Merlot
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MIA Cargo Startup-Maintenance Co$ts On 727-200ADV?

Wed Mar 03, 2010 12:46 am

So across my desk came a solicitation to fund a startup company based in Miami. To make a long story short, the idea is to buy a handfull of parked 727-200s and operate them on an ad-hoc charter and cargo basis.

I have to say the idea SOUNDS reasonable: the planes are cheap, the intended market (Central/South America/Caribbean) is promissing and one of the big selling points is that there aren't many operating costs unless the business is actually doing something profitable...in other words the main part of the operating costs are supposed to come with planes flying and the planes only fly when they are earning business; otherwise they just sit and pilots don't get paid and so forth.

My main question is this: where can I find info on the ongoing maintenance costs of these planes (mostly 727-200 (adv)) of an early 80s vintage? Or does anyone have any general thoughts about what they are? Or even just general thoughts about the basic viability of the business concept?

Would YOU invest in an ad-hoc cargo/charter operator out of Miami and is the market really as strong as I've been told?

thanks

Merlot
 
delawareusa
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RE: MIA Cargo Startup-Maintenance Co$ts On 727-200ADV?

Wed Mar 03, 2010 12:55 am

Market is strong, but many others are in the business already. If they can't shift to Miami and make money, then why would a startup be able to?
 
pilotpip
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RE: MIA Cargo Startup-Maintenance Co$ts On 727-200ADV?

Wed Mar 03, 2010 1:13 am

Not to mention the fact that fuel and crew costs will quickly eat up any savings over a comparable 757.
DMI
 
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tb727
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RE: MIA Cargo Startup-Maintenance Co$ts On 727-200ADV?

Wed Mar 03, 2010 1:15 am

Quoting Merlot (Thread starter):
Would YOU invest in an ad-hoc cargo/charter operator out of Miami and is the market really as strong as I've been told?

No way. There are a lot of players in that MIA market and it would be very tough making any money in my opinion.
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Merlot
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RE: MIA Cargo Startup-Maintenance Co$ts On 727-200ADV?

Wed Mar 03, 2010 2:11 am

Quoting DelawareUSA (Reply 1):
Market is strong, but many others are in the business already. If they can't shift to Miami and make money, then why would a startup be able to?

Thanks for your reply! The offer I have is put together by some guys at current competitors in the market already who want to strike out on their own. Allegedly they have the customers and contacts to get busines from day one. They also say it isn't as easy as one might imagine to get cargo capacity on short notice and that there is something of an unmet demand or undermet demand in the area of need-it-now capacity.

Quoting pilotpip (Reply 2):
Not to mention the fact that fuel and crew costs will quickly eat up any savings over a comparable 757.

Thanks for your reply...The basic idea is that its much cheaper to buy a 727 now and operate it for 1 (or 1.x) year(s) than it is to lease a 757 for that same period of time, but a phase two of the project is to use the proven revenues off the first year or so in business to obtain financing for more efficient aircraft.

Quoting tb727 (Reply 3):
No way. There are a lot of players in that MIA market and it would be very tough making any money in my opinion.

Your opinion is appreciated! When you say tough making money - why do you say that specifically? Do you believe there is not enough business demand? Or do you believe the operating costs wouldn't be covered by the fees and rates they could charge?

Thanks very much for the replies.

Merlot
 
pilotpip
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RE: MIA Cargo Startup-Maintenance Co$ts On 727-200ADV?

Wed Mar 03, 2010 2:50 am

Quoting Merlot (Reply 4):

Thanks for your reply...The basic idea is that its much cheaper to buy a 727 now and operate it for 1 (or 1.x) year(s) than it is to lease a 757 for that same period of time, but a phase two of the project is to use the proven revenues off the first year or so in business to obtain financing for more efficient aircraft.

On paper, sure. But are you factoring in the added costs of flying a three man crew, more engines and airframes that are nearing the limits of their designed life or just the dry leasing costs?

Off the top of my head, there are already half a dozen AMCI carriers at MIA with sizeable operations in the Carribean. Seems like a very saturated market.
DMI
 
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tb727
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RE: MIA Cargo Startup-Maintenance Co$ts On 727-200ADV?

