Elements of Aircraft Maintenance Reserve Development

Transcription

1 Maintenance Topics Conference Presented By: Shannon Ackert Vice President, Capital Markets November 10 th,

2 , LLC Overview is a global commercial aircraft lessor headquartered in San Francisco, California Current satellite offices : London, Seattle, Miami & Buenos Aires. Opening Asia office in The company has a $500 million commitment from Oaktree Capital, which has financed the management team since the mid 1990 s with a high degree of success. is focused on acquiring primarily through Sale & Leaseback (SLB) : Narrowbody & widebody Passenger & freighter 2

3 Agenda 1. Significant Maintenance Events 2. Maintenance Reserve Parameters 3. Maintenance Reserve Escalation 4. Maintenance Reserve Development I. Appendix A Maintenance Reserve Information Resources II. Appendix B Maintenance Costs & Reserve Rates 3

4 1.0 Significant Maintenance Events Equipment Airframe Mtx Events Heavy Structural Inspection (HSI) C Checks Mtx Interval Process Hard Time Components APU Restoration Landing Gear Overhaul Condition Monitored Hard Time Engine Performance Rest LLP Replacement Condition Monitored Hard Time 4

5 2.0 Maintenance Reserve Parameters Reserve Equation Fixed Cost Fixed FC Interval Variable Cost Fixed Interval Variable Cost Variable FH Interval Event Application Engine LLP Replacement Airframe HSI Landing Gear Ovhl Engine Module & APU Restoration Comments Predictable, very little variability in both costs and time on wing Variability in costs, which can be difficult to predict if equipment is new or ageing Variability in both costs and time on wing Often difficult to quantify if equipment is new or ageing Time on wing heavily influenced by operation 5

6 3.0 Maintenance Reserve Escalation I. Annual Escalation Policies Varies By Lessor, But Typically: 1. Fixed (i.e. 3%) 2. Indexed to Core Producer Price (CPI) Index 3. Computed Using OEM escalation formula weighted using labor & material Indices (ECI Labor& PPI Material) ECI Aircraft Mfg, Wages & Salaries PPI Industrial Commodities Source : Boeing 6

7 I. Airframe Heavy Structural Inspection Costs Factors I. Airframe Age (First, Mature, & Ageing Runs) Costs are escalated to account for airframe ageing, which results in higher non routine tasks. II. General non routine factor escalations: 10% 15% per phase. Flight Cycles Cost may be increased to account for high cycle operation. Newness < 6 Years Non Routine Routine Maturity 6 15 Yrs Non Routine Routine Aging > 15 Years Non Routine Routine 7

8 I. Airframe Heavy Structural Inspection Costs Factors continued III. Scope of Work Not driven by the aircraft operation, instead Policy established by Lessor Generally Falls Under Two Structures: Structure A Scope of work includes reimbursement for material and routine & non routine labor for systems, structural & zonal tasks. Structure B Scope of work includes reimbursement for material and routine & non routine labor for structural & zonal tasks. 8

9 I. Airframe Heavy Structural Inspection Interval Factors Two Types of Calendar Interval Structures: Structure A : Calendar interval based off the OEM generic and/or sample block program. Example Generic Block : A320 / A330 Family : 4C/6Yr & 8C/12Yr Structural Inspection 6 & 12 Yr Intervals, Example Sample Block : 737NG Family 8 Yr Intervals Structure B : Calendar interval based on timing of majority of zonal / structural tasks. Reflective of a customized maintenance program. Example : 737NG Family 8, 10, & 12 Year Intervals Example : Family 8 Year Intervals 9

10 I. Airframe Heavy Structural Inspection Example : A HSI Costs Scope of work assumption: includes routine & nonroutine labor for systems, structural & zonal tasks, and material. A. First Run Phase New 6 Yr 4C/6Yr SI Cost : $1.75M 8C/6Yr SI Cost : $1.50M B. Mature Run Phase 6 Yr 12 Yr 4C/6Yr SI Cost : $2.01M 8C/6Yr SI Cost : $1.50M C. Ageing Run Phase > 12 Yr 4C/6Yr SI Cost : $2.20M 8C/6Yr SI Cost : $1.65M 4C/6YR Check Escalated 15% off First Run Costs Both 4C/6YR & 8C/12YR Checks Escalated 10% off Mature Run Costs 10

11 II. Landing Gear Overhaul Cost Factors generally impacted by: Supply & demand of exchange unit cost plus removal and installation labor costs. Interval Factors generally consisting of two limiter: I. Calendar time (i.e. 10 years) II. Flight cycles (i.e. 20,000 flight cycles) Timing of event: whichever is more limiting. 11

