Engine Finance Rountable Managing an engine. Stephane Garson, General Manager Marketing. 1 st May 2008, New York

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1 Engine Finance Rountable Managing an engine Stephane Garson, General Manager Marketing 1 st May 2008, New York

Two Strong Aerospace Leaders Behind CFM CFM

2 Two Strong Aerospace Leaders Behind CFM CFM International is a Joint Company of Snecma & General Electric Co. General Electric Snecma 152 B$ revenue 11 businesses 330,000 employees (25,500 Aircraft engines) 4,3 B revenue 8,400 employees 30 years of cooperation

3 50/50 Efficient Work Sharing SNECMA GE Simple structure : 50% GEAE ( USA) 50% Snecma (France) Everything shared : Research & development, design, engineering, marketing, production, product support Takes full benefit of global GEAE/Snecma partnership CFM is the only interface for the customer

4 Simple Sales & Customer Support Sharing CFM split the world into 2 regions to better support customers on a coordinated basis. SALES, PRODUCT SUPPORT CFMI CINCINNATI, OHIO, U.S.A. SALES, PRODUCT SUPPORT CFMI VILLAROCHE, FRANCE

5 A Wide Range of Products to Match Market Needs CFM56-7B (1997) CFM56-7B/3 (2007) / -700 /-800 / / -700 / -800 & -900 CFM56-5B & 5B/P (1994&1996) CFM56-5B/3 (2007) A318 / A319 / A320 / A321 A318 / A319 / A320 / A321 CFM56-5C (1993) A / -300 CFM56-5C/P (2003) A ENH CFM56-3 (1984) / -400 / -500 CFM56-5A (1988) A319 / A320 CFM56-2 (1982) DC8 /Military applications Engines currently in production ( ) Entry Into Service Year Applications

6 CFM56 Family Today As of December 31, 2007 More than 25,400 CFM56 on commitment (options & spares included) 489 Operators/ Customers & VIP 7,195 A/C / 17,636 engines in service (delivered to Operators) 385 million Engine Flight Hours & 222 million Engine Flight Cycles 1 aircraft departure every 3 seconds THE WORLD S MOST POPULAR ENGINE

Single Aisle A/C Market Share PW 3,7% IAE

A/C CFM IAE PW RR* A319/320/321 2786 2218

7 Single Aisle A/C Market Share PW 3,7% IAE 18,3% RR 6,1% CFM 71,9% * RR / RR Deutsch A/C CFM IAE PW RR* A319/320/ N/A N/A A N/A PW N/A 737/ N/A N/A N/A 737/-7B 4303 N/A N/A N/A 717 N/A N/A N/A N/A N/A MD90 N/A N/A N/A N/A TOTAL 9148 N/A Based on cumulative firm orders (100 Pax +) CFM = THE PREFERRED ENGINE

8 A320 Family Market Share: Firm Orders over last 5 years PW 0.0% PW 0.0% PW 2.5% CFM 56.8% IAE 43.2% CFM 56.5% IAE 43.5% CFM 50.8% IAE 46.7% PW 0 % PW 0 % CFM 62.9% IAE 37% CFM 65.5% IAE 34.5% A320 operators consistently vote CFM

A/C 2260 587 106 456 2256 318 1425 N&S America Africa & Middle East Asia Pacific

9 CFM Single Aisle/ Narrow Body Market Share Number and location of A/C in service A318/ 319/ 320/ 321, B737CL and NG, MD90 Europe & CIS 341 CFM 6259 A/C IAE 1490 A/C N&S America Africa & Middle East Asia Pacific Excellent Marketability More than 4 times more A/C with CFM56 than the competition

2002 2003 2004 2005 2006 2007 2001 2000 1999 1998 1997 CFM56 Engines Ordered & Produced As of

Produced engines 2000 1800 1600 1400 1200 1000 800 600 400 200 0 1979 1980 1981 1982 1983 1984

10 CFM56 Engines Ordered & Produced As of December 31, 2007 Number of engines Number of engines Installed engines orders Produced engines * Installed engines only. Without spares. Year

