Ensuring unbroken reliabilty of civil aircraft fleets
Transcript of Ensuring unbroken reliabilty of civil aircraft fleets
Ensuring unbroken reliabilty of civil aircraft fleets –
similarities and differences to other industries
ISLA – 7th. Service & Logistics Summit
Jörg Asbrand, Lufthansa Technik AG
ISLA - /th Service & Logistics Summit
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“To make a small fortune in
aviation, you need to start out with
a big one”
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What‘s so special about the Aviation Industry ?
Spare Parts Services & Logistics to maintain high availability to aircraft
An industry in a break trough - strategic re-alignment of major players
ahead
Agenda
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Small – expensive – long lasting
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# Taxis in Germany: 50.000
# Commercial aircraft*: 18.000
Airbus A380
List price: 400 MUSD
1968 2013 - ? * Over 100 seats or 10 tonnes (freighter)
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Over the next 20 years, add. growth is driving the market
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Market projection for commercial aircraft*
* Over 100 seats or 10 tonnes (freighter) Source: Airbus Global Market Forecast 2013
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Always dreamt of working for a non-profit organisation?
IATA Airlines cumulative profits 2001-2012 [bn USD]
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Source: CAPA Study 2012
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Airlines have not been able to recover their capital cost
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Source: McK for IATA, 2013
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What‘s so special about the Aviation Industry ?
Spare Parts Services & Logistics to maintain high availability to aircraft
An industry in a break trough - strategic re-alignment of major players
ahead
Agenda
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Let‘s take another transport equipment industry first
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3+ years warranty !
But:
• Regular maintenance by OEM workshop only
• Original parts used
Buying it… Serviceing it…
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Imagine…..
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3+ years warranty !
But:
• Do maintenance yourself
• In case of trouble: find technical failure yourself
• Warranty rights only directly towards system providers
• For special service: No OEM wokshop existing…..
• For integral service: Go to Service Integrator
Buying it… Serviceing it…
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Real life in Aviation
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3+ years warranty !
But:
• Do maintenance yourself – JAR 145
• In case of trouble: find technical failure yourself
• Warranty rights only directly towards system providers
• For special service: No OEM wokshop existing…..
• For integral service: Go to Service Integrator
Buying it… Servicing it…
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35%
55%
24%
45%
15%
13%
4% 4%
4%
DOC DOC
Direct operating cost of an aircraft
Up to 15% for maintanance
Fuel
Cockpit
crew
Maintenance
Cabin crew
Fees (landing, handling, etc.)
Material
Labor
Engine 40% / Heavy Maintenance 22% / Components 21% / Line Maintenance 17%
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The Lufthansa Technik Group
Facts & Figures
The Lufthansa Technik Group is the leading manufacturer independent provider of MRO
services for civil aircraft:
Number of employees: app. 27.000
Number of customers worldwide: over 770
Aircrafts under exclusive contracts: over 2.800, Engines under contract: ca. 2.400
Revenue: 6,6 billion Euros, app. 20% for Lufthansa German Airlines
Corporate Headquarters: Hamburg
30 global subsidiaries
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Lufthansa Technik Group
Subsidiaries and number of employees
Asia: 6.100
Germany: 14.300
other Europe:3.400
USA: 3.200
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Our customers
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Tailored to customer needs
Branded service products were new to the industry
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Aircraft parts
As always: mainly the small parts create the hassle….
TU-Berlin Logistik Praxisseminar, Internationale Ersatzteillogistik, 22. April 2014
3 Landing Gears 2 Engines 15 Structural segments > 1000 Components
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What do we consider a Component?
Generally: a Repairable Aircraft Part
TU-Berlin Logistik Praxisseminar, Internationale Ersatzteillogistik, 22. April 2014
≈ 400.000€
≈ 20.000€
≈ 4.000€
≈ 150.000€
Engine Control Unit
Escape slide
Flight Data Recorder
Coffee Maker
All aircraft parts are
normally repaired up to
70% of the list price
(BER limit) with
predetermined tasks
(Test, Repair, Overhaul),
documented in the
Component Maintenance
Manual
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All parts are categorized by the aircraft manufacturer in a Minimum
Equipment List (MEL). Acknowledgement of the local aviation authorities
required.
