Wim Van Beers MTU Maintenance Managing Mature Assets

Airline E&M Asia Pacific - Managing Mature Assets 4 March 2015 1 MTU Maintenance

Managing mature assets

Wim van Beers, VP Marketing & Sales Asia

Airline E&M: Asia Pacific Conference

Singapore, 4 March 2015


Who is MTU Aero Engines?

MTU Group: Sales 3,914 M*

* Provisional figures - subject to supervisory board approval

Commercial MRO

A leading engine MRO service provider

Global network

Integrated repair solutions

Key programs: V2500, PW2000, CFM56, CF34,

CF6, GE90, PW&C engines

and IGTs

~33%

Commercial OEM

V2500 CF6

PW2000 GEnx

GE9X GP7000

PW4000 LM2500

PW1000G LM6000

PW300/500/800

Key engine programs

Military OEM/MRO

EJ200 F404

RB199 F414

TP400 GE38

MTR390

~14% ~53%


Development of engine MRO pattern over time

1980s 90s e.g. CFM56-3

Narrowbody engine technology Illustrative scenarios

1960s 70s e.g. JT8D

30 yrs

9 -12 shop visits*

Hardly any OEM-LTSA OEM share


Engine management over the life cycle

4

MRO alternatives

Asset management focus Increased surplus availability Focus on cost/SV and customized life builds Tailored MTUPlus Mature Engine solutions

MRO focus

No/hardly alternatives to classic MRO No/limited surplus material Focus on cost/hour and on-wing times MTUPlus repairs and MTUPlus workscoping

Source: MTU/ASM, Feb. 2014 1 Including military applications

CFM56-3

JT8D-200

AE

3007

PW4

-94

CF6-80E

PW4000

-112

PW6000 V2500-D5

V2500-A1

CFM56

-5A

RB211 -524

CF6-501

CF6-6/80A GP7000 Trent 900

GEnx

GE90B

SaM146 Trent 1000

CF34-3

CFM56-21

CFM56-7

V2500-A5

GE90G

Trent

800

JT9D

JT8D

Trent 500

PW4000

-100

CFM56-5B

CF34-8

Trent

700

CF34

-10

CF6-80C

CFM56

-5C

RB211

-535

PW

20001

New / in production fleets Mature fleets Sunset fleets

MRO demand +/++ +++ ++

Note: Analysis based on proportion active aircraft vs. program peak

MTU Maintenance portfolio

Non-served portfolio

# active engines


Challenges for operating aging engines

MRO

OP

ER

AT

OR

S

OPERATIONS

High(er) fuel consumption at high/increasing fuel price level

Low(er) reliability

Decreasing OEM focus

Customized workscope

Low(er) on-wing times leading to more shop visits

High(er) LLP usage and cost

Access & quality of used material

To reduce cost consider alternative MRO solutions and alternatives to MRO

COMMERCIAL

MRO

Low(er) lease rates

Book value expectations

Market demand decreasing

LE

SS

OR

S / B

AN

KS

Maintenance reserve

optimization

Legacy lease return conditions

Alternative approaches to recover

residual value


Repairs

30%

Material

57%

DAT**

10%

New

47%

Used/

serviceable

25%

PMA

3%

LLP

25%

Fees

2%

Repairs

22%

Material

70%

DAT*

7%

New

64%

Used/

serviceable

8%

PMA

1%

LLP

28%

Fees

2%

Shop visit cost split per narrow-body engine technology

New engines

Source: ICF SH&E 2013 Engine Parts Repair Study, weighted average, NB only * Disassembly, Assembly & Test

Sunset engines

% of material: % of material:

Material New Used/serviceable PMAs

Repairs DAT* Other/Fees LLPs

Repairs and USM usage is key to reducing shop visit costs for mature engines

SV cost: $1.9m SV cost: $3.0m


Measures to reduce engine operational cost & maximize asset value Focus aging engines

Engine cleaning (compressor wash)

OPERATIONS: Measures to defer /avoid shop visits*

Condition monitoring

Procedure adjustments (derate take off)

On-site maintenance

Instant power (exchange/ leasing)

SHOP VISIT: Measures to reduce cost and/or maximize asset value*

Material management (used/new)

MTUPlus repairs (improved perf.)

