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8/11/2019 Costs Associated With Airline
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The effect of Aircraft Ageing on Maintenance and relatedOperating Costs
12 September 2013
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Copyright – TBE International Limited 2013
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Why understand the Ageing Effect?
Airlines• Understand future maintenance costs• Understand future hull requirements• Plan for inventory requirements• Plan fleet renewal programmes
MROs• Understand future labour requirements
• Understand market demand• Facilities planning
Firstly….…. because its interesting!• But understanding aircraft ageing has a more practical use• Aircraft ageing can be considered the single most important maintenance cost variable
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What is aircraft ageing and what are the drivers?
Service Bulletins/AD, eg:- Strut mod- T/R lock gear box- NGS
5
Engine Shop Visits- Performance Restoration- Life Limited Parts replacement
External damage- FOD- Hail- Impact damage
Component Maintenance- Wear out failures- Hard time removals
Line Maintenance
Base Maintenance- Routine inspections- Non Routine rectification- Corrosion- Fatigue
Maint ’ Influenced CostsDecreased reliability
- Delay costs Increase fuel burn- Weight increase
Maintenance ground time- Hull costs
Direct Maintenance Costs
External Factors
Operating parametersGeographical location
Labour efficiency
Outsource / in-house
Indirect Maint ’ Costs Spare holding costs
Engineering SupportInfra-structure- Tooling- Hangars
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We will focus on these costs and theirinfluence on other elements
Aircraft Ageing Driver Tree
Operating
CostsAssociatedWith
AircraftAgeing
6
Non Routinefactor
RoutineMaintenance
MaintenanceInfluenced
Costs
IndirectMaintenanceCosts
Infra-structure(Tooling etc)
Engineering
Spares
Delay / Reliabilityinduced Costs
Fuel burn Aircraft Hull / MaintenanceGround time
DirectMaintenance
Costs
On AircraftLine Maint A/C Base
Maint
Off Aircraft
ComponentEngine
Modifications
BER/Scrap
Routine wear outPerformanceRestoration
LLP / Hardtimeremovals
ExternalFactors- Operatingparameters- Geographicallocation- Labourefficiency- Outsource /in-house
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Direct Maintenance Costs
8
To understand how Direct Maintenance Costs are affected by ageing, consider
some real world examples…..
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On Aircraft Maintenance
• For all On Aircraft Maintenance the major cost driver is labour…… so to simplify this presentation we will only consider Labour but in any full analysis materialshould also be modeled.
• To conduct any meaning full analysis the data needs to be normalised, so we need tointroduce some concepts
Non Routine Maintenance:• To understand how the amount of Non Routine changes with aircraft age
Actual Routine Labour Hours of the event
Actual Non Routine Labour Hours of the eventFor each event, Non Routine Maintenance Factor =
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• First consider Non Routine Maintenance….. Its more interesting! • Consider an actual example for a fleet of B744 aircraft…..
NR increases at ~ 4% per yearEasy right?
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
N R / R F a c
t o r
Aircraft Age
NR/R Factor
0
0.2
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0.8
1
1.2
1.4
1.6
1.8
2
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
N R / R F
a c
t o r
Aircraft Age
4A Check C Check D Check
A different picture if check typeis considered!