11 Keep it simple, dummy New York, April 4th

12 First Look at a Jet Engine

13 First Look at a Jet Engine The fan

14 The Fan

15 The Fan The fan The fan sucks air From the outside

16 The Jet Engine Principle

17 The Jet Engine Principle Fuel Fuel Compressor Combustor Turbine Turbine The turbine drives the compressor The fuel brings the energy to to the system

18 The Jet Engine Principle: By-Pass Ratio By-pass ratio = 33 2 Mass flow / Mass flow 11 Air TRUST ME! Increase in in by-pass ratio improves Specific Fuel Consumption (SFC)

19 WHEN THE LARGEST BUYERS OF AIRCRAFT ENGINES DO THEIR CALCULATIONS THEY ALWAYS GET THE SAME ANSWER. Calculating Engine Maintenance

20 Acronyms A/F Airframe ATO Aircraft Take Offs D&C Delays & Cancellations DMC Direct Maintenance Cost ECO Engine Cost Ownership EGT Exhaust Gas Temperature EMO Engine Management Opimization IFSD In Flight Shut-Downs LLP Life Limited Parts LRU Line Replaceable Unit NPV Net Present Value

21 Acronyms OATL SV SVR SVC T/O TOC TOW USG VSV W/S Outside Air Temperature Limit Shop Visit Shop Visit Rate Shop Visit Cost Take Off Total Operating Cost Take Off Weight US Gallons Variable Stator Vanes Work Scope

22 Engine DMC Breakdown THE COST TO KEEP AND RESTORE ENGINE SERVICEABILITY CAN BE SPLIT BETWEEN: Line Maintenance cost Shop maintenance cost

23 Engine DMC Breakdown ( cont d ) LINE MAINTENANCE : Line Labor : Inspection Troubleshooting Replacement of Line Replaceable Units ( LRU s ) Test Line Material : Consumable parts (items which must be scrapped at every maintenance action ) Repair of equipment removed on line LINE MAINTENANCE REPRESENTS ABOUT 7 % OF ENGINE MAINTENANCE COST

24 Engine DMC Breakdown (cont d) SHOP ACTIVITY : Routine Labor : assembly / disassembly, cleaning, inspection of modules and parts Repair of parts ( including LRU s ) Material: cost of parts and material replaced during the shop visit Fees, Tests, Transportation SHOP MAINTENANCE REPRESENTS ABOUT 93 % OF ENGINE MAINTENANCE COST

25 Shop Visit Rate - Definitions SHOP VISIT : An engine Removal is classified as a "SHOP VISIT" whenever the subsequent engine maintenance performed prior to reinstallation entails separation of pairs of major mating flanges or removal of a disk, hub or spool. (WATOG definition) Some maintenance operations performed on wing or on a stand may not be defined as a SV (eg compressor top casing on CFM56 engines) WATOG : World Airlines Technical Operations Glossary

26 Shop Visit Rate Definitions (cont d) SVR IS A MEASURE OF THE ENGINE RELIABILITY PARAMETER DILUTED ( POPULAR ) SHOP VISIT RATE SVR Ratio of the number of shop visits in a fleet to the total fleet flying time (expressed in 1000 hours) within a given period It represents the aging process of the whole fleet NON DILUTED OR RESTORED SHOP VISIT RATE RSVR Ratio of the total number of shop visits having occurred within a period to the total number of hours flown by the involved engines since their last shop visit. It represents an average time on wing between removals Average on-wing time = 1000 / RSVR

27 Shop Visit Rate RSVR and SVR SV/KEFH RSVR Mature SVR SVR Years Average Mature life = 1000 / MatureSVR

28 Engine DMC Breakdown ( cont d ) SHOP MAINTENANCE COST DEPENDS ON TWO FACTORS : SHOP VISIT COST SVC in K$ SHOP VISIT RATE SVR nb SV / 1000 SHOP DMC = SVC x SVR measured in $ / EFH SHOP DMC IS A FUNCTION OF SV RATE AND SV COST

29 Shop Visit Rate Definitions (cont d) Calculation example Yearly utilization h h h h h h Popular SVR = 1000 / = 0.049

30 Shop Visit Rate : Shop Visits cause breakdown Example of a High Thrust Rating engine CFM56-5B3/P A321 Hot Parts 12% Other 32% Performances 42% LLP 14% SV MAINLY CAUSED BY EGT AND OTHER CAUSES

