Engine Selection Analysis – B787 neo engine selection an independent analysis engine leasing trading and finance 2018 london, uk

A320 NEO ENGINE SELECTION

AN INDEPENDENT ANALYSIS

ENGINE LEASING TRADING AND FINANCE 2018LONDON, UK

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ABOUT WAML

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SOME QUESTIONS?

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• Using the EIS of the CEO engines as precedent – will there be a ‘less desirable’ sub-fleet of early engines

• Will the large numbers of NEO orders mean that “pre-PIP” engines will represent a large group

- so less risk?

• Is ordering CEOs and deferring NEO orders for (say) 5 years a smart move?

• How did the OEMs cope with early CEO problems? Did they support the operators / owners?

• Who has the most to lose from making the “wrong decision” – lessor or airline?

• Will OEM PBH programs solve the airline’s problems?

• Are the quoted fuel burn reduction figures realistic?

SOURCE: FLEET ANALYZER AS OF 19/04/2018

*INSTALLED ENGINES ONLY – NOT INCLUDING DELIVERED SPARES.

POPULATION COUNT OF Neo AIRCAFT – NOT ENGINES

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• P&W HAVE 7% MARKET SHARE ADVANTAGE ON HIGHEST THRUST AIRCRAFT (A321NEO)

• CFM HAVE 18% MARKET SHARE ON A320NEO CURRENTLY BUT 42% OF ORDER BOOK STILL UNDECIDED

SOURCE: FLEET ANALYZER – 19/04/2018

SOURCE: FLEET ANALYZER – 19/04/2018

• LEAP-1A HAS CURRENT MARKET SHARE IN ALL REGIONS – MAJORITY IN ASIA PACIFIC AND MIDDLE EAST

• EUROPE / NORTH AMERICA / LATIN AMERICA – RELATIVELY EVEN SPLIT

• UNCONFIRMED OPTIONS WILL INFLUENCE REGIONAL MARKET SHARE SIGNIFICANTLY

0

500

1000

1500

2000

2500

3000

3500

Africa Asia Pacific Europe Latin America Middle East North America Unassigned

PW1000G DELIVERED/ORDER BOOK BY REGION

LEAP PW1000G Unannounced

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• CURRENT MARKET SHARE?

• OEM LOYALTY?

• INDIVIDUAL ORDER STATUS?

• MARKET UPTAKE OF NEO TECHNOLOGYCURRENT ?

• IMPACT ON CEO AIRCRAFT?

• RESIDUAL VALUES?

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• UNIQUE DESIGN FEATURES?

• IS GTF AN UNTESTED TECHNOLOGY?

• EXISTING PW TECHNOLOGY ?

• REDUCED NUMBER OF STAGES

• GTF FAN PERFORMANCE?

• PERFORMANCE IMPROVEMENTS?

• LLP COUNT?

• MATURE ESV COSTS?

PW1100G

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• AN EVOLUTION OF THE CFM56-5B?

• ADVANCED FEATURES?

• LEAP FAN PERFOMANCE?

• PERFORMANCE IMPROVEMENTS?

• LLP COUNT?

• ESV COSTS?

LEAP-1A

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CFM56-5B LEAP 1A

Fan Dia 68.3" Fan Dia 78"

Bypass ratio

5.7 : 1 Bypass ratio 11.0 : 1

Width 1.908 M Width 2.543 M (maximum envelope)

Length 2.599 M (flange to flange) Length 3.328 M (flange to flange)

Weight 2.501 Tonnes (dry) Weight 2.99 / 3.008 Tonnes (with fluids)

Fan / 4-stage LPC / 9-stage HPC / 1-stage HPC / 4-stage LPT

Layout Fan / 3-stage LPC / 10-stage HPC / 2-stage HPT / 7 stage LPT

Published fuel savings ~15%

V2500-A5 PW1100G

Fan Dia 63.5" Fan Dia 81"

Bypass ratio

4.8 : 1 Bypass ratio 12.5 : 1

Width 1.682 M Width 2.224M (Fan case)

Length 3.201 M Length 3.284M (flange to flange)

Weight 2.404 Tonnes (dry) Weight 2.858 Tonnes (dry)

Fan / 4 Stage LPC / 10 Stage HPC / 2 Stage HPT / 5 Stage LPT

LayoutFan / reduction gearbox / 3-Stage LPC / 8-stage HPC / 2-stage HPT / 3 Stage LPT

Published fuel savings ~15%

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PW1100G

CARBON SEAL - #1 REMOVAL DRIVER TO DATE

COMBUSTOR LINER – 2ND LARGEST REMOVAL DRIVER

HPC REAR HUB KNIFE EDGE SEAL – BATCH PROBLEM

FAN BLADE DISBONDING

SLOW STARTS

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LEAP-1A

HPT SHROUD COATING - #1 REMOVAL DRIVER TO DATE

HPT STG 2 DISK – BATCH ISSUE

BOOSTER – PERFORMANCE ISSUE – REDUCED TOW

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• EIS ISSUES ARE NORMAL

• GEARBOX ON PW1000G FOCUS OF ATTENTION PRIOR TO EIS - RELIABILITY SO FAR

VERY GOOD.