The MEL describes, under which circumstances or to which extend an aircraft
can be released to service with inoperative equipment.
Limitations, procedures and substitutions may be used to provide conditions
under which the inoperative equipment will not make the operation unsafe or
the aircraft unairworthy.
Examples:
• Engine failure No-go item
• Emergency slide defect Go-if item – aircraft can be operated with limitations
• Window wiper No-go item in India during Monsoon
• Toilet broken Go-Item – only passenger comfort effected
Criticality of components are described precisely
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Standard model: Airlines invests in own inventory
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Airline‘s
home-
base
inventory
Numerous vendors 6-10 weeks
Typical protection level:
MEL A: 98%
MEL B: 95%
MEL C: 90%
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Benefits of cross-customer pooling are shared
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Lufthansa Technik
Component Pool Airline‘s
Home Base
inventory
Lufthansa Technik
Repair and overhaul
Single-source
supply
Vendors
3-10 days
Reduced home base inventory level driven by: • Size and type of fleet
• Short replenishment between Home Base and Pool
• Transportation and customs clearance time
• Customers personal risk preference (service level)
• Operational parameters (Fh p.y., cycle ratio, etc.)
• MEL items
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Aviation parts logistics is…..
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… … …
• Place of demand ist always an airport
• Industry-wide communication: The user speaks
the same language, uses same docs
• A part number is a part number…
• All relevant serial numbers have complete back-
to-birth history
• All material demanding customers have own
means of transportation
• Customs exemptions apply in case of own
equipment and AOG situations
• Industry-wide help organized (IAT Pool)
• Common spare parts model includes
constant change of title of parts (Cross-
border problems, accounting problems)
• Restrictions apply for dual use goods
• National aviation authorithies require
individual documentation (CAAC, JCAB..)
Complicated!
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Central Pooling Warehouse
Facts & Figures
Location: Cargo City South, Airport FRA 8.500 qm Area
30.000 Components Value app. 400 MEUR
State-of-the-Art-Technologies and -Processes
100+ employees
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What‘s so special about the Aviation Industry ?
Spare Parts Logistics to maintain high availability to aircraft
An industry in a break trough - strategic re-alignment of major players
ahead
Agenda
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Two main drivers lead to a low cash flow period
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Older aircraft being taken out of service:
• Surge of available surplus parts
• Material sale strongly effected
• MRO revenues replaced by used parts
Surplus on
legacy aircraft
Tiered
supplier structure
on new a/c
Smaller number of Tier 1 suppliers:
• High price entry ticket: 600 MUSD+
• Strong dependency on Airbus or Boeing
• Long payback time – 16 years+
• Increased technical risk
• Increased takeover risk
Long period of low cash flows Countermeasures:
• Control aftermarket chanels
• Increase material list price (5% yoy)
• Capitalize on Intellectual property
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Does not look too nice…
Surplus on legacy aircraft
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4 main factors for increased aircraft tear down
Surplus on legacy aircraft
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Remember the „replaced“ portion?
Surplus on legacy aircraft
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Source: Airbus Global Market Forecast 2013
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Industrialization of aircraft manufacturing triggered
massive changes in the service industry
Tiered supplier structure on new aircraft
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Concentation of supplier base down to 46 Tier 1‘s
Tiered supplier structure on new aircraft
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Source: ICF, LufthansaTechnik
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Aircraft OEM plan to become a major player in Service
Tiered supplier structure on new aircraft
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Source: ICF, LufthansaTechnik
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• Intellectual property rights
• Proactively carve out relevant data from Maintenance manuals
• Split information relevant for maintenance and repair of parts
• Prohibitive pricing of test equipment
• Automatic test equipment (ATEC) mandatory to repair avionics
• ATEC pricing raised from 1.2 to 10 MUSD, killing every business plan
• Licence fees
• Request license fees for continous support with tech data or even „purchasing license“
• License fees easily reach 50+ MUSD
• Limit number of licencees down to 2 or 3 globally
New entry barriers are establish to keep competition out
Tiered supplier structure on new aircraft
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Future state of the industry players is yet unclear
Outlook
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Source: ICF, LufthansaTechnik
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