12 II. Landing Gear Overhaul Notes: In cases where there is a calendar limiter, this establishes the minimum monthly rate required. Some models have different limiters for main and nose gear assemblies. Example : 737NG Landing Gear Reserve Exchange Cost Assumption : $320,000 Limiters: 10 Years / 18,000 FC Scenario 1 Annual FC = 1,250 FC Cyclic limiter = 16 Yr(18,000/1,250) TOW Limiter = 10 Yr = 120 Mo Mo Rate :(320,000/ 120) = $ 2,666 Scenario 2 Annual FC = 2,250 FC Cyclic limiter = 8 Yr (18,000/2,250) TOW Limiter = 8 Yr = 96 Mo Mo Rate: (320,000/ 96) = $ 3,333 12

13 III. Auxiliary Power Unit (APU) Restoration Cost Factors Material driven 70% 80% of cost is material, Minor variance between first & mature run costs. Scope of work : Rework of the power section, load impeller & gearbox modules according to OEM s performance restoration and full gas path overhaul criteria. Time On Wing Factors If new generation APU : Use of empirical Mean Time Between Unscheduled Removal (MTBUR) from similar in production APU model. If mature APU : OEM Published Mean Time Between Unscheduled Removal (MTBUR) Metrics. 13

14 III. Auxiliary Power Unit (APU) Restoration Time On Wing Factors OEM MTBUR Metrics Mean Time Between Removals 12 Mo Rolling Averages 6,450 FH MTBCR 5,945 FH MTBUR 5,495 FH MTBR Example : APU (GTCP 131 9B) MTBUR = 6,500 APU FH Average Cost = $235,000 APU Reserve Rate = $36 / APU FH 14

15 IV. Engine Performance Restoration Cost Factors I. Engine Build Goals Tend be influenced by business decisions, and based on: a) Maximizing usage of LLP hardware, which often leads to lower shop visit costs but higher DMC ($ / FH), or b) Building for minimum number of shop visits, which allows one to achieve lower shop DMC ($ / FH) but higher shop visit costs. Notes Many lessors are now imposing minimum build goals in their leases to prevent short building. 15

16 IV. Engine Performance Restoration Cost Factors Engine LLP EIS I. Engine Build Goals Example First Run TOW = 13,000 FC / 26,000 FH At Shop Visit : Maximizing usage of LLP hardware Minimize Number of Shop Visits Replace No LLPs Build to 7,000 FC Replace Core LLPs Build to 10,000 FC Restoration $ 1,650,000 LLP Removed $ 0 Total Shop Visit $ 1,650,000 Restoration $/FH $/FH Restoration $ 1,800,000 LLP $ Removed $ 1,000,000 Total Shop Visit $ 2,800,000 Restoration $/FH $/FH 16

17 IV. Engine Performance Restoration Cost Influencing Factors continued II. Age rates reflective of first & mature run status As Engine Ages 20,000 FH 16,000 FH 15,000 FH Hardware Deterioration Rate Increases 1 st SV 2 nd SV 3 rd SV Higher Maintenance Costs 17

18 IV. Engine Performance Restoration Time On Wing Factors I. Engine Thrust Rating Increasing Thrust > Higher EGT Deterioration > Lower Time On Wing Same Engine Goes Into Shop Same Engine Goes Into Shop EGT Margin EGT Margin Loss ( C ) EGT Limit EGT Limit 8,000 FC Time On Wing High Thrust Time On-Wing High Thrust Rating Flight Cycles 2,000 4,000 6,000 8,000 10,000 Flight Cycles EGT Limit EGT Limit 10,000 FC Time On Wing On-Wing Low Low Thrust Thrust Rating Flight Cycles 2,000 4,000 6,000 8,000 10,000 Flight Cycles 18

19 IV. Engine Performance Restoration Time On Wing Factors continued II. Engine Flight Leg Cruise Flight Profile = 1.0 Flight Hour per Flight Cycle 1 FH 1 FH 1 FH Flight Profile = 3.0 Flight Hours per Flight Cycle Cruise 3 FH 19

20 IV. Engine Performance Restoration Time On Wing Factors continued II. Engine Flight Leg Increasing Flight Leg Increasing Flight Leg Lowers EGT Deterioration Lowers EGT Deterioration Cost $ / FH Cost $ / FH Greater Flight Leg Greater Flight Leg Lower DMC Higher Time On Wing and Lower Cost $ / FH Higher Time On-Wing Flight Leg (Hours) 20

