How to Compare Two Engines ? - Airfinance Journal - News ... to compare two... · How to Compare...

How to

Compare Two

Engines ?

May 1, 2008

Financing, Managing &

Maintaining Engines:

Roundtable Summit for

Financiers

Engine AcquisitionPrice

Engine OperationMaintenance

Life Limited Parts

Reliability

Fuel & Oil

Emissions

Fleet Management

Engine ResaleResidual Value

Cost of Ownership

Aren’t a

ll engine

s the sa

me ??

?

Aren’t a

ll engine

s the sa

me ??

?

Should I re

ally c

are ab

out th

is ???

Should I re

ally c

are ab

out th

is ???

EASY TO

COMP

ARE

EASY TO

COMP

ARE

Price

Maintenance



Life Limited Parts

Reliability

Fuel & Oil

Emissions

Fleet Management


Cost of OwnershipMaintenance

Maintenance

Price

Shop Visit Rate Reports

Comparable Fleet (Experience, Size, Age and Operations) should have Comparable SVR

Longer Current and Expected Lives for Engine A

Fewer Shop Visit

0,2

0,4

0,6

0,8

1,0

Sept 2002 Jan 2003 Sept 2003 Jan 2004 Sept 2004

Engine A’s SVR & UER are more than 3 times* lower compared

to Engine B's

Engine A’s SVR & UER are more than 3 times* lower compared

to Engine B's

0.0270.027

0.0720.072

0.0220.022

0.0080.008

Engine B SVR

Engine A UER

Engine A SVR

Engine B UER

0,02

0,04

0,06

SVRRate/1000 EFH

UERRate/1000 EFH

Maintenance

……Time on wing avoids Shop Visits

Operating Cost - Cost Generated by Shop Visits

Operating conditions:

42 A/C3000 hours / yearFlight leg 2.0Derate 15%

Shop visits:

25% shorter lives for engine B, due to worldwide fleet dilution effect (conservative approach)350,000 $ advantage on shop visit average cost for engine A vs engine B(excluding LLP’s)

Maintenance

Assumptions

Operating Cost

50 80

1.2M$ 1.55M$

Base +64M$

Engine A Engine BMaintenance Cost Model Analysis

Number of SV for 42 A/C

within 10 year

Average Cost of a SV

Average Total Cost

Cost Generated by Shop Visits – 10 years

Maintenance cost savings of 1.5 M$ per A/C

Over 10 years of operation

($ constant & no inflation)

Maintenance

Operating Cost

117 167

1.2M$ 1.55M$

Base +118M$


Number of SV for 42 A/C

within 15 year

Average Cost of a SV

Average Total Cost

Cost Generated by Shop Visits – 15 years

Maintenance cost savings of 2.8 M$ per A/C

Over 15 years of operation


Maintenance

Operating Cost

6 7

Base ~ 7 - 8 M$


# Spare Engine Recommendation

Cost for spare engines

Cost Generated by Spare Engine

Spare engine savings of ~ 180 K$ per A/C


Maintenance

Cost of Ownership



Life Limited Parts

Reliability

Fuel & Oil

Emissions

Fleet Management


LLP

Maintenance

Life Limited Parts

Life Limited Parts Advantage

20

25

30

20

20

20

0 10 20 30

LPT

Core

Fan

x1000 cycles

QTY of LLPsQTY of LLPs Ultimate LivesUltimate LivesLLP Set PriceLLP Set Price

18

25

0 10 20 30Number

1 830 090

2 114 300

0 1 000 000 2 000 000

Engine A Engine B

$

For Budgetary Purpose Only

For Budgetary Purpose Only

Lower LLP Cost

$0 $20 $40 $60 $80 $100

Cost / cyc * : $ 105.7 Cost / cyc * : $ 105.7 ($2007)($2007)

Cost / cyc * : $ 79.7 * Cost / cyc * : $ 79.7 * ($2007)($2007)

