The effect of Aircraft Ageing on Maintenance and related Operating Costs

The effect of Aircraft Ageing on Maintenance and related

Operating Costs

12 September 2013

Copyright – TBE International Limited 2013

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2


1. Why is understanding aircraft ageing important?

2. Drivers of aircraft ageing

3. Ageing and Direct Maintenance Cost

4. Ageing and Maintenance Influenced Costs

5. Ageing and Indirect Maintenance Costs

1. Summary

Agenda

This presentation focuses on a complex topic and is intended as an

overview rather than a detailed description of the aircraft ageing topic

3

Copyright – TBE International Limited 2013 4

Why understand the Ageing Effect?

Airlines • Understand future maintenance costs

• Understand future hull requirements

• Plan for inventory requirements

• Plan fleet renewal programmes

MROs • Understand future labour requirements

• Understand market demand

• Facilities planning

Firstly….…. because its interesting!

• But understanding aircraft ageing has a more practical use

• Aircraft ageing can be considered the single most important maintenance cost variable


What is aircraft ageing and what are the drivers?

Service Bulletins/AD, eg:

- Strut mod

- T/R lock gear box

- NGS

5

Engine Shop Visits

- Performance Restoration

- Life Limited Parts replacement

External damage

- FOD

- Hail

- Impact damage

Component Maintenance

- Wear out failures

- Hard time removals

Line Maintenance

Base Maintenance

- Routine inspections

- Non Routine rectification

- Corrosion

- Fatigue

Maint’ Influenced Costs

Decreased reliability

- Delay costs

Increase fuel burn

- Weight increase

Maintenance ground time

- Hull costs

Direct Maintenance Costs

External Factors

Operating parameters

Geographical location

Labour efficiency

Outsource / in-house

Indirect Maint’ Costs

Spare holding costs

Engineering Support

Infra-structure

- Tooling

- Hangars


We will focus on these costs and their

influence on other elements

Aircraft Ageing Driver Tree

Operating

Costs

Associated

With

Aircraft

Ageing

6

Non Routine

factor

Routine

Maintenance

Maintenance

Influenced

Costs

Indirect

Maintenance

Costs

Infra-structure

(Tooling etc)

Engineering

Spares

Delay / Reliability

induced Costs

Fuel burn

Aircraft Hull / Maintenance

Ground time

Direct

Maintenance

Costs

On Aircraft

Line Maint

A/C Base

Maint

Off Aircraft

Component

Engine

Modifications

BER/Scrap

Routine wear out

Performance

Restoration

LLP / Hardtime

removals

External

Factors

- Operating

parameters

- Geographical

location

- Labour

efficiency

- Outsource /

in-house


OEM Ageing Curve

7

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Ma

turi

ty / A

ge

ing

Fac

tor

Airframe Age

Pre-MSG3 MSG3 Millenium

• Most people have seen the typical OEM ageing curve

Can this be used equally for all the aircraft operating cost elements?

Source: Boeing


Direct Maintenance Costs

8

To understand how Direct Maintenance Costs are affected by ageing, consider

some real world examples…..


On Aircraft Maintenance

• For all On Aircraft Maintenance the major cost driver is labour …… so to simplify this presentation we will only consider Labour but in any full analysis material

should also be modeled.

• To conduct any meaning full analysis the data needs to be normalised, so we need to

introduce some concepts

Non Routine Maintenance:

• To understand how the amount of Non Routine changes with aircraft age

Actual Routine Labour Hours of the event

Actual Non Routine Labour Hours of the event For each event, Non Routine Maintenance Factor =


• First consider Non Routine Maintenance….. Its more interesting!

• Consider an actual example for a fleet of B744 aircraft…..

NR increases at ~ 4% per year

Easy right?

0

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0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

NR

/R F

ac

tor

Aircraft Age

NR/R Factor

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

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0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

NR

/R F

ac

tor

Aircraft Age

4A Check C Check D Check

A different picture if check type

is considered!

