1415-1500 Mtce Reserves Reports BOEING

Copyright 2012 Boeing. All rights reserved.

Sep 11-13, 2013

Dublin, Ireland

Maintenance Cost Estimates for Leasing - A new approach for the next generation airplanes!

Khwaja M. (KM) Ali

Director, Maintenance Economics

Copyright 2012 Boeing. All rights reserved. Dublin, Sep 11-13, 2013

Background on maintenance reserves

Outdated Maintenance Reserves Report and deficiencies

New technology airplanes and new era requirements

New Maintenance Cost Estimates for Leasing

Maintenance Cost Estimates for Leasing Overview


Protects the maintenance asset value for a lessor

Collected on high value components with long intervals between events

Reserves plus the residual condition of select high cost maintenance events keep the economic condition of the

aircraft in equilibrium

Most contentious item in lease negotiations

When maintenance reserves are not collected some collateral, like Letter of Credit, is usually required to cover the

value of the asset

Why collect Maintenance Reserves?


Airplanes on Operating Lease

50% 38%

2013

Current Fleet 2032

20 year

Forecast

20,310 41,240

Current Fleet: 20,310 38% or 7,700 on Operating Lease Estimated 25% or 2,000 airplanes have maintenance reserve transactions

Leased airplanes market share increases to 50% and fleet doubles in 20 years

Maintenance Reserve transactions will triple in 20 years

% on Operating Lease


Maintenance Reserves collected on high value items

Typical Reserved High Value &.. Major Events . Long Intervals

Not Reserved

Stage Length: 2 Fhrs/Trip

Utilization: 3,400 Fhrs/Year

Labor Rate: $55/Mhr, all Contract

Engine: CFM56-7B27E

Copyright 2012 Boeing. All rights reserved.

Maintenance Costs Airframe

Event costs modeled directly and presented explicitly

Utilizes discrete event cost data from industry sources

Engine

Based on OEM shop visit costs


ICAS data better reflects market realities Data Sources:

Operator Reported Data

Maintenance Planning

Documents (Intervals)

Industry Publications

Boeings Vendor Costs

Boeings TOPIC$

Conferences

MRO Quotes

Boeings In-Service Data

Program (ISDP)

US DOT Form 41

Data

IATA Maintenance

Cost Task Force (MCTF)

Data

Boeings Reliability

Department (RM&T)

ICAS: Integrated Cost Analysis System Industry leading operating cost tool


737NG modeling based on industry data

Maintenance

Event

# of Airlines

Reported # of Data Points

A-Check 19 1,780

C-Check 25 655

D-Check 11 77

APU 23 40

Landing Gear 18 28


Outdated Maintenance Reserves Report - Sample MAINTENANCE RESERVE REPORT

ESTIMATED MATURE MAINTENANCE COSTS 2012 US DOLLARS PER FLIGHT HOURAirplane Type: 777-300ER Engine: GE90-115 Flight Time: 8.00

Max TOGW(lbs): 775,000 Thrust(lb): 115,300

Engine Derate (%): 11.87 MSVR: 0.051

Annual Utilization: 4,012

MAINTENANCE RESERVES

BREAKDOWN LABOR MATERIAL TOTAL

C or 1C-3C Check 47.46 15.74 63.21

D/SI or 4C/SI Check 36.29 13.64 49.94

Checks (Sub-Total) 83.76 29.39 113.14

Landing Gear Overhaul & Repair 13.10 3.77 16.87

APU Shop 10.72 22.59 33.32

Shop (Sub-Total) 23.83 26.36 50.19

AIRFRAME (Sub-Total) 107.58 55.75 163.34

QEC Shop 11.97 41.77 53.74

Engine Shop 33.47 826.50 859.97

Life Limited Parts - 150.07 150.07

ENGINE (Sub-Total) 45.43 1018.34 1063.77

TOTAL DIRECT 153.02 1074.09 1227.11

OVERHEAD - - -

TOTAL MAINTENANCE 153.02 1074.09 1227.11

Note 1: Engine maintenance cost estimates utilize baselines prov ided by the manufacturer in accordance w ith EMCWG Specifications, Version 4.2. Each engine in this

study has been subjected to a credibility assessment by Boeing and has been placed in an EMCWG defined "credibility category " (see accompany ing Ground Rules).

Note 2: Material Costs include equally distributed shipping and handling costs.

29-M ar-12 1:34 PM

Study: 1 Wide Body Code: 26841680

Maintenance Reserves

20 year old and very popular, but,

outdated Maintenance Reserve Report needs changes


Are the constituents OK all high value assets addressed?

Is the format user friendly?

What Changes are needed?

Other OEMs or Lessor samples

Industry Standard needed

Maintenance Reserves Report changes needed


Maintenance Reserves are collected on monthly basis not just on Flight Hour basis

Event Cost (Labor & Material) provided

Interval between events noted

Lessors and airlines can calculate independently for variable utilization

Mature cost not suitable for older leased airplanes

25 year Life Cycle Cost (LCC) method introduced for new airplanes

Age and study duration for older airplanes is used for accurate cost forecast

Maintenance Reserves on QEC (Powerplant) Components not collected

Deleted from listing

New technology, high cost components of new generation airplanes to be considered

Thrust Reversers

Nitrogen Inerting System Osmosis filter

Variable Frequency Starter Generators

No new components found suitable for reserves collection

Deficiencies in Outdated Maintenance Reserves Report

Changes needed !