Engine A LLP Cost Advantage: $26 / Cycle / Engine

780 K$ advantage per A/C over 10 years (3000 hrs/year & flight leg 2.0)

LLP

Cost of Ownership



Life Limited Parts

Reliability

Fuel & Oil

Emissions

Fleet Management


Life Limited Parts

Reliability

Reliability

Reliability Trend

Engine in Flight Shut Down Trend

Engine Dispatch Reliability Trend

2003 2004 2005 2006 2007

0

0,002

0,004

0,006

0,008

0,010

0,0010,001

0,0020,002

0,0030,003

IFSD: Delta of 0.001/1000 EFH @

Engine A advantage

IFSD: Delta of 0.001/1000 EFH @

Engine A advantage

0,0020,002

Engine B (June 2006 / AI March 2007)

2003 2004 2005 2006 2007

99,85

99,90

99,95

100,00

D&C: Delta of more than 0.03/100

departures @ Engine A advantage

D&C: Delta of more than 0.03/100

departures @ Engine A advantage

99,9899,98

Engine B (June 2006 )

99,9699,96

99,9399,93

Reliability

Cost of IFSD, D&C

IFSD & D&C cost savings of about 140 K$ per A/COver 10 years of operation($ constant & 0% inflation)

(*) based on an annual utilisation of 3000 hours and a flight leg of 2.0

100K$

Base +64M$

0.002 0.003IFSD rate / 1000 EFH

5 7Number of events over 10 years

Average Cost of an IFSD

10 year Average Total Cost for 42 A/C (*)

Engine A Engine B

20K$

Base +64M$

0.02 0.05D&C rate / 100 departures

13 32Number of flight impacted

per year for 42 A/C (*)

Cost of one delay (66% of the D&C)

10 year Average Total Cost for 42 A/C (*)

50K$Cost of one Cancellation (33% of the D&C)

Reliability

Cost of Ownership



Life Limited Parts

Reliability

Fuel & Oil

Emissions

Fleet Management


Fuel & Oil

Reliability

Fuel & Oil

Fuel Burn Comparison

Fuel Burn starts at the gate …Fuel Burn starts at the gate …

BIG NEWS !!BIG NEWS !!

Fuel & Oil

Oil Consumption Comparison

Oil Consumption comparison … Easy !!!

… but also reliability of oil system and impact on SV and D&C

Fuel & Oil

Cost of Ownership



Life Limited Parts

Reliability

Fuel & Oil

Emissions

Fleet Management


Emissions

Fuel & Oil

Emissions

Gatwick airport NOx charges for A320 Family

35

30

25

20

15

10

90 100 110 120 130 140 150

From the ICAO certification data sheets

Charges per landing ($)Charges per landing ($)

Thrust (kN)Thrust (kN)

Engine A Engine A upgraded Engine B

Emissions

Cost of Ownership



Life Limited Parts

Reliability

Fuel & Oil

Emissions

Fleet Management


Fleet Management

Emissions

Fleet Management

CFM56-7B for the B737NG family CFM56-5B/P for the A320 family

Engine Rerating :1 – Change the engine rating plug2 – Engrave the name plate

Excellent Marketability – Extensive CommonalityReduced cost through commonality for Spares/ Training/ Fleet Management/ …

Excellent Marketability – Extensive CommonalityReduced cost through commonality for Spares/ Training/ Fleet Management/ …