0
0.2
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1
1.2
1.4
1.6
1.8
2
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
N R / R F a c
t o r
Aircraft Age
4A Check C Check D Check
A checks do not show any increased NR findings with age0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
N R / R F a c
t o r
Aircraft Age
4A Check C Check D Check
A checks do not show any increased NR findings with age
• C checks show the typicalageing ‘bump’
• But 2 different rates ofIncrease of NR findings
10
On Aircraft Maintenance – Non Routine Maintenance
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
N R / R F a c
t o r
Aircraft Age
4A Check C Check D Check
A checks do not show any increased NR findings with age
• C checks show the typicalageing ‘bump’
• But 2 different rates ofIncrease of NR findings
• The rate of NR findings increase at the same ratefor D checks and C checks (~4.2% - 5% / year)
• Magnitude of NR for each 1 hour of R is differentbetween C and D checks (due access and levelof inspection)
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0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
R o u
t i n e
L a
b o u r M
a t u r i t y
F a c
t o r
Aircraft Age
4A Check C Check D Check
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
R o u
t i n e
L a
b o u r
M a
t u r i t y
F a c
t o r
Aircraft Age
4A Check C Check D Check
A checks do not show any increased routine findings with age
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
R o u
t i n e
L a
b o u r
M a
t u r i t y
F a c
t o r
Aircraft Age
4A Check C Check D Check
• C checks show the typicalageing ‘bump’
A checks do not show any increased routine findings with age
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
R o u
t i n e
L a
b o u r
M a
t u r i t y
F a c
t o r
Aircraft Age
4A Check C Check D Check
A checks do not show any increased routine findings with age
• C checks show the typicalageing ‘bump’
• The rate of Routine increase is the same for Dchecks and C checks (~1.5% / year) but froma different base
11
On Aircraft Maintenance – Routine Maintenance
• Consider the same fleet of B744 aircraft…..
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On Aircraft Maintenance – Routine and Non Routine
• Putting together the Routine and Non Routine elements…..
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
2.2
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
R + N R L a
b o u r
A g e i n
g / M a
t u r i t y
F a c
t o r
Aircraft Age
4A Check C Check D Check
A checks do not show any ageing effect
C and D checks exhibit an ageing effect of~4.5% per year after maturity
Maturity at5-10 years
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Component Maintenance
• Component maintenance can be looked at via 2 mechanisms:1. The number of removals or MBTUR/hard-time limit of each component2. The cost of repair of each component when removed
• Follow the process
1. Consider the MBTUR of each rotable / repairable component fitted2. Consider the Quantity per Aircraft (QPA) fitted
This will give the quantity of removals per year
3. Dissect removals into 1 st , 2 nd , 3 rd etc removals4. Apply a cost to each removal type
This will give the cost ageing curve for the aircraft
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
20
40
60
80
100
120
140
160
180
200
0
5 0 ,
0 0 0
1 0 0 ,
0 0 0
1 5 0 ,
0 0 0
2 0 0 ,
0 0 0
2 5 0 ,
0 0 0
3 0 0 ,
0 0 0
3 5 0 ,
0 0 0
4 0 0 ,
0 0 0
4 5 0 ,
0 0 0
5 0 0 ,
0 0 0
5 5 0 ,
0 0 0
6 0 0 ,
0 0 0
6 5 0 ,
0 0 0
7 0 0 ,
0 0 0
7 5 0 ,
0 0 0
8 0 0 ,
0 0 0
8 5 0 ,
0 0 0
9 0 0 ,
0 0 0
9 5 0 ,
0 0 0
1 , 0 0 0 ,
0 0 0
C u m u
l a t i o v e
Q t y C o m p o n e n
t s ( % )
Q t y C o m p o n e n
t s ( F r e q u e n c y
)
MBTUR
Cum Components Qty Components
The aircraft has ~ 1,000 Rotable andRepairable components fitted with a
CMM and CLP > $5000
Component Maintenance, cont ’
• Consider an example of an A330• Operating at a utilisation of 4000 FH p.a, 8 FH/FC
14
A/C TSN after 25 years =100,000 FH
• Now apply the QPA to obtain the quantity of removals
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0
50
100
150
200
250
300
350
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
C o m p o n e n
t R e m
o v a
l s p e r
Y e a r
Aircraft Age
5+ Removal 4th Removal 3rd Removal 2nd Removal 1st Removal
16
Component Maintenance, cont ’
• Look at the ‘type’ of removals….