Wed Mar 03, 2010 2:09 pm

Quoting Merlot (Reply 4):
Your opinion is appreciated! When you say tough making money - why do you say that specifically? Do you believe there is not enough business demand? Or do you believe the operating costs wouldn't be covered by the fees and rates they could charge?

There are a lot of scumbag operators down there, not as many as there used to be, but it's pretty cut throat. There are a lot of foreign operators as well. They are established and will undercut anyone trying to come into the market. There is a wide variety of aircraft down there too, from DC-3's to 747's. The most popular one down there now is probably the 727.

Also being around the airlines a lot and working for one 10 years now, I would never invest in one. It is very hard to come out ahead and get something that works. How do you make a small fortune in the airlines? You start out with a large fortune.
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Merlot
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RE: MIA Cargo Startup-Maintenance Co$ts On 727-200ADV?

Sun Mar 07, 2010 4:23 am

Thanks for the replies. I am considering investing a very small amount (~USD$20000) with a colleague as they are soliciting 100 [$40,000] units, or around 100 shareholders for a startup cost of around USD 6 million, with the guys putting the project together (mostly pilots) contributing around 2 million themselves.

Quoting pilotpip (Reply 5):
But are you factoring in the added costs of flying a three man crew, more engines and airframes that are nearing the limits of their designed life or just the dry leasing costs?

I've got a bunch of rosy spreadsheets put together by the people seeking investors. Supposedly the investment would be secured by the aircraft, which have a fairly known, defined and stable value. I think I'm hearing from you I should demand more answers about maintaing old 727s and when they need to be re-engined, contingent repair costs, etc...

Quoting tb727 (Reply 6):
They are established and will undercut anyone trying to come into the market. There is a wide variety of aircraft down there too, from DC-3's to 747's. The most popular one down there now is probably the 727.

Thanks for the insight. One of the selling points of this idea is the availability of pilots and aircraft...would you know or agree if its easy to get qualified flight crew on short notice in Miami to fly on long international trips?

Merlot
 
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tb727
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RE: MIA Cargo Startup-Maintenance Co$ts On 727-200ADV?

Sun Mar 07, 2010 4:51 am

Quoting merlot (Reply 7):

Thanks for the insight. One of the selling points of this idea is the availability of pilots and aircraft...would you know or agree if its easy to get qualified flight crew on short notice in Miami to fly on long international trips?

lol yeah, that's what MIA is all about as well as a lot of the freight flying out there. It's gonna cost you though, if you need a 727 driver, let me know, pay me $175k a year, give me a week on, week off schedule with tickets to and from work and I'll do it.   The problem with this industry is that someone will come in and do it for next to nothing.

Quoting merlot (Reply 7):

I've got a bunch of rosy spreadsheets put together by the people seeking investors. Supposedly the investment would be secured by the aircraft, which have a fairly known, defined and stable value. I think I'm hearing from you I should demand more answers about maintaing old 727s and when they need to be re-engined, contingent repair costs, etc...

The 727 unfortunately only has a couple years left on it. As soon as the economy rebounds, I have a feeling oil will be going back up and it's going to really hurt the future of it, these things burn a lot of dinosaur bones. The parts aren't a huge issue and you won't be re-engining them. These things keep on trucking when they are flying but come heavy check time, you are gonna pay.
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lotsamiles
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RE: MIA Cargo Startup-Maintenance Co$ts On 727-200ADV?

Mon Mar 08, 2010 1:32 am

Quoting pilotpip (Reply 2):
Not to mention the fact that fuel and crew costs will quickly eat up any savings over a comparable 757.

You can buy an entire 727F for far less than the cost of one overhaul to a 757 engine. The baby 8's are so cheap you can treat them as disposable. I still think you can buy a lot of fuel and FE's with the monthly rent saved with the 727F versus the 757SF. The mass replacement of 727F's with 757SF's just has not materialized outside of the parcel carriers. Amerijet looked at it for years and ultimately bumped up the 767SF to grow beyond the 727F, they just couldn't make the 757SF work out of MIA when compared to their 727F's.
 
413X3
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RE: MIA Cargo Startup-Maintenance Co$ts On 727-200ADV?

Wed Mar 10, 2010 12:50 am

Amerijet can only do well when they run their pilots into the ground. There isn't much revenue in flying cargo around that area unless you pay pilots the bare minimum and don't even give them toilets

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