Block-hour packages: price them safely and track hours

The club down the road sells ten-hour blocks at a discount, and someone on your committee thinks you should too.

It's not a bad idea. Letting members pay for ten hours up front at a better rate is good for a club. The money arrives early, and a member who has paid for ten hours tends to fly them. Where clubs come unstuck is copying that other club's discount, then keeping the balances in a spreadsheet only one person understands.

So here's how we'd do it. Keep the discount inside the margin between what an hour costs the club and what it charges. Then treat the money members have prepaid as a debt the club owes in flying, and reconcile it every month.

The examples use plain numbers that work the same in any currency.

What goes in a package#

There are three common kinds. The one you pick decides how much risk the club carries.

Members think in hours, so an hours package is the easiest to sell. The catch is that it fixes the price of every hour in the block, and that includes the fuel in a wet rate.

On the example aircraft used below, fuel is 90 of the 290 an hour costs to fly. Say fuel goes up by a fifth. Each hour now costs the club 18 more, and a member with eight hours left in a block costs the club 144 that the package price never covered. A money package gets round this. The credit is spent at whatever the rate is on the day, so the club can change its rates without breaking a promise.

One more thing to watch: a bonus and a discount aren't the same number. Paying 3,000 for 3,150 of credit is a 5% bonus but a 4.8% discount, because 3,000 divided by 3,150 is 0.952. Say which one you mean, and work out the discount before you compare it with your margin.

Pricing the discount from your costs#

Every point of discount comes out of the margin between what an hour costs the club and what it charges. Go past that margin and every hour in the block loses money. So start from the cost of an hour, which our guide to setting a hire rate that covers its costs works out.

That guide's example aircraft flies 150 hours a year, costs 290 an hour and hires at 335 wet. Here's what a ten-hour block looks like at three discounts.

At 150 hours, the most this aircraft can give away is 45 divided by 335, about 13%. That sounds like plenty of room. Now look at the last column. Drop to 120 hours (one long wet winter and an engine away for a while would do it) and even the 5% block loses money on every hour. If a 120-hour year is possible, the ceiling is 6 divided by 335, under 2%.

Put another way, a 5% block only works if the aircraft reliably flies 150 hours. A 10% block leaves 11.50 an hour to absorb everything else that goes wrong, which isn't much. If you want to offer more than the margin allows, raise the rate card first and discount from there. (The examples below round the 5% block to 3,180, or 318 an hour.)

Before the committee signs a package off, we'd check it three ways.

1. Divide the margin by the rate. That percentage is the ceiling. Set the discount at the ceiling for your worst realistic year rather than your best.
2. Price the block at the hours the aircraft actually flew over the last two or three years, not the hours you hope it'll fly once the packages sell.
3. Watch the wet element. If fuel is a large part of the rate and moves often, sell blocks as money rather than hours, or put the dry rate in the block and charge fuel on top. Our guide to wet and dry hire rates covers the second option.

Early money and committed members are real benefits, and we wouldn't talk anyone out of them. But neither makes an hour any cheaper to fly, so neither can pay for a discount larger than the margin.

Write the terms before you sell#

Most block-hour arguments start with a question nobody answered when the package was sold. They tend to surface at the desk, with a member holding a receipt and the treasurer trying to remember what was agreed. Answer the questions in the package terms instead, show the terms before the member pays, and apply them the same way to everyone.

1. What it can be spent on. Name the aircraft or types, and say whether instructor time, landing fees or exam fees can come out of it. If a block is sold for one aircraft, say what happens when that aircraft is away for maintenance for a month.
2. Which clock. Draw the block down by the same clock you charge by: tacho, Hobbs, airborne or brakes-off (our guide to billing flight time explains each one). Say how part hours are counted.
3. Running over. When a flight uses more than is left, the remainder is charged at the normal rate, not the block rate. Write that down, because members assume the opposite.
4. Expiry. Set a date by which the hours must be flown, often 12 months from purchase, and say what happens to anything left: lost, converted to credit at the block rate, or extended once on request. Expiry limits how long the club carries the debt and how long an old rate stays in use.
5. Refunds. Say when unused hours are refunded and at what rate. The usual cases are a member who moves away, a medical that lapses, and the club selling or permanently grounding the aircraft. Refund unused hours at the price paid for them.
6. Rate changes. For an hours package, hours already bought are flown at the price paid and new blocks are sold at the new price. For a money package, say plainly that credit is spent at the rate on the day of the flight.
7. Transfers. Say whether a member can pass unused hours to another member. A common answer is no, or only with the treasurer's approval.

