IAEA Embry Riddle Aircraft Engine & Fleet Planning February 28 2013

Aircraft Engine & Fleet Planning Embry Riddle Executive Program

Daytona Beach, FL - February 28, 2012

Dr. Hooman Rezaei

IAEA Founder & President

@IAEA1, : International Aircraft Engine Association

www.turbineengine.org

http://www.turbineengine.org/

http://www.linkedin.com/e/vgh/1613297/

http://www.erau.edu/

www.turbineengine.org 2

Feb 28, Thursday Second Day Lecture Topics

8:45-9:00 Coffee

9:00-10:30 Aircraft Engine and Fleet Planning Fleet Planning Overview

10:30-10:45 Coffee Break

10:45-12:15 Aircraft Engine and Fleet Planning Aircraft Engine Overview

AGENDA




Fleet Planning




Commercial Aviation Growing Steadily

A380

777

737

A320

EJet

2.7 3.5

7 8.3

3.5 10

38 42

40 42

8.7 9.2

Production rate (’12 ’14)

787

CRJ 2.5 2.5

Traffic growth (Trillion RPKs)

5.4%

CAGR

‘10 ’14F ’20F

Highest production ramp rates in 3 decades … inconsistent with demand growth

9.3%

CAGR

Boeing and Airbus are increasing rates to ~40 / month. That means: 40 x 2 (Airbus & Boeing) x 11.5 mth. / yr. = 920 / yr. or ~1,000 including the other new single aisles.1,000 x 5 years = 5,000 / 10 yrs. = 10,000 / 20 yrs. = 20,000 aircraft.




Narrowbody 60%

Narrowbody 57%

2012 20,840 Aircraft

2022 29,955 Aircraft

Regional 17%

Regional 19%

Widebody 23%

Widebody 24%

10 Year Projection

3.7% CAGR

Narrowbody Aircraft Models Maintain Majority

Source Data: TeamSAI




Lease vs. Own

Increasing Trend of Leasing – Forecast 50%+ by 2020

1970 3,722 Aircraft

17 Leased (.5%)

1980 6,037 Aircraft

100 Leased (1.7%)

1990 9,160 Aircraft 1,343 Leased

(14.7%)


(24.7%)


(36.5%)

Source: Boeing




7 Source Boeing.com

Global Point To Point

B777-200LR: 300 Passenger – 9400 NM – 19 Hour Flight




8 Source Airbus.com

Extensive Regional Coverage

A321: 185 Passenger – 3200 NM




Aircraft Age & Value

5 10 15 20 25 30 Year

Lessor’s AVG 12.7

Worldwide AVG 15.3

0

100%

Theoretical

End of Life Solution Preparation

Aircraft Value = Engines’ Value

B737-900ER @ $30M FMV Oldest (2007) CFM56-7B27 @ $6.4M Half Life Ratio (2 Engines) = 2.3, LLP = $2.3M, Overhaul Cost = $2.1M MTBO = 16,000, FH:FC = 2.0

B747- 400 @ $11.5M FMV Oldest (1989) PW4056 @ $4.1M Half Life Ratio (4 Engines) = 0.7 LLP = $4.7M, Overhaul Cost = $3.4M MTBO = 16,500, FH:FC = 6.6

B767-300ER @ $9.5M FMV Oldest (1986) CF6-80C2B6F @ $4.5M Half Life Ratio (2 Engines) = 1.05 LLP = $4.9M, Overhaul Cost = $2.6M MTBO = 16,500, FH:FC = 6.0

Source: IBA




Maintenance Costs Breakdown

~11%

$8.7 $9.9 $11.9

$22.4 $27.7

$31.6

$9.5

$11.3 $13.4

$8.9

$10.6

$11.5

2012 2017 2022

HMV & Mod Engines Component Line

Global MRO Forecast Total Value in $B

CAGR 3.7%

CAGR 2.8%

$49.5B industry will grow to $68.4B over 10-year forecast period –2012 up 5.7% from 2011 –2022 is down from the 2021 forecast due to the lower average fleet age

Engine remains the largest segment with the highest growth rate – Component to grow as fast as engines MRO in the latter half of the forecast