~150 of the annual removalswill be very low MBTURitems eg: wheels, filters etc
• Why is this important?• The 1 st removal is a lower cost than subs removals, ie: repair cost increases with age
Proportion of 1 st / 2nd etc removalsdecreases as the aircraft ages
• Now apply the different cost per event
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0.6
0.7
0.8
0.9
1
1.1
1.2
1.3
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
C o m p o n e n
t A g e
i n g /
M a
t u r i t y
F a c
t o r
Aircraft Age
Avg increase in costs after maturityis ~0.4% - 0.5% per year
WarrantyPeriod
17
Component Maintenance, cont ’
• Putting together the quantity of events and the relative cost per event a component costageing curve can be developed
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Engine Maintenance
• Analysing engine ageing can be difficult as internal component deterioration is onlyfinancially relised once the engine as a ‘system’ is unserviceable
• This is further compounded by different on-wing and in-shop inspection limits• A component (eg: blade) which is serviceable on-wing can be unserviceable if exposed in
the shop
• To observe the effect of ageing use a process similar to that used for componentmaintenance
• Split Activity – engine SVs, module exposure and LLP replacement• Apply Price – increase in scrap rates as individual components age
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Engine Maintenance, cont ’
• Consider a fleet of CFM56-7 engines• Operating at a rating of 24,000lbs, 3.0 EFH/EFC and 8% T/O derate
0
1
2
3
4
5
6
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
U S D
, M i l l i o n s
Aircraft/Engine Age (Years)
Core Refurb LPT Refurb LLP Replacement
Avg TOW10,500cyc
Avg TOW9,500cyc
Avg TOW8,000cyc
Core EngineLLP Limit
Booster/LPTLLP Limit
Pull fwd toalign with SV
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Engine Maintenance, cont ’
• Consider a different view…..
0
0.5
1
1.5
2
2.5
3
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
U S D
, M i l l i o n s
Aircraft/Engine Age (Years)
Core Refurb Booster/LPT Refurb LLP Replacement
• Core Refurb costs increaseover time due to increasedscrap/repair costs
• LLPs generally do notexhibit ‘ageing’ as cost isdriven by a regulatory limit
• Booster/LPT refurb costswould also exhibit‘ageing’ effects ifprojected out far enough
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0
0.2
0.4
0.6
0.8
1
1.2
1.4
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
A g e
i n g
/ M a
t u r i t y
F a c
t o r
( U S D / E F C )
Aircraft/Engine Age (Years)
Core Booster/LPT LLP Total
21
Engine Maintenance, cont ’
• Looking at a cost per EFC
The steps represent theageing effect
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Modifications
• We haven’t addressed modifications in any of the previous examples • Modifications can be classified in 2 categories:
1. Safety• ADs and mandatory SBs• Risk reduction modifications• Ageing aircraft modifications
2. Economic• Any non safety modification should have
some form of economic break even for theairline
• Not necessarily from maintenance cost
• These increase with age• But can affect young aircraft• Aircraft type specific or ‘global’
• The magnitude of modificationswill increase with age
• These should ‘pay back’ withina specific time hurdle
• The key is to have a structured and robust modification evaluation processwithin the airline
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Maintenance Influenced Costs
23
To understand how Maintenance Influenced Costs are affected by ageing, consider
some real world examples…..
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• Generally, maintenance ground time is proportional to labour hours spent on the aircraft• So it follows that a similar curve to the airframe labour ageing curve also applies to
ground time
Effect of Ground time
0
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0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
R + N R L a
b o u r
A g e
i n g
/ M a
t u r i t y
F a c
t o r
Aircraft Age
4A Check C Check D Check
Potential120%
increase inTAT in the
first 6 years
Potential 30% increase inTAT in 7 years after
maturity
Variability increases as ageincreases effecting turn time
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1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 1 3 5 7 9 11
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
September June July August
98% 98% 98% 98% 98%98% 98% 98% 98% 98% 98%98% 98% 98% 98% 98% 98%
GREEN = check yield <98%, ORANGE = check yield 98-99%, RED = check yield 100%
1 2 3 4 5 6 8 9 10 12 13 14 16
7 11 15 100%
99%
100%
99% 99% 100%
100%
99%98% 98% 98% 99% 99% 100% 99% 100%
With an extension of 2 days in TAT (6 to 8 days => 33% increase)
1 2 3 5 7 9 11 13 15 17 19
4 6 8 10 12 14 16 18 20 95%
96%96%
97% 96% 96% 96% 95%98% 97% 97%
98% 98% 98%98% 98% 97% 97% 97% 96%
This generally turns into 2 lines of maintenance
Effect of Ground time, cont ’
• This only considers a single check type – obviously this will be compounded for everyD check cycle due to the addtional turn time associated with a D check
• Consider a maintenance planning scenario – simplified for illustration:• A single line of maintenance, 6 day TAT, 18 month maint interval and 98% interval utilisation
ff f
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Ground Time can be viewed in economic terms as:
1.Revenue Potential of Aircraft, but only count it if this is‘
real’
• The measure is actual revenue $
2. Hull Cost , this is always‘
real’
if a hull can be saved/deferred• The measure is the ownership cost of hull (lease costs etc)
Effect of Ground time, cont ’
• When considering ground time in an economic sense it is effectively the opportunity costof an aircraft
• The opportunity cost relates to:• The revenue making potential of the aircraft if it were in service• The value of an extra hull
• Consider the dry lease rates of:• B738/A320 = US$180K-300K per mth (US$2.2M-3.6M p.a.)• A330 = US$490K-790K per mth (US$5.9M-9.5M p.a.)