Consumer law on expiry and refund terms differs from country to country, and in some places unclaimed property law decides what happens to expired balances. Have the terms checked before you rely on them.

Accounting for the prepaid balance#

When a member pays 3,180 for ten hours, it's tempting to feel 3,180 better off. You aren't, quite. The club has the cash but hasn't earned it yet. It owes ten hours of flying.

The accounting standards see it the same way. Under IFRS 15 (adopted in Australia as AASB 15 and for New Zealand businesses as NZ IFRS 15), a business that receives a prepayment records a liability for the amount of the prepayment, and recognises the revenue only when it provides the service (paragraph B44). In the UK and Ireland, FRS 102 says the same for accounting periods beginning on or after 1 January 2026 (paragraph 23.125). This applies if your club's accounts follow these standards. The US and Canada have their own revenue standards, so ask your accountant which one your club follows, and on what basis its accounts are kept.

Hours that are never flown are what the standards call breakage (IFRS 15 paragraphs B45 and B46, FRS 102 paragraphs 23.129 and 23.130). Where the member can't get the prepayment back, unflown hours become income in one of two ways. If the club can reliably expect some to go unused, they become income gradually, as the other hours are flown. Otherwise they become income once it becomes remote that they'll be flown, for example when they expire. The exception is a law that requires unclaimed balances to be handed to someone else, such as a government under unclaimed property laws. That money stays a liability and never becomes the club's income (IFRS 15 paragraph B47).

Now picture the numbers at a busy club. Take 40 members each holding an average of 6.5 hours at 318. That's 260 hours, and the club owes 82,680 of flying. The money has to still be there when those hours are flown, because that's when their fuel, maintenance and engine reserve have to be paid. A club that spends block-hour money on this month's bills is borrowing from its members. We'd put the total of outstanding balances in front of the committee every month, right next to the bank balance.

Tax can fall on the sale rather than the flight. In the UK, HMRC's VAT Notice 700 says that if you receive payment before the service is performed, the tax point is the date you receive the payment or issue the invoice, whichever is first (paragraph 14.2.2(a)). So a VAT-registered club or school accounts for VAT on a block when it sells it. If you keep a payment for a supply the customer doesn't take up, VAT is still due on the amount paid, so expired hours don't get the VAT back. If you refund unused hours, you can reclaim the VAT on the refund in your next return (paragraph 8.13.1). Sales taxes elsewhere have their own timing rules, so talk to your accountant before the first package goes on sale.

Reconciling block hours every month#

Once a month, sit down with the same five lines and a closing balance. It takes less time than the argument it saves.

The closing balance should match the total of every member's remaining hours at the price they paid. If it doesn't, a flight has been charged at the normal rate instead of drawn from a block, or the other way round. That's far easier to find in the month it happened than at the year end, when nobody can remember who flew what in March.

A few habits keep the numbers clean.

• Draw down on every flight, the day it's flown. A block updated weekly from flight sheets is always a few flights out.
• Show members their balance. Hours used and hours left after every flight answer most of the questions the treasurer would otherwise get.
• Warn before the balance reaches zero. Tell the member when it drops below the length of a normal booking, for example 1.5 hours, so they can buy the next block before the flight that would run over. A member who finds out at the desk pays the full rate for the remainder and feels caught out, and honestly, you can see why.
• Keep expired, refunded and flown hours apart. They mean different things in the accounts, and members ask about them differently. If the balances still live in a spreadsheet, our guide to moving off spreadsheets covers the switch.

Block-hour packages in Volanti#

In Volanti, a package is a sellable bundle that funds a prepayment account, and it can include a membership. Each prepayment account carries per-item allowances and restrictions, so you decide what it can pay for.

Every completed flight is priced at your rates and charged automatically. When the allowance covers it, the charge is paid from the member's prepayment account, so the block is drawn down the day it's flown. The member's statement shows the flight at its full price with a credit that cancels it out, so they can see what each flight was worth even when nothing is owed. Members are alerted when their prepayment account runs out, can see what's left in the pilot portal, and can buy packages there.

For the treasurer, reports show package hours remaining and hours flown by package, and prepayment accounts export to CSV for the monthly reconciliation. See how packages and balances work in billing and payments, what members see in the pilot portal, and the package reports in reporting.