31 Shop Visit Rate : Shop Visits cause breakdown Example of a Low Thrust Rating engine CFM56-5B6/P A319 LLP 47% Other 42% Performances 1% SV MAINLY CAUSED BY LLP AND OTHER CAUSES Hot Parts 10%

32 Shop Visit Cost - Shop Visit Workscope Determined by : Shop visit cause Time since last shop visit Condition of different modules On-wing life policy Status of Life Limited Parts Expected time to the next shop visit Business consideration Goal is to rebuild an engine with acceptable time to the next shop visit Shop Visit Expected time to next shop visit Performance Life Limited Parts Other Parts

33 On-Wing Life Parameters Engine Rating Engine Age Usage severity

34 Engine By-pass Rating Ratio Limitations and On-Wing Life

35 Engine By-pass Rating Ratio Limitations and On-Wing Life Maximum temperature

36 Engine Rating and On-Wing Life Engine goes to shop EGT deterioration EGT Limit EGT Limit 0 10,000 20,000 Time on wing High Rating 0 10,000 20,000 Time on wing Low Rating Same Engine LARGE EGT MARGIN & LOW DETERIORATION RATE TRANSLATE INTO LONGER ON-WING LIFE

37 Factors Affecting Severity Severity Factor Flight Leg and Thrust Derate Outside Air Temperature Influence Exhaust Gas Temperature % 5% 10% 15% Decreasing Takeoff Derate Engine Corner Point Source: EMCWG Flight Leg (Hours) Outside Air Temperature at T/O Environmental Conditions

38 LLP Management CFM56-7B/5B Life Limited Parts Status Current Lives Fan Disk Booster spool Shaft High Pressure Compressor Front shaft Stage 1-2 spool Stage 3 disk Stage 4-9 spool CDP seal High Pressure Turbine Front shaft Front air seal Disk Rear shaft Low Pressure Turbine Shaft Conical support Stage 1 disk Stage 2 disk Stage 3 disk Stage 4 disk 30,000 30,000 30,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 25,000 25,000 25,000 25,000 25,000 25,000 For Budgetary Purpose Only

39 LLP management Depending on the shop visit time occurrence, LLP management must be adapted to the situation (example of an operator requiring a minimum build of 6,000 cycles) Shop visit occurs close to 20,000 cycles Remove 20,000 and 25,000 cycle parts SV Remove 30,000 cycle parts SV 20,000 cycles 28,000 cycles Shop visit occurs close to 17,000 cycles Remove 20,000 Remove 25,000 Remove 30,000 cycle parts cycle parts cycle parts SV SV SV 17,000 cycles 23,500 cycles 29,500 cycles

40 Engine Aging As engine ages, the average time to shop visit lessens Relative times to Shop Visit Mature Engine st SV 2nd SV 3rd SV 4th SV

41 Maintenance Reserve Calculation An example - Assumptions First Operator (10 year lease contract ): Flight Leg: 1.3 hours Utilization: 2,800 hours per year Calculated average mature SVR: T/O derate: 15% Western Europe Expected on wing lives: Mature Shop Visit at 1000/SVR = hours First shop visit at 10,000/ 0.6 = 16,700 hours ( cycles) Second Shop Visit at 11,700 hours (9000 cycles), but limited at 7,100 cycles due to 20,000 cycle LLP limit Following Shop Visits expected every 10,000 hours (Mature life)

42 Maintenance Reserve Calculation An example - Rapid Calculation Expected Shop Costs (LLP cost not included) 2 Core refurbishment: 2 M$ SV1 SV2 Operator 1 10 year Contract Expected expenses Operator 1: 2,0 M$ over 28,000 hours, or 78 $/EFH

43 Maintenance Reserve Calculation An example - Assumptions Second Operator (7 year lease contract ) : Flight Leg: 2.4 hours Utilization: 3,200 hours per year T/O derate: 10% Western Europe Calculated average mature SVR: < Operator 1 Shop Visits expected every 1000/ = 11,200 hours (4700 cycles) (theoretical first and second lives at 18,700 and 13,100 hours) Expected Shop Costs (LLP cost not included) Core refurbishment: 1 M$ Core + LPT refurbishment: 1.4 M$