0

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0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

NR

/R F

ac

tor

Aircraft Age


A checks do not show any increased NR findings with age 0

0.2

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0.6

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1

1.2

1.4

1.6

1.8

2

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

NR

/R F

ac

tor

Aircraft Age


A checks do not show any increased NR findings with age

• C checks show the typical

ageing ‘bump’

• But 2 different rates of

Increase of NR findings

10

On Aircraft Maintenance – Non Routine Maintenance

0

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1.2

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1.6

1.8

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0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

NR

/R F

ac

tor

Aircraft Age


A checks do not show any increased NR findings with age


ageing ‘bump’

• But 2 different rates of

Increase of NR findings • The rate of NR findings increase at the same rate

for D checks and C checks (~4.2% - 5% / year)

• Magnitude of NR for each 1 hour of R is different

between C and D checks (due access and level

of inspection)


0

0.2

0.4

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1.2

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1.6

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2

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Ro

uti

ne

La

bo

ur

Ma

turi

ty F

ac

tor

Aircraft Age


0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Ro

uti

ne

La

bo

ur

Ma

turi

ty F

ac

tor

Aircraft Age


A checks do not show any increased routine findings with age

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Ro

uti

ne

La

bo

ur

Ma

turi

ty F

ac

tor

Aircraft Age



ageing ‘bump’


0

0.2

0.4

0.6

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1

1.2

1.4

1.6

1.8

2

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Ro

uti

ne

La

bo

ur

Ma

turi

ty F

ac

tor

Aircraft Age




ageing ‘bump’

• The rate of Routine increase is the same for D

checks and C checks (~1.5% / year) but from

a different base

11

On Aircraft Maintenance – Routine Maintenance

• Consider the same fleet of B744 aircraft…..


On Aircraft Maintenance – Routine and Non Routine

• Putting together the Routine and Non Routine elements…..

0

0.2

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1

1.2

1.4

1.6

1.8

2

2.2

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

R+

NR

La

bo

ur

Ag

ein

g /

Ma

turi

ty F

ac

tor

Aircraft Age


A checks do not show any ageing effect

C and D checks exhibit an ageing effect of

~4.5% per year after maturity

Maturity at

5-10 years



• Component maintenance can be looked at via 2 mechanisms:

1. The number of removals or MBTUR/hard-time limit of each component

2. The cost of repair of each component when removed

• Follow the process

1. Consider the MBTUR of each rotable / repairable component fitted

2. Consider the Quantity per Aircraft (QPA) fitted

This will give the quantity of removals per year

3. Dissect removals into 1st, 2nd, 3rd etc removals

4. Apply a cost to each removal type

This will give the cost ageing curve for the aircraft


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

20

40

60

80

100

120

140

160

180

200

0

50,0

00

100,

000

150,

000

200,

000

250,

000

300,

000

350,

000

400,

000

450,

000

500,

000

550,

000

600,

000

650,

000

700,

000

750,

000

800,

000

850,

000

900,

000

950,

000

1,00

0,00

0

Cu

mu

lati

ove Q

ty C

om

po

ne

nts

(%

)

Qty

Co

mp

on

en

ts (

Fre

qu

en

cy)

MBTUR

Cum Components Qty Components

The aircraft has ~ 1,000 Rotable and

Repairable components fitted with a

CMM and CLP > $5000

Component Maintenance, cont’

• Consider an example of an A330

• Operating at a utilisation of 4000 FH p.a, 8 FH/FC

14

A/C TSN after 25 years =

100,000 FH

• Now apply the QPA to obtain the quantity of removals



• This is only an arisings measure, now dissect the type of arisings

“Mature”

at 4-6 yrs

0

50

100

150

200

250

300

350

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Co

mp

on

en

t R

em

ov

als

pe

r Y

ear

Aircraft Age

Avg increase in removals of

~0.2% per year

= effectively “flat”

Warranty

Period


0

50

100

150

200

250

300

350

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Co

mp

on

en

t R

em

ova

ls p

er

Yea

r

Aircraft Age

5+ Removal 4th Removal 3rd Removal 2nd Removal 1st Removal

16


• Look at the ‘type’ of removals….