21 IV. Engine Performance Restoration Time On Wing Factors continued II. Engine Flight Leg 777 Average Utilization Model Series Utilization Fl Leg ER LR ER Source : Boeing Cumulative Statistics 21

22 IV. Engine Performance Restoration Time On Wing Factors continued III. Engine Derate Increasing Derate Increasing Derate Lowers Thrust and EGT Deterioration Lowers Thrust & EGT Deterioration Higher Time On Wing and Lower Cost $ / FH Higher Time On-Wing Cost $ / FH Cost $ / FH Increasing Derate = Lower Thrust Increasing Derate = Lower Thrust Flight Leg (Hours) Flight Leg (Hours) 5% Derate 10% Derate 15% Derate 0% 10% 20% 22

23 IV. Engine Performance Restoration Time On Wing Factors continued IV. Environment Engines operated in dusty, sandy and/or erosive corrosive environments are exposed to higher blade distress and thus greater performance deterioration. Notes: Lessors are now adjusting their reserve rates to account for region of operation. Generally applies to narrow body aircraft operating within distressed environments. 23

24 IV. Engine Performance Restoration Time On Wing Factors continued Engine Environmental Distress Chart Lowest Medium / Low Medium High Highest Colors highlight severity and rate of occurrence of distress 24

25 IV. Engine Performance Restoration Example Severity Curve Severity Factor % Matrix = 10% Matrix = 15% Matrix = Base Flight Leg (2.0) Base Rate = $80 / FH $194 $150 $88 $86 $84 $176 $136 $80 $78 $76 $158 $122 $72 $70 $68 5% Derate 10% Derate 15% Derate Flight Leg 25

26 IV. Engine Performance Restoration Example CFM56 7B26 Restoration Calculation Base Operation : 2.0 Flight Leg / 10% Derate / Temperate Region Base Rate : $80 / FH Operating Scenario 1: 1.5 FL / 10% Derate / Temperate FL Factor = 1.7 Derate Factor = 1.0 Region Factor = 1.0 Composite Factor = 1.7*1.0*1.0 Composite Factor = 1.70 Adjusted Rate = 80 *1.70 Adjusted Rate = $136 / FH Operating Scenario 2: 2.5 FL / 5% Derate / Hot Dry FL Factor = 0.98 Derate Factor = 1.1 Region Factor = 1.2 Composite Factor = 0.98*1.1*1.2 Composite Factor = 1.30 Adjusted Rate = 80 *1.30 Adjusted Rate = $104 / FH 26

27 V. Engine Life Limited Parts (LLP) Replacement Cost Factors OEM piece part escalation currently averaging over 5% per year. Inclusion of Static LLPs Although these parts are not classified to be critical they do fall under the category of parts whose failure could create a hazard to the aircraft i.e. shrouds and frames. 27

28 V. Engine Life Limited Parts (LLP) Replacement Piece Part Life Limit Factors Life limits tend to range between 15,000 30,000 flight cycles, however LLPs can have shorter lives imposed on them by airworthiness directives (ADs). Lessor imposed stub factor on life limits typically: 10% for narrowbody engines 5% for widebody engines Some manufacturers certify ultimate lives of LLPs at the time they certify an engine model. Other manufacturers certify the lives as experience is accumulated. In these scenarios, ultimate lives are reached after one or several life extensions. 28

29 V. Engine Life Limited Parts (LLP) Replacement Stack Cost Lessors often assume that each LLP will retain 5% 10% of its stub life before being replaced. LLP FC Limit Cost $ $ / FC 10% Stub 1 30, , , , , , ,000 50, ,000 80, , , ,000 30, , , , , , , ,000 90, ,000 60, , , , , ,000 70, ,000 90, ,000 80, ,000 70, ,000, % Stub = Cost $ / (90% * FC Limit) 29

30 VI. Lessor s Perspective: Many lessors base their costs to be reflective of costs negotiated from either a U.S. or European based MRO facility. Consequently, their reserves rates are normally ranked as market based to above market based. Ultimately, reserves are heavily negotiated and are often marketing driven. 30

