Engine Finance Rountable Managing an engine Stephane ... an Engine... · Engine Finance Rountable. Managing an engine. Stephane Garson, General Manager Marketing. 1. st . May 2008,

Engine Finance RountableManaging an engine

Stephane Garson, General Manager Marketing

1st May 2008, New York

Two Strong Aerospace Leaders Behind CFM

30 years of cooperation

General Electric

152 B$ revenue11 businesses

330,000 employees(25,500 Aircraft engines)

4,3 B€ revenue8,400 employees

Snecma

CFM International is a Joint Company of Snecma & General Electric Co.

50/50 Efficient Work Sharing

SNECMAGE

Simple structure :

Everything shared 50-50 :

Takes full benefit of global GEAE/Snecma partnership

CFM is the only interface for the customer

50% GEAE ( USA) 50% Snecma (France)

Research & development, design, engineering, marketing, production,product support

Simple Sales & Customer Support Sharing

CFM split the world into 2 regions to better support customers on a coordinated basis.

SALES,PRODUCT SUPPORT

CFMI CINCINNATI,OHIO, U.S.A.

SALES,PRODUCT SUPPORT

CFMI CINCINNATI,OHIO, U.S.A.

SALES, PRODUCT SUPPORTCFMI VILLAROCHE,

FRANCE

SALES, PRODUCT SUPPORTCFMI VILLAROCHE,

FRANCE

A Wide Range of Products to Match Market Needs

( ) Entry Into Service Year

Engines currently in production

Applications

737-600 / -700 /-800 / -900CFM56-7B (1997) CFM56-7B/3 (2007)

737-600 / -700 / -800 & -900

A318 / A319 / A320 / A321CFM56-5B & 5B/P (1994&1996) CFM56-5B/3 (2007)

A318 / A319 / A320 / A321

A340-200 / -300CFM56-5C (1993)

A340-300 ENHCFM56-5C/P (2003)

A319 / A320CFM56-5A (1988)

737-300 / -400 / -500CFM56-3 (1984)

DC8 /Military applicationsCFM56-2 (1982)

CFM56 Family TodayAs of December 31, 2007

THE WORLD’S MOST POPULAR ENGINETHE WORLD’S MOST POPULAR ENGINE

More than 25,400 CFM56 on commitment (options & spares included)

489 Operators/ Customers & VIP

7,195 A/C / 17,636 engines in service (delivered to Operators)

385 million Engine Flight Hours & 222 million Engine Flight Cycles

1 aircraft departure every 3 seconds

CFM = THE PREFERRED ENGINECFM = THE PREFERRED ENGINE

Single Aisle A/C Market Share

CFM71,9%

IAE18,3%

PW3,7%

RR6,1%

* RR / RR Deutsch

CFMA/C IAE PW RR*2786A319/320/321 2218 N/A N/A71A318 N/A PW N/A

1988737/-3 N/A N/A N/A 4303737/-7B N/A N/A N/AN/A717 N/A N/A 155N/A757 N/A 429 617N/AMD90 N/A N/A N/A

9148TOTAL N/A 464 772Based on cumulative firm orders (100 Pax +)

A320 operators consistently vote CFMA320 operators consistently vote CFM

A320 Family Market Share: Firm Orders over last 5 years

CFM56.5%

IAE43.5%

PW0.0%

2004

CFM50.8%

IAE46.7%

PW2.5%

2005

CFM62.9%

IAE37%

PW0 %

2006

CFM65.5%

IAE34.5%

PW0 %

2007

PW0.0%

2003

CFM56.8%

IAE43.2%

CFM Single Aisle/ Narrow Body Market Share

Europe & CIS

341

2260

Asia Pacific

456

1425

Africa & Middle East

106

318

N&S America

587

2256

Excellent MarketabilityMore than 4 times more A/C with CFM56 than the competition

Excellent MarketabilityMore than 4 times more A/C with CFM56 than the competition

CFM – 6259 A/C

IAE – 1490 A/C

Number and location of A/C in serviceA318/ 319/ 320/ 321, B737CL and NG, MD90

2600

2400

2200

2000

1800

1600

1400

1200

1000

800

600

400

200

0

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

YearYear

Number of enginesNumber of engines

CFM56 Engines Ordered & Produced

* Installed engines only. Without spares.