~150 of the annual removals

will be very low MBTUR

items eg: wheels, filters etc

• Why is this important? • The 1st removal is a lower cost than subs removals, ie: repair cost increases with age

Proportion of 1st / 2nd etc removals

decreases as the aircraft ages

• Now apply the different cost per event


0.6

0.7

0.8

0.9

1

1.1

1.2

1.3

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Co

mp

on

en

t A

ge

ing

/ M

atu

rity

Fac

tor

Aircraft Age

Avg increase in costs after maturity

is ~0.4% - 0.5% per year

Warranty

Period

17


• Putting together the quantity of events and the relative cost per event a component cost

ageing curve can be developed


Engine Maintenance

• Analysing engine ageing can be difficult as internal component deterioration is only

financially relised once the engine as a ‘system’ is unserviceable

• This is further compounded by different on-wing and in-shop inspection limits

• A component (eg: blade) which is serviceable on-wing can be unserviceable if exposed in

the shop

• To observe the effect of ageing use a process similar to that used for component

maintenance

• Split Activity – engine SVs, module exposure and LLP replacement

• Apply Price – increase in scrap rates as individual components age


Engine Maintenance, cont’

• Consider a fleet of CFM56-7 engines

• Operating at a rating of 24,000lbs, 3.0 EFH/EFC and 8% T/O derate

0

1

2

3

4

5

6

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

US

D,M

illio

ns

Aircraft/Engine Age (Years)

Core Refurb LPT Refurb LLP Replacement

Avg TOW

10,500cyc

Avg TOW

9,500cyc

Avg TOW

8,000cyc

Core Engine

LLP Limit

Booster/LPT

LLP Limit

Pull fwd to

align with SV



• Consider a different view…..

0

0.5

1

1.5

2

2.5

3

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

US

D,M

illio

ns


Core Refurb Booster/LPT Refurb LLP Replacement

• Core Refurb costs increase

over time due to increased

scrap/repair costs

• LLPs generally do not

exhibit ‘ageing’ as cost is

driven by a regulatory limit

• Booster/LPT refurb costs

would also exhibit

‘ageing’ effects if

projected out far enough


0

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0.8

1

1.2

1.4

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Ag

ein

g / M

atu

rity

Fa

cto

r (U

SD

/EF

C)


Core Booster/LPT LLP Total

21


• Looking at a cost per EFC

The steps represent the

ageing effect


Modifications

• We haven’t addressed modifications in any of the previous examples

• Modifications can be classified in 2 categories:

1. Safety

• ADs and mandatory SBs

• Risk reduction modifications

• Ageing aircraft modifications

2. Economic

• Any non safety modification should have

some form of economic break even for the

airline

• Not necessarily from maintenance cost

• These increase with age

• But can affect young aircraft

• Aircraft type specific or ‘global’

• The magnitude of modifications

will increase with age

• These should ‘pay back’ within

a specific time hurdle

• The key is to have a structured and robust modification evaluation process

within the airline


Maintenance Influenced Costs

23

To understand how Maintenance Influenced Costs are affected by ageing, consider

some real world examples…..


• Generally, maintenance ground time is proportional to labour hours spent on the aircraft

• So it follows that a similar curve to the airframe labour ageing curve also applies to

ground time

Effect of Ground time

0

0.2

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1

1.2

1.4

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1.8

2

2.2

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

R+

NR

La

bo

ur

Ag

ein

g /

Ma

turi

ty F

ac

tor

Aircraft Age


Potential

120%

increase in

TAT in the

first 6 years

Potential 30% increase in

TAT in 7 years after

maturity

Variability increases as age

increases effecting turn time


1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 1 3 5 7 9 11

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

SeptemberJune July August

98% 98% 98% 98% 98%98% 98% 98% 98% 98% 98%98% 98% 98% 98% 98% 98%

GREEN = check yield <98%, ORANGE = check yield 98-99%, RED = check yield 100%

1 2 3 4 5 6 8 9 10 12 13 14 16

7 11 15 100%

99%

100%

99% 99% 100%

100%

99%98% 98% 98% 99% 99% 100% 99% 100%

With an extension of 2 days in TAT (6 to 8 days => 33% increase)

1 2 3 5 7 9 11 13 15 17 19

4 6 8 10 12 14 16 18 20 95%

96%96%

97% 96% 96% 96% 95%98% 97% 97%

98% 98% 98%98% 98% 97% 97% 97% 96%

This generally turns into 2 lines of maintenance

Effect of Ground time, cont’

• This only considers a single check type – obviously this will be compounded for every

D check cycle due to the addtional turn time associated with a D check

• Consider a maintenance planning scenario – simplified for illustration:

• A single line of maintenance, 6 day TAT, 18 month maint interval and 98% interval utilisation


Ground Time can be viewed in economic terms as:

1.Revenue Potential of Aircraft, but only count it if this is ‘real’ • The measure is actual revenue $

2. Hull Cost, this is always ‘real’ if a hull can be saved/deferred

• The measure is the ownership cost of hull (lease costs etc)

Effect of Ground time, cont’

• When considering ground time in an economic sense it is effectively the opportunity cost

of an aircraft

• The opportunity cost relates to: • The revenue making potential of the aircraft if it were in service

• The value of an extra hull

• Consider the dry lease rates of: • B738/A320 = US$180K-300K per mth (US$2.2M-3.6M p.a.)