• B773ER = US$1M-1.2M per mth (US$13-14M p.a.)
Di h R li bili
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Management Strategy orthere is no age related DR decrease?
27
Dispatch Reliability
• There are some issues when looking at long term Dispatch Reliability trends1. The airplane can fly multiple mission types throughout its life2. Schedule constraints vary over time3. Availability of ‘spare’ hulls in network is an issue 4. Availability of spares to recover the aircraft
• But, there is a general ‘feeling’ that Dispatch Reliability decreases with aircraft age• But by how much, if at all?
• Although, consider that many airlines operate ‘older’ fleets quite successfully where
dispatch reliability is critical• Delta• UPS / Fedex
Dispatch Reliability can be significantly affected by External Factors
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I Di t M i t C t
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In-Direct Maintenance Costs
29
• In-direct Maintenance costs do have a link to Direct Maintenance costs changes and canbe considered ‘Direct Maintenance Support Costs’
Spare holding costs- Inventory acquisition and mgt- Warehousing- Obsolescence
Engineering Support- Repair schemes- Maintenance system content / hosting- SB/AD review
Infra-structure- Hangar costs- Tooling
DMC Ageing Link
Component Ageing- MBTUR- Repair TAT
Airframe Ageing- Routine elements- Non routine elements
Airframe Ageing- Routine elements- Non routine elements
Putting it all together
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No visible labour impact, butreliability is impacted (see reliability)
Linked to ground time, non routinefactors
Both Routine and Non Routine
exhibit ageing effects (see graph)Event / MBTUR and subsequentrepair cost driven
Costs are event driven, large impactof external factors
Increases due to weight, non-flush
repairs, panel warpingGenerally proportional to labourincrease + ‘unusual defects’
Dispatch reliability decreases withage, unique defects
Linked to ground time, non routinefactors
Linked to MBTUR, repair TAT andnon routine
Putting it all together….
OperatingCosts
AssociatedWith
AircraftAgeing
Spares
Infra-structure(Tooling etc)
Engineering
Fuel
Delay / Reliabilityinduced Costs
Aircraft Hull / MaintenanceGround time
Line Maintenance
Base Maintenance
Component Maintenance
Engine Maintenance
30
MaintenanceInfluenced
Costs
IndirectMaintenance
Costs
DirectMaintenanceCosts
Summary
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Summary
• If conducting an ageing analysis for fleet renewal purposes don’t forget toinclude the ‘Maintenance Influenced Costs’
• These can have a significant effect (sometime more than Direct Maintenance)
• This IS NOT an exact science, all aircraft age differently, there is no one rule,consider
• Aircraft type• Your operating parameters• Your geographical location• Labour efficiency• Insource/outsource
• There are multiple ageing mechanisms and each are different
• There are commercial management strategies to limit / manageexposure of ageing
• But that will be a topic for another day !
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TB E …Capability through people…
Thank You!
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Copyright – TBE International Limited 201333
For further information please contact
Tom BemsteinTBE International Limited
Level 19, Two International Finance Centre.
8 Finance Street,Central. Hong Kong.
Phone: +852 3101 7286Fax: +852 3101 7287
Email: [email protected]
[email protected] (direct)