Source Data: TeamSAI

$49.5

$59.5

$68.4




Fuel Cost Impact

Retiring Older Asset, Inducting Newer Fleet & Technologies

0

20

40

60

80

100

120

0

5

10

15

20

25

30

352

00

3

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

% O

per

atin

g C

ost

Source: IATA Economics




Multidisciplinary Function

CEO’s STRATEGIC VISION

FINANCE

ENGINEERING

OPERATIONS

STRATEGIC PLANNING

FLEET PLANNING AIRCRAFT

ACQUISITION




Aircraft Engine Industry



World Regions

Africa 2,045 4%

Asia Pacific 6,634 15%

China 3,599 8%

Eastern Europe 2,115 5%

India 770 2%

South America 2,965 7%

Middle East 2,456 5%

North America 14,951 33%

Western Europe 9,728 21%

Total (2012) 45,263

Total (2022) 62,544 +38%

OEMs 2012 2022

CFMI 16,658 26,951

GE Aviation 9,860 13,085

Rolls Royce 6,134 7,775

Pratt & Whitney 7,441 7,638

IAE 4,118 5,405

EA = GE + P&W 120 824

Power Jet 8 592

Honeywell 924 276

ACAE - TBD

CFMI Fleet Largest Share of 37% , +15

RR’s Fleet Overtake P&W’s Fleet by 2022

Source Fleet Data: Ascend

An Industry With 150,000+ Professionals


Commercial Engine Industry Overview




Fuel Consumption #1 Cost

SFC: The weight flow rate of fuel required to produce a unit of power or thrust



Fan Size Trend

FAN DIA , Nacelle DIA , Engine Weight , Landing Gear FOD , Transportation Cost , Maintenance Cost




Geared Fan Performance


Fan Diameter High Bypass Ratio Low Bypass Ratio

High

Low

Noise

Fuel Burn

Geared

Direct Drive

Direct Drive: Larger Fan → Lager LPT → Heavier Engine Geared: Larger Fan → Smaller LPT → Lighter Engine



Gearbox on LEAP’s Architecture? Open Rotor?


Fan Drive System




Airline Shop OEM Shop Independent

LHT 5A/5B/5C/7

Snecma all models

GA Telesis 5B/5C

SR Technics

5B/5C/7

TAP 3/5B/5C

Iberia 5A/5B/5C

GE Strothers all models

Air France/KLM 3/5A/5B/5C/7

China Airlines

5B/5C/7

GE Wales all models

NEC 3/5B/7

MTU Zhuhai

3/5B/7

Alitalia 5B

Kelly 5A/5B/5C

GE Celma 3/5A/5B/5C

AeroThrust 3/7

American 7

CEES 3

Delta Tech Ops

3/7

GE Malaysia

3

GMF 3

IAI 3/7

IHI 3/5A

LTAI 3/7

MTU Hannover

3/7

JTS 3

Snecma Morocco

3/7

Snecma Sichuan

5B/7

STA 3/7

TEC 3/5C/7

Timco 3

United 3

Ameco 3

Snecma Brussels

3

ANA 5A

PIA 3

GE Varig 3

Avio 3

Olympic 5C

KAL 7

JAT 3

SAMES 3/7

MTU Vancouver 3

7000+ GTF and LEAP Sold – Non Available For 3rd Party

PBH Coverage – Source TEAMSAI CFMI: ~35% Installed Trent: ~90% Installed V2500: ~43% Installed V2500: ~ 80% Future Deliveries

PW/China Eastern 3/5B/7

X

Standard Aero 7

Kelly 3/7

JALCO 3

$22B+ Global MRO Market → OEMRO



Success Story: GE90 Implementation Result: Fundamentally Different Fleet Management


Operation: Fan-Propulsor Architecture



Engineering: Modular Management

Challenge: Tracking time/cycles/config on each module





High T4 & Fan DIA CMC & TiAl




Engine Fleet Management Goals

1. Optimize Engine Maintenance Cost (MC)

2. Improve Engine Fleet Reliability

3. Decrease Aircraft Indirect Operating Cost (AC IOC)

4. Decrease Fleet Fuel Consumption




Operator’s Mission

• Help achieve the EFM goals, the operator’s mission is to:

a) Improve the engine reliability

b) Decrease the engine operating and repair costs

• To increase the engine reliability, it is required to:

a) Increase the level of engine performance

b) Decrease the number of delays & cancellations (D&C)

c) Decrease the number of operational events

• Decrease the engine operating and repair costs, it is required to decrease the:

a) Shop visit rate (SVR)

b) Shop visit cost (SVC)

c) Line & base maintenance cost

d) Number of operational discrepancies (OD)

• In-flight shutdown (IFSD)

• Aircraft turn back (ATB)

• Aborted takeoff (ATO)

• Flight diverted (FLT-DIV)




Engine Related Variable Cost Drivers

Maintenance Cost per Engine Flight Hour (MC/EFH)

• 4% of total operating cost

• Equation: MC/EFH = SVR X SVC + L&B Cost

– SVR = Shop Visit Rate

• 43% of all engine shop visits are planned

• 57% of all engine shop visits are unplanned, which is used as one measurement of engine reliability

– SVC = Shop Visit Cost

• Includes partial and full engine refurbishment.

• Costs vary from $ 0.5 to 1.5 million.

• Varies with engine type and workscope plan

– L&B Cost = Cost to perform on-wing maintenance.

Aircraft Indirect Operating Cost (AC IOC)

• 10% of total operating cost (1% of total from the engines)

• Equation: AC IOC = OD + D&C + OTHER

– OD: Operational Discrepancies, each one costs approximately $150,000

• IFSD: Event requires the engine to be shutdown

• ATB: Event requiring aircraft return to the airport after takeoff

• ATO: Event stopping takeoff before aircraft lifts off the runway

• FLT-DIV: Event re-routing the aircraft to a different location from its destination

- D&C = Delays and cancellations

• Events are classified under schedule interruptions (SI)

• Delay is considered if it lasts over 15 minutes.