Repair vs. replace (salvation)

Optimized fleet/LLP management

Tailored workscoping

Unscheduled (e.g. FOD)

LLP expiry

Hardware/ performance

TRIGGERS

DRIVERS

Cycle length

Operational parameters

Operating environment

* Decision by airline and/or MRO


Alternative solutions for aging engines

MTUPlus Mature Engine Solutions

Smart repair Instant power

Lease

Engine lease ful-filling operator needs

- identical configuration - required LLP cycles

Lease at daily/ monthly rate

On-wing engine exchange

Sale and lease back

Salvation

Engine teardown

Parts evaluation

Parts repair

Parts certification

Parts management

Storage

Re-marketing

Asset/part purchase

Maintenance

Optimized engine repair driven by - required rem. cycle - minimum cost - residual value

Tailored workscoping

Used material usage (including LLP mgt)

Module swap

Exchange

Exchange engine ful-filling operator needs

- identical configuration - required LLP cycles

Purchase at current market value

On-wing engine exchange

Financing

Modular integrated solutions based on custom-tailored analysis and consultancy


Salvation Understanding the material market

Properly valuing the engines (as the sum of the parts) is essential for understanding and maximizing value and for selecting the proper strategy

Fan / booster LPC

airfoils

Slow mover

Fast mover

HPC

airfoils

Com-

bustor

HPT

a/f

LPT

airfoils

Accessories

Value in teardown engines

Mature

Sunset

LLPs

used parts price [% CLP]

100%

0%

20%

40%

60%

80%

pro rata value*


Maintenance Smart repair solutions

Example: Maximization of CFM56 residual value (> 4,500 cycles remaining)

CMV: $650K

Options

Sale

as-is

Trust

upgrade

Refur-

bishment

Results Customer benefits

Market value $ 950,000

Invest $ 35,000

Residual value $ 915,000

Benefit* $ 265,000

Market value $ 1,650,000

Invest $ 485,000

Residual value $ 1,165,000

Benefit* $ 515,000

Market value $ 2,100,000

Invest* $ 1,295,000

Residual value $ 805,000

Benefit* $ 605,000

* MTU compensation depending on service (commission fee / revenue participation) CMV: Current Market Value

MPA/EOL run

MTU release tag (no refurbishment)

MTU utilizes its sales channels to market the engine as is

Engine upgraded from -B1 to -C1

MTU release tag (no refurbishment)

MTU utilizes its sales channels to market the engine

Engine PR + upgrade -B1 to -C1

MTU release tag

MTU utilizes its sales channels to market the engine

Intelligent assessment leads to enhanced return on engine asset values

CFM56-3B1

CMV: $200K

CFM56-3B1


Instant power vs. smart repair

Example: Airline-owned CF6-80C2 B1F

Smart repair

LLP shop visit

2.2 M$ + LLP cost

Long-term perspective +2,000 cycles

Mid-term perspective between 1,100 and 2,000 cycles

Short-term perspective up to 1,100 cycles

Instant power: Exchange

Sale of engine as-is to MTU and purchase of exchange engine from MTU

Instant power: Lease

Sale of engine as-is to MTU and lease of engine from MTU

1k

6k

3k

18k Cycle/FH

Options MTU advise

Optimized MTUPlus Mature Engine Solutions for each and every requirement

0k

0k

1

2

3

4

M$

6:1 ratio and 4,000 FH/year 0 LLP time left Looking to operate 1,000 / 2,000 or

3,000 additional cycles

2k

12k


Summary: True benefits for aging engines

MTUPlus Mature Engine Solutions

Creative solutions

truly focused on

mature engine needs

Alignment with

customer objectives

and budget

One-stop

provider

Independent support

to maximize

residual value

Transparent cost

structure for strategic

planning

Innovative material

sourcing for significant

cost reduction


Summary

Identifying the most cost-effective strategy is best performed by an experienced and independent provider

that is in a position to offer real alternative solutions

Engine technology and age have a large impact on potential maintenance strategies

Lower MRO cost for ageing engines can be achieved by intelligent USM usage, however in some cases instant

power solutions may be more economical than MRO

High-tech repairs further offer considerable material

savings, longer parts life and better engine efficiency

Customization is key to maximizing benefits

there is no solution that fits all!


Anytime, anywhere, we care!

For further information, please contact:

Wim van Beers, VP Marketing & Sales Asia

Office: +49 511 7806 2390

Cell: +49 176 1008 1202

mailto: [email protected]

Wim Van Beers MTU Maintenance Managing Mature Assets

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