31 Appendix A Sources of Maintenance Reserve Metrics 1. Maintenance Reserve Claims Example Performance Restoration 31

32 Appendix A Sources of Maintenance Reserve Metrics 2. OEM Conferences & Publications 3. Commercial Publications 32

33 Appendix B Maintenance Costs & Reserve Rates 1.0 Airframe Heavy Structural Inspection Costs & Reserve Rates Assumes full workscope (systems, structures & zonal & material) Aircraft Check Phase Interval Costs 2010 $ Rates ($ / Mo) A C / 6Y SI First Run 72 Months $750K $850K $10,400 $11,800 A C / 12Y SI First Run 144 Months $850K $900K $5,500 $5,900 A C / 6Y SI First Run 72 Months $1.4M $1.6M $19,500 $22,200 A C / 12 Y SI First Run 144 Months $1.5M $1.7M $10,400 $11,800 B C6 C8 Equivalent First Run 120 / 144 Mo $1.3M $1.5M $9,000 $12,500 B C4 / D Check Ageing 72 Months $4.0M $4.5M $55,500 $62,500 B S4C Ageing 72 Months $1.5M $1.7M $22,200 $23,600 B ER S4C Ageing 72 Months $2.0M $2.3M $27,800 $31,900 B ER C4 / SI First Run 96 Months $2.5M $2.8M $26,000 $29,100 E190 C4 / SI First Run 96 Months $475K $575K $4,900 $5,900 CRJ 700 HSI First Run 96 Months $425K $525K $4,400 $5,400 33

34 Appendix B Maintenance Costs & Reserve Rates 2.0 Engine Performance Restoration Costs & Reserve Rates Engine Thrust Phase Fl Leg Time On Wing (FC) Costs 2010 $ Rate ($ / FH) CFM56 5B6/P 23,500 First Run ,500 16,500 $1.8M $2.2M $68 $78 CFM56 5B4/P 27,000 First Run ,000 12,000 $1.8M $2.2M $86 $96 CFM56 5B3/P 33,000 First Run 2.0 7,500 8,500 $1.8M $2.2M $124 $134 CFM56 7B24/P 24,000 First Run ,500 16,500 $1.8M $2.2M $68 $78 CFM56 7B26/P 26,300 First Run ,500 13,500 $1.8M $2.2M $78 $88 CFM56 7B27/P 27,300 First Run ,000 12,000 $1.8M $2.2M $84 $94 V2524 A5 24,000 First Run ,000 16,000 $1.8M $2.2M $72 $82 V2527 A5 27,000 First Run ,000 11,000 $1.8M $2.2M $92 $102 V2533 A5 33,000 First Run 2.0 6,500 7,500 $1.8M $2.2M $135 $145 Trent ,200 First Run 6.0 3,500 4,000 $3.6M $4.0M $175 $185 PW ,000 First Run 6.0 3,000 3,500 $3.2M $3.6M $180 $190 CF6 80E1A4 70,000 First Run 6.0 3,000 3,500 $3.0M $3.4M $165 $175 GE90 115B 115,000 First Run 8.0 2,250 2,750 $4.4 $4.8M $250 $260 34

35 Appendix B Maintenance Costs & Reserve Rates 3.0 Landing Gear Overhaul Costs & Reserve Rates Assumes cost for exchange unit plus removal/installation labor Aircraft Interval Costs 2010 $ Rates ($ / Mo) A320 Family 10 YR / 20,000 FC $380K $420K $3,160 $3,500 A330 Family 10 YR $875K $925K $7,300 $7,700 B737NG Family 10 YR / 18,000 FC $320K $380K $2,650 $3,166 B757 Family 10 YR / 18,000 FC $425K $475K $3,540 $3,950 B767 Family 10 YR $550K $600K $4,580 $5,000 B747 Family 10 YR / 6,000 FC $750K $800K $6,250 $6,660 B777 Family 10 YR $1.0M $1.2M $8,333 $10,000 E190 Family 10 YR / 20,000 FC $325K $350K $2,700 $2,900 CRJ 700 Family 10 YR / 20,000 FC $180K $220K $1,500 $1,800 35

36 Appendix B Maintenance Costs & Reserve Rates 4.0 APU Performance Restoration Costs & Reserve Rates Aircraft Interval APU FH Costs 2010 $ Rates ($ / APU FH) A320 Family 6,000 7,000 $210K $240K $33 $38 A330 Family 6,000 7,000 $350K $375K $40 $45 B737NG Family 6,000 7,000 $210K $240K $33 $38 B757 Family 5,000 6,000 $200K $225K $37 $42 B767 Family 5,000 6,000 $200K $225K $37 $42 B747 Family 8,000 9,000 $425K $475K $48 $53 B777 Family 7,500 8,500 $425K $475K $50 $55 E190 Family 5,000 6,000 $160K $180K $31 $36 CRJ 700 Family 4,000 5,000 $130K $160K $30 $35 36