Tracking an aircraft maintenance cost can be intimidating, considering millions of dollars are being accounted for. Hence, why not rely on an aircraft maintenance cost tracking outsourcing service for easy and cost-efficient MRO accounting?
The reason for relying on outsourcing service is because accounting MRO (Maintenance, Repair, and Overhaul) is prone to be complex and challenging. From risk of errors, inefficient maintenance, lack of real-time tracking process, and unplanned downtime.
Since aircraft maintenance represents 10–15% of the total airline operating costs, it is better to leave this to the experts specialized for accounting MRO. But if an airline already has its own accounting team, this article will provide information about its challenges and solutions.
There are plenty of reasons why MRO cost accounting can be complex. First, while that 10–15% seems little, aircraft maintenance still costs millions because airlines need to perform:
Second, it’s the complexity of cost allocation from such maintenance. Airlines will need to account for labor, materials, overhead expenses, and any contracted services.
Lastly, airlines also need to follow either IFRS (International Financial Reporting Standards) or the United States’ GAAP (Generally Accepted Accounting Principles) rules.
These regulations need to be followed when accounting for asset capitalization (like when upgrading or fixing an aircraft) and routine expenses (like routine maintenance).
Understanding how complex MRO cost accounting can be, airlines need to follow the best method of doing it. It can range from doing an accurate cost allocation to using modern platforms to track MRO & assets properly.
Every aircraft has its own maintenance cost tag. Some require heavy part replacements, and some just need routine maintenance. The problem is if the airline averages them when doing MRO accounting, which is inaccurate.
Therefore, activity-based costing is needed to make sure a maintenance cost is accurately accounted for to all the aircraft. While this may look unimportant, an accurate cost allocation can also help airlines spot cost-inefficiency in maintenance.
In the modern, digital era, anything can be eased by utilizing modern ERP (enterprise resource planner) software, including MRO accounting. Here’s some of the best software that airlines can use to track MRO & aircraft assets:
In order for optimal MRO accounting & aircraft asset tracking, airlines need to evaluate key metrics. These metrics can help airlines to manage their maintenance cost and the aircraft’s reliability:
Since MRO cost management can be managed by proper cost tracking, it’s obvious that this needs to be done. However, airlines will face these cost-tracking challenges, which, fortunately, still have their solutions:
Considering the complexity, aircraft maintenance work order accounting should be managed properly. The reason is because there’s a challenge during this work order management.
To put it simply, there can be a problem with limited aircraft resources, delayed work because of constantly changing work priorities, financial data inaccuracy because of improperly accounted work details, etc.
All of these problems can lead to overstated or understated maintenance costs. So, to avoid this, airlines need real-time tracking of work orders from their initiation to completion for better cost tracking.
Another challenge with cost tracking also comes from how airlines store their aircraft parts and materials. For example, rotables can be used as spare parts multiple times, which have their own consumption costs.
To tackle this challenge, airlines are usually implementing RFID (radio-frequency identification) tags on aircraft parts. RFID tags have a serial number tracking system that can also be integrated with ERP systems.
As stated before, heavy maintenance like a D check requires serious overhauls and full airframe checks. This particular maintenance can be challenging because it takes weeks, requires work orders, needs inventory planning, and tracks all the costs.
So, the solution here is to use modern enterprise systems that have already been explained above. By using automated MRO and aircraft asset tracking systems, airlines can finally focus on doing major maintenance.
The alternative choice for airlines is outsourcing the aircraft maintenance cost tracking. A Philippines-based outsourcing service, Global Virtuoso (GV), can provide such great assistance because of these benefits:
GV has an extensive amount of experience in multiple industries, and aviation is one of them. They are an expert in finance and MRO accounting service, which is what airlines should expect from an aircraft maintenance cost tracking outsourcing service.
When it comes to cost-efficiency, airlines should choose outsourcing services like Global Virtuoso compared to creating internal (in-house) accounting teams. As a result, airlines could save up to 60–70% of accounting costs.
No experience with aviation software to track MRO and aircraft assets? No worries. GV is also an expert in using AMOS, Ramco, and TRAX. Airlines can have this software being managed or, better, make it integrated into the existing airline’s accounting system.
In conclusion, Global Virtuoso is a great solution to your aircraft maintenance cost tracking outsourcing needs. Then, you can focus on operating your airline operations. Contact us for a consultation now!