Thrust Reversers

Nitrogen Inerting System Osmosis Filter

Starter Generators

787: High Value Components


VFSG (Variable Frequency Starter Generator)

ASG (Auxiliary Starter Generator)

Supplier: Hamilton-Sundstrand

787 Generator Overhaul Cost Estimates

x4

x2

List Price

(2012 USD)

MTBR

(FH)

Estimated

MTBF

(FH)

QPA Estimated

OH Cost $/FH

VFSG

(ATA 24) $451,000 15,000 16,500 4 $38,400 $2.33

ASG

(ATA 49) $287,000 20,000 22,000 2 $24,400 $1.11

Less complex than IDG


Contains section on Maintenance Cost Estimates for Leasing

Lessors and Appraisers Aircraft Handbook New!


Maintenance Cost Estimates for Leasing New!

Contains popular models maintenance cost estimates for leasing in new format

All airplane models cost estimates available on CD


Maintenance Cost Estimates for Leasing the new report!

Airplane Type: 777-300ER GE90-115B 12.60

Max TOGW (LB): 775,000 115,300 5,033

10.00

Average

Labor

Hours*

Labor

Rate

Average

Event Labor

Cost*

Average

Event

Material

Cost*

Average

Estimated

Maintenance

Cost*

Days Months YearsFH

Limit

FC

Limit

A-Check 332 $55 $18,200 $27,000 $45,200 1,000

C or 1C-3C Check 4,349 $55 $239,200 $250,100 $489,300 37 6,000

D/SI or 4C/SI Check 21,201 $55 $1,166,100 $1,288,900 $2,455,000 8 16,000

Sub-Total 25,882 $55 $1,423,500 $1,566,000 $2,989,500

Landing Gear Overhaul** $55 $696,000 10 16,000

APU Overhaul** $55 $446,700 13,500

Engine Shop***

Engine LLP 15,000

Cost estimates are averages, actuals typically range between +/- 10% * includes SB/AD estimates

Interval Assumptions may vary with airline practices. ** Excludes fees / scrapage / exchange

*** includes labor, material, and Outside Shop Repair

Calendar Limit

Average Overhaul

(per engine)

$6,601,900

$6,480,300

Engine Derate (%): Starting Age: 0

Report Period: 25 years

First Maintenance Cycle Intervals

Maintenance Cost Estimates for Leasing

25 year average costs, 2012 USDEngine: Fleet Avg Flight Time:

Thrust (LB): Fleet Avg Utilization:

8.00

Excludes Exchange Fee and S&H

22,700

Engine

Hours


Boeing acts as an unbiased 3rd party between airlines and lessors

Starting point for maintenance reserve discussions

Boeing estimates costs, reserves are negotiated



Boeing can assist both airlines and lessors in Lease Transitions: Boeing Edge

Everything needed to rapidly redeploy your aircraft

Benefits & Value:

Aircraft Transition Service Globally-accepted OEM certification

One OEM point of contact for contracted services for lease returns / lease transitions / new lease requirements

Reduced transition times

Reliable records accuracy

Bridging maintenance

Preservation of asset values


New Maintenance Cost Estimate for Leasing

Displays Event Cost and Check Intervals

Life Cycle Cost considered, Mature term discarded

Older leased airplanes cost estimates are more accurate

New technology components considered of inclusion

Maintenance Cost Estimates for Leasing Summary:

Airplane Type: 777-300ER GE90-115B 12.60

Max TOGW (LB): 775,000 115,300 5,033

10.00

Average

Labor

Hours*

Labor

Rate

Average

Event Labor

Cost*

Average

Event

Material

Cost*

Average

Estimated

Maintenance

Cost*

Days Months YearsFH

Limit

FC

Limit

A-Check 332 $55 $18,200 $27,000 $45,200 1,000

C or 1C-3C Check 4,349 $55 $239,200 $250,100 $489,300 37 6,000

D/SI or 4C/SI Check 21,201 $55 $1,166,100 $1,288,900 $2,455,000 8 16,000

Sub-Total 25,882 $55 $1,423,500 $1,566,000 $2,989,500

Landing Gear Overhaul** $55 $696,000 10 16,000

APU Overhaul** $55 $446,700 13,500

Engine Shop***

Engine LLP 15,000

Cost estimates are averages, actuals typically range between +/- 10% * includes SB/AD estimates

Interval Assumptions may vary with airline practices. ** Excludes fees / scrapage / exchange

*** includes labor, material, and Outside Shop Repair

Calendar Limit

Average Overhaul

(per engine)

$6,601,900

$6,480,300

Engine Derate (%): Starting Age: 0

Report Period: 25 years

First Maintenance Cycle Intervals


25 year average costs, 2012 USDEngine: Fleet Avg Flight Time:

Thrust (LB): Fleet Avg Utilization:


Thank you!

Questions?