whose enthusiasm for - flying very greatly overbalanced his skill as a pilot, and whose write-off's in the aggregate must have amounted to a prince s ransom. Needless to say there is no place m civil We lor this type of pilot, and. happily, at least one pilot in known to the writer who has completed 1,000 hours' flying in France without a single write-off against him. Investigation of the subject seems to indicate that among high-class pilots one must look for a complete write-ofi in aeroplanes every six hundred hours and in seaplanes every five hundred hours. This record will probably improve very considerably as War-time machines give place to commercial types but "until the War products are used up it is not considered safe that one should figure any less than one- sixth of one per cent, per flying hour crashes against aeroplanes- and one-fifth of one per cent, per flying hour against sea- planes. . „ r It may be explained that the loss in seaplanes is usuairy greater than in aeroplanes, as slight accidents often result in the seaplane sinking, thus converting a partial into a total °Sfii) Deterioration.—The last factor to be considered! is deterioration. Every type of aircraft has a flying hfe, that is to say after a machine is erected and flown a time will come when, apart from crashes, it will become unfit for further sen-ice. This life must, of course, differ in different types of machines, the life of some being greater as the factor ot safety of the machine is higher and landing speed lower, etc. For other types of machines the life will be shorter. One type of machine' may be instanced which probably has the worst flying record of all, the-flying-boat. In one of the largest seaplane stations in England it has been found from carerui records of figures kept during the War that the life of the hull of large flying-boats was just over seventy hours, mis figure excluded all war risk and simply took care of wear ana tear. In another squadron of the same type of machine, the average was 103. On the other hand, we find examples of aeroplanes whose life averaged between 700 and 800 hours, and in one or two instances the known life of an aeroplane has even been as great as 1,000 hours with only very minor repairs. A careful study of all figures available seems to indicate that the average flying; life of an aeroplane may be stated to be 700 hours and of a seaplane 400 hours, or. in other words that the allowance for deterioration should be at the rate ot one-seventh of one per cent, per flying hour for aeroplanes, and one-quarter of one per cent, per flying hour for seaplanes. It now becomes apparent that A and B must be considered separately. In the event of an aeroplane being bought and not flown, the only factor that need be considered is constant depreciation, since' the machine is not subject to either crash risk or deterioration, due to wear and tear. In the event of a machine being used during the summer months only and stored during the winter months it will be necessary to charge depreciation under different headings. In other words, IO39
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