• COMMON MISCONCEPTION TO CONSIDER LEAP-1A ENGINES AS EVOLVED FROM

CFM56 FAMILY – ENGINE DESIGN MORE REFLECTIVE OF GENX.

• BOTH ENGINES MEETING HEADLINE PRE-EIS MILESTONES.

• MATURE DMC ADVERTISED BY BOTH OEMS AS SAME AS PREDECESSOR ENGINES

• MATURE PHASE TOW – ENGINE REMOVAL DRIVERS

• OVERALL MCPH

• SHORT TERM SPARES COVERAGE

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• THRUST CAPABILITY / RANGE

• FUEL BURN

• TECHNICAL EVOLUTION / COMPLEXITY

• UNIT COSTS / VALUES / LEASE RATES

• OEM FINANCIAL SUPPORT

• MAINTENANCE COSTS / MRO NETWORK / MR RATES

• OEM AFTERMARKET CONTROL / SUPPORT

• EIS SUPPORT (TRAINING / MANUALS / PROVISIONING)

• LLP STACK COSTS / VALUES

• SPARE ENGINE COSTS / CONFIG (THRUST / QEC)

DECISION

FINANCIAL

TECHNICAL

COMMERCIAL

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BRENT CRUDE

• WARRANTIES

• ENGINE DEFECTS OR FAILURES• PART DEFECTS (INCLUDING LLPS)

• GUARANTEES

• IFSD• ATB• SV RATE• FUEL BURN / RETENTION• EGT DETERIORATION• AOG SUPPORT (SPARE ENGINES)• DELAYS & CANCELLATIONS• LLP ULTIMATE LIFE

• MAINTENANCE

• TERM BASED• PAY AT SHOP VISIT• LLP SUPPORT • AOG SUPPORT (SPARE ENGINES)• ETOPS GUARANTEE

• SPARES

• 3RD PARTY LEASE• POOLING ARRANGEMENT• OWNED SPARES

• IAFTERMARKET

• A HEALTHY INDEPENDENT SECTOR TO SUPPORT RESIDUAL VALUES

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• MARKET SHARE CURRENTLY IN FAVOUR OF THE LEAP ENGINE BUT A LARGE PROPORTION OF ORDER BOOK UNDECIDED.

• EIS TECHNICAL ISSUES ARE EXPECTED TO LEVEL, BUT MATURE COST OF OWNERSHIP IS TOO DIFFICULT TO PREDICT – TOO MANY UNKNOWNS AT THIS POINT

• LARGEST COST INFLUENCER (FUEL BURN) – BOTH ENGINES ARE COMPARATIVELY EQUAL – MEETING OEM MILESTONES

• MITIGATE AGAINST EIS RISKS VIA SECURITY OF STRONG WARRANTIES AND GUARANTEES, SPARES PARTS AND (WHERE APPROPRIATE) RISK TRANSFER MAINTENANCE PROGRAMS.

• THE DECISION MAKING PROCESS IS COMPLEX - AFFECTS ALL ASPECTS OF THE OPERATION SO SHOULD INVOLVE ALL DEPARTMENTS

• INEXPERIENCED AIRLINES SHOULD SEEK EXTERNAL EXPERT ADVICE

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FINALLY…

• EXTERNAL CONSULTANT CAN PROVIDE A FULLY MODELLED COMPARATIVE REVIEW OF

ALL ASPECTS OF THE COMPETING ENGINES PRIOR TO PURCHASE INCLUDING:

• RELIABILITY & TECHNICAL CONSIDERATIONS

• FUEL BURN

• PROCUREMENT COSTS & OEM CREDITS

• MAINTENANCE AND OPERATING COSTS

• SPARE ENGINE REQUIREMENTS

• DETAILED CONTRACTUAL TERMS AND CONDITIONS

• PRIOR EXPERIENCE OF MANAGED ENGINE SELECTIONS, ENABLES BASELINES FOR

NEGOTIATION WITH OEMS

• BESPOKE FINANCIAL MODELLING OF EACH OEM PROPOSAL

• SUPPORT CAN BE PROVIDED THROUGHOUT ENTIRE PROCESS

• A COMPLETE SOLUTION ENSURES AIRLINE SECURES LOWEST POSSIBLE COST OF

OPERATION FOR CHOSEN POWERPLANT

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CONTACT US AT: P: +44(0)1656 765200E: BDV@WILLISASSET.COM

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CONTACT US FOR MORE INFORMATION:

NEO@WILLISASSET.COM