- OTHER = Discrepancies

• There are other discrepancies; however, they have minor impacts on the AC IOC and engine reliability.

Fuel Cost (FC)

• 11% of total operating cost

• Equation: FC = AIRCRAFT + ENGINE

– Aircraft rigging and trimming (performance retention)

– Aircraft operations (optimum flight path)

– Engine deterioration

– Engine route structure (cycle to hour ratios)




Engine Related Variable Cost Drivers

AC IOC (10%)

= + + OD D&C OTHER

PARTIAL/FULL REFURBISHMENT ($ 0.5 – 5.0 MILLION)

$25,000

AIRCRAFT RELATED

IFSD ($150,000)

OTHER

FUEL (11%)

= AIRCRAFT + ENGINE

DETERIORATION

ROUTE STRUCTURE

PERFORMANCE

OPERATIONS

PLANNED (43%)

UNPLANNED (57%)

MC/EFH

(4%)

= SVR SVC x + L&B MAINT COST

< 6% OF TOTAL MC




Engine Shop Visit Rate Impact

0.1024

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0 5 10 15 20 25 30 35 40 45

NUMBER OF MONTHS

BA

SIC

SH

OP

VIS

ITS

PE

R 1

,000 H

OU

RS TARGET LEVEL 0.0973 5%

.1024

1000 x $1,200,000 = $123

= .0973

1000 x $1,200,000 = $117

MC

FLEET YEAR = = 6 x 40 x 4,000 = $960,000

x SVC = MC

EFH =

SVR

1000

EFH = $6

DMC

x # ENG. x HOURS

YEAR EFH

DMC




Shop Visit Impact on Engine MC

SVR x SVC = MC x EFH/YR MC/YR

SVR PER

1,000 HRS

AVERAGE COST PER

SV ($)

MC/ EFH

($/HR) X = X

EFH/YR (HRS)

MC/ENG PER YR

($)

SV TOTAL

100% SV 0.1024 $1,200,000 $ 122.90 4,000 $ 491,520

SV OIL SYSTEM

5.0 % SV

0.0051 $1,200,000 $ 6.14 4,000 $ 24,576

SV IMPACT

ON MC/ENG




Operational Discrepancy IOC Impact

0.0052

0.000

0.002

0.004

0.006

0.008

0.010

0.012

0.014

0.016

0 5 10 15 20 25 30 35 40 45

NUMBER OF MONTHS

OP

ERA

TIO

NA

L D

ISC

REP

AN

CY

(x1

,00

0 H

OU

RS)

x # OD’s

YEAR =

0.0045

1,000 4,000 = 0.018

# OD’s

EFH x

EFH

YEAR =

OD PROBABILITY COST

YEAR = = 0.018 x $150,000 = $2,700

# OD’s

YEAR OD

OD COST x

RISK COST PER ENGINE PER YEAR

( # OD’s per EFH ) * ( OD COST ) = ( 0.0045 / 1,000 ) * ( $150,000 ) = $ 0.68 / EFH

TARGET LEVEL 13% 0.0045




Majority Future Fleet Lessors Owned

Fuel Consumption, Noise, Emission and $/Flight Hour

EIS Part Out $Z

TSN = 0 Hr TSN = X Hr

SV1 $Y1

SV2 $Y2

SV3 $Y3

$/Flight Hour =$𝑌1+$𝑌2+$𝑌3

𝑋

Fleet Planning & Cost of Ownership



Dr. Hooman Rezaei has more than 15 years of experience in Aviation industry and is currently Managing Director at Oasis Aviation Consulting providing total aircraft engine management services globally. Prior to Oasis Aviation Consulting, he worked in positions spanning from military advanced R&D to global sales of aftermarket services at Pratt & Whitney. He led major Power-By-Hour aircraft engine maintenance services P&Ls, developed $1bn+ CFM56 MRO sales plan and closed a major PBH services contract in the Middle East region. Hooman is the founder of the International Aircraft Engine Association with more than 7400 members globally integrating the aircraft engine industry on a global ecommerce platform. Through IAEA, he has developed and offers a front to back engineering and business review executive program on aircraft engines. Hooman has completed his Ph.D. in Turbomachinery at Michigan State University and is an author of several technical papers in this field. He holds a MS Degree in Management with Finance Concentration from Rensselaer Polytechnic Institute. Contact: P.O. Box 4405 Irvine, CA 92616, USA Mobile: +1 (860) 992-2452 Email: [email protected]


About Instructor



http://www.linkedin.com/in/hoomanrezaei


http://www.egr.msu.edu/

http://www.rpi.edu/

mailto:[email protected]

http://www.twitter.com/iaea1

THANK YOU!

International Aircraft Engine Association P.O. Box 4405 Irvine, CA 92616 USA Email: [email protected] Telephone: +1 (310) 266-5514 @IAEA1 International Aircraft Engine Association




mailto:[email protected]




IAEA Embry Riddle Aircraft Engine & Fleet Planning February 28 2013

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