44 Maintenance Reserve Calculation An example - Rapid Calculation SV1 SV2 SV3 SV4 Operator 1 Operator 2 10 year Contract 7 year Contract Expected expenses Operator 1: 2 M$ over 28,000 hours, or 85 $/EFH Expected expenses Operator 2: 2.4 M$ over 22,400 hours, or 107 $/EFH Operator 2 operation less severe than Operator 1 =>Maintenance Reserves need to be adjusted

45 Maintenance Reserve Calculation An example - More Accurate Calculation SV1 SV2 SV3 SV4 Operator 1 Expected expenses over 4 Shop visit, with operation 1: 4.4 M$ over 46,000 hours. Operation 1 maintenance reserves : 96 $/EFH 688k$ remaining in the reserve at the end of the 10th year SV1 SV2 SV3 SV4 Operator 2 Expected expenses over 4 Shop visit, with operation 2: 4.4 M$ over 54,200 hours. Operation 2 maintenance reserves : 81 $/EFH Enough reserves to cover SV3 and SV4

46 Engine Fleet Management OBJECTIVES KEEP HIGHEST RELIABILITY MAXIMIZE ASSET USE MINIMIZE COST OF OWNERSHIP MINIMIZE SPARE ENGINE INVENTORY

47 Engine Fleet Management - Tools Commonality Staggering Spare engines used to reduce average usage of individual engines Easier Shop Visit planning Engine Re-rating Take advantage of the different ratings of a common engine model installed on different aircraft models Permit to extend the average time between shop visits of the engine fleet

48 Engine Fleet Management - Commonality Commonality within a fleet of engines brings savings on : Spare engine inventory Spare parts inventory Engine fleet management Mechanics training Interface with Engine Manufacturer Documentation ENGINE COMMONALITY A KEY DRIVER TO REDUCE COSTS

49 Engine Fleet Management - Staggering Using a spare engine to dilute utilization of installed engines permits to avoid that several shop visits occur simultaneously. Without Staggering With Staggering Several Shop visits occur simultaneously 2 spares minimum required No overlap of Shop visits 1 spare sufficient Installed engine Spare engine Shop Visit ENGINE STAGGERING : POSTPONE SHOP VISITS AND REDUCE SPARE REQUIREMENT

50 3D. Engine Operation Fuel consumption vs. on-wing life EMO Extends the on wing life of the engines that are EGT limited on A321 Postpones shop visits which would have otherwise occurred on A321 EGT EGT Redline A321-5B3/3 On Wing Life A319-5B6/3 Additional On Wing Life EFH Engine Removed from A321 and installed on A319

51 3D. Engine Operation Fuel consumption vs. on-wing life Single Engine deterioration 7% 5 shop visits for Operator 1 % Fuel Burn deterioration 6% 5% 4% 3% 2% Average fuel consumption increase Operator 1 : 3.8% to 3.9% 1% 0% EIS Year 5 Year 10 Year 15

52 3D. Engine Operation Fuel consumption vs. on-wing life % Fuel Burn deterioration 7% 6% 3 shop visits for Operator 2 Average fuel consumption increase Operator 2 : 4.5% to 4.6% 5% 4% 3% 2% 1% 0% EIS Year 5 Year 10 Year 15

53 3D. Engine Operation Fuel consumption vs. on-wing life 0.7% Lower fuel consumption for Operator 1 at the cost of 2 additional Shop Visits over 15 years 7% % Fuel Burn deterioration 6% 5% 4% 3% 2% 1% 0% EIS Year 5 Year 10 Year 15

54 3D. Engine Operation Fuel consumption vs. on-wing life $ saved in fuel $ higher shop cost 7% % Fuel Burn deterioration 6% 5% 4% 3% 2% 1% 0% Assumptions: -Savings per aircraft -15 year study period - FL = 1,4 - A320/ CFM56-5B4/P -1,8 $/ USG fuel FH/ year EIS Year 5 Year 10 Year 15

55 NEW CFM OWNERS TIME TO PUT YOUR FIRST SHOP VISIT IN THE DIARY

Engine Maintenance Management

Engine Maintenance Management Managing Technical Aspects of Leased Assets Madrid, Spain / May 12 th, 2015 Presented By: Shannon Ackert SVP, Commercial Operations Jackson Square Aviation Agenda Technical