As of December 31, 2007

Installed engines ordersProduced engines

Keep it simple, dummy

New York, April 4th

First Look at a Jet Engine

The fanThe fan

First Look at a Jet Engine

The Fan

The fan sucks airFrom the outsideThe fan sucks airFrom the outside

The fanThe fan

The Fan

The Jet Engine Principle

The turbine drives the compressorThe turbine drives the compressor

The fuel brings the energy to the systemThe fuel brings the energy to the system

CompressorCompressor CombustorCombustor TurbineTurbine

FuelFuel

The Jet Engine Principle

Increase in by-pass ratio improves SpecificFuel Consumption (SFC)

Increase in by-pass ratio improves SpecificFuel Consumption (SFC)

11 AirAir

33

33

22

22

By-pass ratio = Mass flow / Mass flow

By-pass ratio = Mass flow / Mass flow33 22

TRUST ME!TRUST ME!

The Jet Engine Principle: By-Pass Ratio

WHEN THE LARGEST BUYERS OF AIRCRAFT ENGINES DO THEIR CALCULATIONS THEY ALWAYS GET THE SAME ANSWER.

Calculating Engine Calculating Engine MaintenanceMaintenance

Acronyms

A/F AirframeATO Aircraft Take OffsD&C Delays & CancellationsDMC Direct Maintenance CostECO Engine Cost OwnershipEGT Exhaust Gas TemperatureEMO Engine Management Opimization ®IFSD In Flight Shut-DownsLLP Life Limited PartsLRU Line Replaceable UnitNPV Net Present Value

OATL Outside Air Temperature LimitSV Shop VisitSVR Shop Visit RateSVC Shop Visit CostT/O Take OffTOC Total Operating CostTOW Take Off WeightUSG US GallonsVSV Variable Stator VanesW/S Work Scope

Acronyms

Engine DMC Breakdown

THE COST TO KEEP AND RESTORE ENGINESERVICEABILITY CAN BE SPLIT BETWEEN:

THE COST TO KEEP AND RESTORE ENGINESERVICEABILITY CAN BE SPLIT BETWEEN:

Line Maintenance cost

Shop maintenance cost

Engine DMC Breakdown ( cont’d )

LINE MAINTENANCE REPRESENTS ABOUT 7 %OF ENGINE MAINTENANCE COST

LINE MAINTENANCE REPRESENTS ABOUT 7 %OF ENGINE MAINTENANCE COST

Line Labor :

LINE MAINTENANCE :

InspectionTroubleshootingReplacement of Line Replaceable Units ( LRU’s )Test

Consumable parts (items which must be scrapped at everymaintenance action )

Line Material :

Repair of equipment removed on line

Engine DMC Breakdown (cont’d)

SHOP MAINTENANCE REPRESENTS ABOUT 93 %OF ENGINE MAINTENANCE COST

SHOP MAINTENANCE REPRESENTS ABOUT 93 %OF ENGINE MAINTENANCE COST

Routine Labor : assembly / disassembly, cleaning, inspection ofmodules and parts

SHOP ACTIVITY :

Repair of parts ( including LRU’s )

Material: cost of parts and material replaced during the shop visit

Fees, Tests, Transportation

Shop Visit Rate - Definitions

WATOG : World Airlines Technical Operations Glossary

“An engine Removal is classified as a "SHOP VISIT" wheneverthe subsequent engine maintenance performed prior toreinstallation entails separation of pairs of major mating flangesor removal of a disk, hub or spool. (WATOG definition)”

SHOP VISIT :

Some maintenance operations performed on wing or on a standmay not be defined as a SV (eg compressor top casing onCFM56 engines)

Shop Visit Rate – Definitions (cont’d)

SVR IS A MEASURE OF THE ENGINE RELIABILITY PARAMETER

DILUTED (“POPULAR”) SHOP VISIT RATE SVRRatio of the number of shop visits in a fleet to the total fleet flying time(expressed in 1000 hours) within a given period

It represents the aging process of the whole fleet

Ratio of the total number of shop visits having occurred within a period to the total number of hours flown by the involved engines since their last shop visit.

Average on-wing time = 1000 / RSVR

It represents an average time on wing between removals

NON DILUTED OR RESTORED SHOP VISIT RATE RSVR

Shop Visit Rate – RSVR and SVR

Average Mature life = 1000 / MatureSVR

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

SV/KEFHSV/KEFH

YearsYears

RSVR

Mature SVR

SVR

Engine DMC Breakdown ( cont’d )

SHOP MAINTENANCE COST DEPENDS ON TWO FACTORS :

SHOP DMC IS A FUNCTION OF SV RATE AND SV COSTSHOP DMC IS A FUNCTION OF SV RATE AND SV COST

SHOP DMC = SVC x SVR measured in $ / EFHSHOP DMC = SVC x SVR measured in $ / EFH

SHOP VISIT COST SVC in K$

SHOP VISIT RATE SVR nb SV / 1000

Shop Visit Rate – Definitions (cont’d)