• A330 = US$490K-790K per mth (US$5.9M-9.5M p.a.)

• B773ER = US$1M-1.2M per mth (US$13-14M p.a.)


Management Strategy or

there is no age related DR decrease?

27

Dispatch Reliability

• There are some issues when looking at long term Dispatch Reliability trends

1. The airplane can fly multiple mission types throughout its life

2. Schedule constraints vary over time

3. Availability of ‘spare’ hulls in network is an issue

4. Availability of spares to recover the aircraft

• But, there is a general ‘feeling’ that Dispatch Reliability decreases with aircraft age

• But by how much, if at all?

• Although, consider that many airlines operate ‘older’ fleets quite successfully where

dispatch reliability is critical

• Delta

• UPS / Fedex

Dispatch Reliability can be significantly affected by External Factors


Dispatch Reliability, cont’

93%

94%

95%

96%

97%

98%

99%

100%

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Dis

patc

h R

eli

ab

ilit

y <

15m

in

Aircraft Age

Avg Dispatch Reliability / Qtr

• Consider a long haul fleet which has which has been operating a similar route structure

for its life….

Poor EIS experience,

resulting in an OEM

working group

Mature ‘stable’ region

~ up to 2nd D check

Ageing region where

variability increases and DR

decreases ~0.1% per year

• Recall that Line Maintenance labour didn’t exhibit ageing but dispatch reliability seems to

decrease…… in this case it was due to unique failures on the line rather than volume of work


In-Direct Maintenance Costs

29

• In-direct Maintenance costs do have a link to Direct Maintenance costs changes and can

be considered ‘Direct Maintenance Support Costs’

Spare holding costs

- Inventory acquisition and mgt

- Warehousing

- Obsolescence

Engineering Support

- Repair schemes

- Maintenance system content / hosting

- SB/AD review

Infra-structure

- Hangar costs

- Tooling

DMC Ageing Link

Component Ageing

- MBTUR

- Repair TAT

Airframe Ageing

- Routine elements

- Non routine elements

Airframe Ageing

- Routine elements

- Non routine elements


No visible labour impact, but

reliability is impacted (see reliability)

Linked to ground time, non routine

factors

Both Routine and Non Routine

exhibit ageing effects (see graph)

Event / MBTUR and subsequent

repair cost driven

Costs are event driven, large impact

of external factors

Increases due to weight, non-flush

repairs, panel warping

Generally proportional to labour

increase + ‘unusual defects’

Dispatch reliability decreases with

age, unique defects

Linked to ground time, non routine

factors

Linked to MBTUR, repair TAT and

non routine

Putting it all together….

Operating

Costs

Associated

With

Aircraft

Ageing

Spares

Infra-structure

(Tooling etc)

Engineering

Fuel

Delay / Reliability

induced Costs

Aircraft Hull / Maintenance

Ground time

Line Maintenance

Base Maintenance


Engine Maintenance

30

Maintenance

Influenced

Costs

Indirect

Maintenance

Costs

Direct

Maintenance

Costs


Summary

• If conducting an ageing analysis for fleet renewal purposes don’t forget to

include the ‘Maintenance Influenced Costs’

• These can have a significant effect (sometime more than Direct Maintenance)

• This IS NOT an exact science, all aircraft age differently, there is no one rule,

consider • Aircraft type

• Your operating parameters

• Your geographical location

• Labour efficiency

• Insource/outsource

• There are multiple ageing mechanisms and each are different

• There are commercial management strategies to limit / manage

exposure of ageing • But that will be a topic for another day !


32 TBE…Capability through people…

Thank You!


For further information please contact:

Tom Bemstein

TBE International Limited

Level 19, Two International Finance Centre.

8 Finance Street,

Central. Hong Kong.

Phone: +852 3101 7286

Fax: +852 3101 7287

Email: [email protected]

or

[email protected] (direct)

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The effect of Aircraft Ageing on Maintenance and related Operating Costs

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