UT to Replace 30-Year-Old Plane

KNOXVILLE — The University of Tennessee has executed the purchase of an airplane to replace the 30-year-old King Air 200 purchased by the university in 1985.

Cost to the university after allowance for its current plane is $4.4 million. The vendor – Beechcraft – expects to deliver the aircraft in February 2008. The purchase price for the new King Air 350 turbo prop is $5.2 million, and the university will receive $825,000 for its old King Air 200 plane, also a turbo prop.

“The financial advantages of warranties, equipment upgrades, pilot training being included, and the trade-in allowance for the old plane made the factory purchase the most attractive bid,” said UT Senior Vice President and Chief Financial Officer Gary Rogers. He also noted that the University uses the plane across the state in its operations and in the conduct of University business.

In addition to being 30 years old, the plane being replaced has been used in almost 13,000 flight hours. The plane logged 415 flight hours in fiscal 2007. Nationally, the industry average for a 1978 King Air 200 plane is 370 flight hours per year, or 10,730 flight hours over 29 years, according to Conklin and de Decker, an independent aviation research and consulting firm the university has used to validate usage and conduct cost analysis. By comparison, usage of the UT King Air 200 has exceeded the national industry average by approximately 21 percent.

Overhauling the King Air 200’s engines cost $600,000 when the service was last performed in 2005. Engines must be overhauled every 3,000 flight hours and undergo a less-expensive, mid-cycle (1,500 hours) inspection. Rogers explained that investing in additional overhauls would not be cost effective due to its age and its extensive use. Last year, the plane was grounded for nearly six weeks due to maintenance and performance issues.

The UT plane is available to employees in all university departments, including the athletic department. Users bill expenses to their department(s). Since there is only one plane, demand is high.

Most UT travel occurs within Tennessee, and a corporate plane is more cost effective. The state is nearly 500 miles from east to west, and UT has campuses, institutes and offices in all 95 counties.

Use of an airplane provides greater access to UT facilities, enabling multiple campus and other site visits in a single day. Commercial air service is not available to destinations such as Martin, where there is a campus, and direct service to Nashville from Knoxville does not exist.

BACKGROUND INFORMATION

King Air 200

Built in 1978, owned by UT since 1985

12,856 total flight hours for UT (as of 9/16/07) – equivalent to 3.9 million miles logged, based on rate of speed

Seating capacity: 8

King Air 350

Net price: $4.4 million

($5.2 million purchase price, less $825,000 allowance for UT plane)

Includes optional $29,000 satellite weather-monitoring equipment

Includes training for two pilots and a $7,200 credit toward training a third pilot.

Seating capacity: 9

Purchase Considerations

Billing university departments for employees who take flights helps pay operating costs. For the past five to seven years, the university has had to set aside money for engine overhauls and associated costs. As those costs grew, the need to replace the aging plane became apparent, the university started saving funds for an anticipated purchase of a replacement plane.

Various air travel options also were considered: leasing, charters, fractional ownership, and outright buying. Based on where UT employees most often need to fly and the number of hours flown, outright ownership was seen as the most cost-effective option.

As a new aircraft, the plane will have the most recently available upgrades and thus enhanced safety and reliability.

Operating Cost

Based on current operations and hours flown, administrators anticipate operating costs to remain constant after realizing savings on maintenance and repairs.

Average annual flight hours for past seven years: 412

Flight hours in fiscal 2007: 415

Demand

81 percent of UT flights are made within Tennessee.

89 percent of in-state flights were between Knoxville and Nashville or another UT campus.

In 2006, 7 percent of all UT plane trips were made at passenger capacity.

If made by ground, trips taken by UT administrators in 2006 would have required an additional 2,100 hours travel time, with an approximate cost of $430,000 for compensated time. Hotel and meal expenses necessitated by overnight stays would also have added to the cost of ground travel.

Reliability

Federal Aviation Administration (FAA) safety regulations mandate that plane engines be overhauled every 3,000 flight hours.

Since the King Air 200 was purchased in 1985, an engine overhaul has been performed three times, at exponentially increasing cost each time.

1992: $202,000

1998: $306,000

2005: $604,000

Performance and maintenance issues resulted in the plane being out of service a total of six weeks during 2006.

Contact:

Gina Stafford, (865) 974-0741, stafford@utk.edu