5 4730 h

20130 h

Yearly utilization

Calculation example

Popular SVR = 1000 / 20130 = 0.049

1 3610 h

2 3480 h

3 4340 h

4 3970 h

Shop Visit Rate : Shop Visits cause breakdown

SV MAINLY CAUSED BY EGT AND OTHER CAUSESSV MAINLY CAUSED BY

EGT AND OTHER CAUSES

Other 32%

Hot Parts 12%

LLP 14%

Performances 42%

CFM56-5B3/PA321

Example of a High Thrust Rating engine

Other 42%

Hot Parts 10%

LLP 47%

Performances 1%

SV MAINLY CAUSED BY LLP AND OTHER CAUSESSV MAINLY CAUSED BY

LLP AND OTHER CAUSES

CFM56-5B6/PA319

Shop Visit Rate : Shop Visits cause breakdown

Example of a Low Thrust Rating engine

Shop Visit Cost - Shop Visit Workscope

Determined by :

Goal is to rebuild an engine with acceptable time to the next shop visit

Shop visit causeTime since last shop visit Condition of different modulesOn-wing life policyStatus of Life Limited PartsExpected time to the next shop visitBusiness consideration

Expected time to next shop visit

Performance Performance

Life Limited PartsLife Limited Parts

Other PartsOther Parts

Shop Visit

On-Wing Life Parameters

Engine Rating

Usage severityEngine Age

By-pass Ratio LimitationsEngine Rating and On-Wing Life

Maximum temperatureMaximum temperature

By-pass Ratio LimitationsEngine Rating and On-Wing Life

Engine Rating and On-Wing Life

LARGE EGT MARGIN & LOW DETERIORATION RATETRANSLATE INTO LONGER ON-WING LIFE

LARGE EGT MARGIN & LOW DETERIORATION RATETRANSLATE INTO LONGER ON-WING LIFE

0 10,000 20,000Time on wing

EGT

dete

riora

tion

EGT Limit

0 10,000 20,000

Time on wing

EGT Limit

Low RatingHigh Rating

Same Engine

Engine goes to shop

Exhaust Gas Temperature

Outside Air Temperature at T/O

Severity Factor

1

2

1 2 3 4Flight Leg (Hours)

Factors Affecting Severity

Engine Corner Point

Flight Leg and Thrust DerateFlight Leg and Thrust Derate Outside Air Temperature InfluenceOutside Air Temperature Influence

0.78

1.35

Decreasing Takeoff Derate

Source: EMCWG

0%

5%

15%10%

Environmental Conditions

Fan DiskBooster spoolShaft

High Pressure Compressor Front shaftStage 1-2 spoolStage 3 diskStage 4-9 spoolCDP seal

High Pressure TurbineFront shaftFront air sealDiskRear shaft

Low Pressure TurbineShaftConical supportStage 1 diskStage 2 diskStage 3 diskStage 4 disk

Current Lives

30,00030,00030,000

20,00020,00020,00020,00020,000

20,00020,00020,00020,000

25,00025,00025,00025,00025,00025,000

For Budgetary Purpose Only

LLP Management CFM56-7B/5B Life Limited Parts Status

LLP management

Depending on the shop visit time occurrence, LLP management must be adapted to the situation (example of an operator requiring a minimum build of 6,000 cycles)

SV SVShop visit occurs close to 20,000 cycles

Remove 20,000 and 25,000 cycle parts

Remove 20,000 and 25,000 cycle parts

Remove 30,000 cycle parts


20,000 cycles 28,000 cycles

SV SV SVShop visit occurs close to 17,000 cycles







17,000 cycles 23,500 cycles 29,500 cycles

Engine Aging

As engine ages, the average time to shop visit lessens

1st SV

1

2nd SV

0.7

3rd SV

0.6

4th SV

0.6

Relative times to Shop Visit Mature Engine

Maintenance Reserve Calculation

An example - Assumptions

First Operator (10 year lease contract ):

Expected on wing lives:

Flight Leg: 1.3 hoursUtilization: 2,800 hours per yearCalculated average mature SVR: 0.100T/O derate: 15%Western Europe

Mature Shop Visit at 1000/SVR = 10 000 hoursFirst shop visit at 10,000/ 0.60.6 = 16,700 hours (12 900 cycles)Second Shop Visit at 11,700 hours (9000 cycles) , but limited at 7,100cycles due to 20,000 cycle LLP limit Following Shop Visits expected every 10,000 hours (Mature life)

An example - Rapid Calculation

Expected Shop Costs (LLP cost not included) 2 Core refurbishment: 2 M$

Expected expenses Operator 1: 2,0 M$ over 28,000 hours, or 78 $/EFH

SV1 SV2

Operator 1

10 year Contract


An example - Assumptions

Second Operator (7 year lease contract ) :