Engine commonality for the entire A/C familyFleet Management

No EMO

With EMO

68 Shop Visits68 Shop Visits28 Shop Visits28 Shop Visits 40 Shop Visits40 Shop Visits

65 Shop Visits65 Shop Visits

23 Shop Visits23 Shop Visits 42 Shop Visits42 Shop Visits

5 transfers 5B3 5B65 transfers 5B3 5B6

Shop Visit BenefitFleet Management

Cost of Ownership



Life Limited Parts

Reliability

Fuel & Oil

Emissions

Fleet Management


Value

Fleet Management

Residual Value

Aircraft Residual Value depends mostly on engines

Aircraft/Engine value relationship

Airframe

Engine

Percent of Aircraft ValuePercent of Aircraft Value

Aircraft/Engine AgeAircraft/Engine Age

Scrap valuefor the Aircraft v

Scrap valuefor the Aircraft v

Value

On older Aircraft,

engines maintained with OEM parts

& repairs hold the value

Market Share

Marketability & LiquidityMarketability & Liquidity

Engine A powered A/C

Engine B powered A/C

Number and location of Operators in service

N&S America

587

2256

Europe & CIS

341

2260

Asia Pacific

1425

456

Africa & Middle East

106

318

Value

CFM & IAE Engine Depreciation

Information from appraisers:

Engine resale value stay constant until the end of production

CFM engine at half life is about 70 to 80% of new engine’s price

Market demand can make these trend vary

2018

Base Values,from Avitas BlueBook (Constant $), 2007

6.0M$

5.5M$

5.0M$

4.5M$

4.0M$

3.5M$

3.0M$

2006 2008 2010 2012 2014 2016 2018

Year

CFM higher resale value : +7.5%

CFM56-5B4/P

V2527-A5

Year

6.0M$

5.5M$

5.0M$

4.5M$

4.0M$

3.5M$

3.0M$

2006 2008 2010 2012 2014 2016

Base Values,from IBA Engine Values Book (Constant $), 2007

CFM56-5B4/P

V2527-A5

CFM higher resale value : +9.1%

Higher resale value for CFM56 engines : for one engine at half life CFM56-5B4/P vs V2527-A5 :

+ $360,000 from Avitas+$470,000 from IBA

Higher resale value for CFM56 engines : for one engine at half life CFM56-5B4/P vs V2527-A5 :

+ $360,000 from Avitas+$470,000 from IBA

Value

CFM56 Residual Value Advantage

Higher market value, from different appraisersHigher market value, from different appraisers

CFM56 engine market value advantage: up to +9%

Base Values, from Avitas BlueBook, 2007

6.0 M$

5.5 M$

5.5 M$

4.5 M$

4.0 M$

3.5 M$

22k 23.5k 27k 30k

CFM56

V2500

Thrust ratingThrust rating

Base Values, from IBA (Engine Value Book), 20076.5 M$

5.5 M$

4.5 M$

3.5 M$

22k 23.5k 27k 33k

CFM56

V2500

Thrust ratingThrust rating

Value

Upgrade Kits improve the asset value

400

350

300

250

200

150

100

50

0

5B/3

7B/3

ASCEND IBA

$K$K

Value

IBA and ASCEND each

performed an independent

assessment of the Tech Insertion

Upgrade

Small differences are explained

by the use of slightly different

assumptions

Report represents the opinion of

IBA and ASCEND and is

intended to be advisory only

Potential impact of non OEM materials on residual value

… and up to 65% if the whole engine need to be put backto the OEM standards

… and up to 65% if the whole engine need to be put backto the OEM standards

OEM

Non-OEM ?

Acquisition Maintenance Disposition

Estimated by independentappraisors between10% to 26% on a mid-lifeCFM56-3 engine …

Estimated by independentappraisors between10% to 26% on a mid-lifeCFM56-3 engine …

Engine valuation life cycle

EngineProjectedValue

EngineProjectedValue

Value

CFM genuine parts

OEM support

PMA blades Source 1

CFM genuine parts

PMA blades Source 1

OEM support

PMA blades Source 2

CFM genuine parts

PMA blades Source 1

PMA blades Source 2

OEM support

STCH Spool Source 3

CFM genuine parts

PMA blades Source 1

PMA blades Source 2

STCH Spool Source 3

OEM support

No One has the Data to Support this ConfigurationNo One has the Data to Support this Configuration

When comparing engines, see global !

Can’t see the forest for the trees ?

Don’t hesitate to ask questions …

How to Compare Two Engines ? - Airfinance Journal - News ... to compare two... · How to Compare...

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