Calculated average mature SVR: 0.089 < Operator 1

Expected Shop Costs (LLP cost not included)

Flight Leg: 2.4 hoursUtilization: 3,200 hours per yearT/O derate: 10% Western Europe

Shop Visits expected every 1000/ 0.089 = 11,200 hours (4700 cycles)(theoretical first and second lives at 18,700 and 13,100 hours)

Core refurbishment: 1 M$Core + LPT refurbishment: 1.4 M$


SV1 SV2

Operator 1

SV3 SV4

Operator 2

Expected expenses Operator 1: 2 M$ over 28,000 hours, or 85 $/EFHExpected expenses Operator 2: 2.4 M$ over 22,400 hours, or 107 $/EFH

10 year Contract 7 year Contract

Operator 2 operation less severe than Operator 1

=>Maintenance Reserves need to be adjusted

Maintenance Reserve Calculation An example - Rapid Calculation


Expected expenses over 4 Shop visit, with operation 2: 4.4 M$ over 54,200 hours.Operation 2 maintenance reserves : 81 $/EFH

Expected expenses over 4 Shop visit, with operation 1: 4.4 M$ over 46,000 hours.Operation 1 maintenance reserves : 96 $/EFH 688k$ remaining in the reserve at the end of the 10th year

SV1 SV2 SV3 SV4

Operator 1

SV3 SV4

Operator 2

SV1 SV2

An example - More Accurate Calculation

Enough reserves to cover SV3 and SV4Enough reserves to cover SV3 and SV4

Engine Fleet Management

OBJECTIVES

KEEP HIGHEST RELIABILITYMAXIMIZE ASSET USEMINIMIZE COST OF OWNERSHIPMINIMIZE SPARE ENGINE INVENTORY

Engine Fleet Management - Tools

Take advantage of the different ratings of a common engine modelinstalled on different aircraft models

Permit to extend the average time between shop visits of theengine fleet

Engine Re-rating

Easier Shop Visit planningSpare engines used to reduce average usage of individual engines

Staggering

Commonality

Engine Fleet Management - Commonality

ENGINE COMMONALITYA KEY DRIVER TO REDUCE COSTS

ENGINE COMMONALITYA KEY DRIVER TO REDUCE COSTS

Commonality within a fleet of engines brings savings on :

…DocumentationInterface with Engine ManufacturerMechanics trainingEngine fleet managementSpare parts inventorySpare engine inventory

Engine Fleet Management - Staggering

Installed engineSpare engineShop Visit

Without StaggeringSeveral Shop visits occur simultaneously 2 spares minimum required

With StaggeringNo overlap of Shop visits 1 spare sufficient

Using a spare engine to dilute utilization of installed engines permits to avoid that several shop visits occur simultaneously.

ENGINE STAGGERING : POSTPONE SHOP VISITSAND REDUCE SPARE REQUIREMENT

ENGINE STAGGERING : POSTPONE SHOP VISITSAND REDUCE SPARE REQUIREMENT

EMO

3D. Engine Operation – Fuel consumption vs. on-wing life

Engine Removed from A321 and installed on A319

Extends the on wing life of the engines that are EGT limited on A321Postpones shop visits which would have otherwise occurred on A321

EGT Redline

A321-5B3/3 On Wing Life A319-5B6/3 Additional On Wing Life

EGT

EFH


0%

1%

2%

3%

4%

5%

6%

7%

EIS Year 5 Year 10 Year 15

5 shop visits for Operator 1

Single Engine deterioration

Average fuel consumption increase

Operator 1 : 3.8% to 3.9%

% F

uel B

urn

dete

riora

tion


0%

1%

2%

3%

4%

5%

6%

7%


3 shop visits for Operator 2

Average fuel consumption increase

Operator 2 : 4.5% to 4.6%

% F

uel B

urn

dete

riora

tion

0.7% Lower fuel consumption for Operator 1 at the cost of 2 additional Shop Visits over 15 years


0%

1%

2%

3%

4%

5%

6%

7%


% F

uel B

urn

dete

riora

tion


300 000 $ saved in fuel

2 400 000 $ higher shop cost

0%

1%

2%

3%

4%

5%

6%

7%


% F

uel B

urn

dete

riora

tion Assumptions:

-Savings per aircraft-15 year study period- FL = 1,4- A320/ CFM56-5B4/P-1,8 $/ USG fuel-3000 FH/ year

NEW CFM OWNERSTIME TO PUT YOUR FIRST SHOP VISIT IN THE DIARY

Engine Finance Rountable Managing an engine Stephane ... an Engine... · Engine Finance Rountable. Managing an engine. Stephane Garson, General Manager Marketing. 1. st . May 2008,

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