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Airlines Paying For Engines Against Hour Flown?  
User currently offlinemortenbaek From Denmark, joined Sep 2007, 42 posts, RR: 0
Posted (3 years 3 days 13 hours ago) and read 5038 times:

The text book used in a business course I'm currently taking at my university has mentioned a couple of times that Roll Royce has based its aircraft engine business model on "leasing" out engines to the airlines who operate them. The one thing I was able to look up is this:

http://www.rolls-royce.com/civil/services/totalcare/index.jsp

I was under the impression that the aircraft manufacturer (Airbus/Boeing) acquired the engines and sold the entire aircraft as a "package" to the airline.

Anyone who has some more insight into the interesting subject?

Thanks in advance

/Morten

28 replies: All unread, showing first 25:
 
User currently offlineRoseFlyer From United States of America, joined Feb 2004, 9635 posts, RR: 52
Reply 1, posted (3 years 3 days 12 hours ago) and read 5020 times:

The latest genration of contracts is power by the hour. Airlines lease engines for operating hours. Included is all maintenance on the engines. For the airline, they use an engine until scheduled overhaul or a detected defect. They replace the engine and the manufacturer repairs/overhauls it and sends it back. It saves the airline from having to overhaul its own engines. Originally when power by the hour took hold in the 1980s, it was best for smaller airlines who did not have full repair shops and capabilities. Nowadays airlines are not investing in maintenance facilities like they use to, so large overhaul shops at the engine manufacturer or a contracted company do most of the work.

Nowadays, airplanes rarely have the same engines on for their entire lifetime. Engines are constantly swapped so it is rare to see a left and right engine with the same amount of cycles unless the plane is brand new. Both Boeing and Airbus are obligated to provide new engines with their airplane as their production certificates do not allow used or overhauled parts to be installed during assembly.

Quoting mortenbaek (Thread starter):

I was under the impression that the aircraft manufacturer (Airbus/Boeing) acquired the engines and sold the entire aircraft as a "package" to the airline.

Also, engines like many other components on an airplane are airline purchased equipment. The airline enters separate agreements on engine manufacturers and that gets coordinated with Boeing and Airbus during the configuration period of the airplane. This is partially why it takes at least 1 year from when an airline orders an airplane until they can take delivery. The same is true for many things, subsystems, interiors/seats/galleys, flight deck equipment, etc.



If you have never designed an airplane part before, let the real designers do the work!
User currently offlinetepidhalibut From Iceland, joined Dec 2004, 209 posts, RR: 6
Reply 2, posted (3 years 3 days 7 hours ago) and read 4905 times:

Nothing much to add, but I just thought I'd add a viewpoint.

30 Years ago, yes, Engine Companies sold engines to airlines, generally at a minimal / negative margin. However, they made their money from engine component sales, and engine rebuilds. A good business, for some people. But the odd situation was that the more unreliable and the quicker an engine deteriorates, the more parts and overhauls the engine companies get paid for. Not really what the airlines want is it? Where's the incentive to maximise on-wing life ? (I'm not saying that the EngCos's deliberately built in engine deterioration, but who knows what GE builds into their engines   )

I think it was RR who came up with the "Power By The Hour" concept. A fixed amount per hour per engine, and your overhaul costs are covered. Airlines get a fixed, easily planned cost (rather than occasional big bills). EngCo gets a steady income as well, and is incentivized to make their engines as reliable as possible. Customer gets reliable dependable scheduling. (Hey, I can wish). Everyone wins. (Except maybe third tier operators, who want to just buy old aircraft, fly them, eking out the last of their lives, then junk before the next big overhaul.)

As the business model shows it's worth, the concept expands to cover airframe maintenance, asset and maintenance planning, spares support, conditional monitoring, etc. For every variant, and every provider, there is a variety of names for the deal. Total Care and Power-by-the-Hour are two of the more descriptive ones.

HTH.


User currently offline474218 From United States of America, joined Oct 2005, 6340 posts, RR: 9
Reply 3, posted (3 years 3 days 6 hours ago) and read 4866 times:

Quoting RoseFlyer (Reply 1):
Both Boeing and Airbus are obligated to provide new engines with their airplane as their production certificates do not allow used or overhauled parts to be installed during assembly.

Installing used engines new production aircraft is legal and covered in Advisory Circular 21-19B dated 1/29/2010.


User currently offlinetdscanuck From Canada, joined Jan 2006, 12709 posts, RR: 79
Reply 4, posted (3 years 3 days 3 hours ago) and read 4820 times:

Quoting 474218 (Reply 3):
Installing used engines new production aircraft is legal and covered in Advisory Circular 21-19B dated 1/29/2010.

That doesn't conflict with what RoseFlyer said...he didn't say it was illegal, just that Boeing's production certificate doesn't allow it. This would still be consistent with the AC. I have no idea if/why Boeing's PC wouldn't allow this, but it's possible.

Tom.


User currently offlineredflyer From United States of America, joined Feb 2005, 4327 posts, RR: 28
Reply 5, posted (3 years 3 days 1 hour ago) and read 4780 times:

Quoting RoseFlyer (Reply 1):
They replace the engine and the manufacturer repairs/overhauls it and sends it back.

RF, do they send it back to the same carrier or do they send it out to the field with any carrier? Frankly, if I'm not paying for the engine as an owner and I'm instead paying for "power by the hour", would I care whether or not I get the same engine back?

Quoting RoseFlyer (Reply 1):
Both Boeing and Airbus are obligated to provide new engines with their airplane as their production certificates do not allow used or overhauled parts to be installed during assembly.
Quoting 474218 (Reply 3):
Installing used engines new production aircraft is legal and covered in Advisory Circular 21-19B dated 1/29/2010.
Quoting tdscanuck (Reply 4):
That doesn't conflict with what RoseFlyer said...he didn't say it was illegal, just that Boeing's production certificate doesn't allow it.

Very interesting. Why would a production certificate not allow for a used engine? Perhaps another question would be what is the benefit of not allowing a used engine, especially under a "power by the hour" scenario?



My other home is a Piper Cherokee 180C
User currently offlineStarlionblue From Greenland, joined Feb 2004, 17039 posts, RR: 66
Reply 6, posted (3 years 3 days ago) and read 4772 times:

Quoting redflyer (Reply 5):
RF, do they send it back to the same carrier or do they send it out to the field with any carrier? Frankly, if I'm not paying for the engine as an owner and I'm instead paying for "power by the hour", would I care whether or not I get the same engine back?

It goes to the next carrier that needs it. As you say if the carrier doesn't own the engine they don't really care as long as there is an engine on the pylon and it works.



"There are no stupid questions, but there are a lot of inquisitive idiots."
User currently offlinetdscanuck From Canada, joined Jan 2006, 12709 posts, RR: 79
Reply 7, posted (3 years 3 days ago) and read 4768 times:

Quoting redflyer (Reply 5):
RF, do they send it back to the same carrier or do they send it out to the field with any carrier?

To any carrier.

Quoting redflyer (Reply 5):
Frankly, if I'm not paying for the engine as an owner and I'm instead paying for "power by the hour", would I care whether or not I get the same engine back?

Not only would you not care, you *can't* care. Going power-by-the-hour means you cede all engine issues to the OEM. You don't get to pick which engine you get.

Quoting redflyer (Reply 5):
Why would a production certificate not allow for a used engine?

No idea. Just pointing out that it's not incompatible with the AC.

Tom.


User currently offlinemortenbaek From Denmark, joined Sep 2007, 42 posts, RR: 0
Reply 8, posted (3 years 2 days 20 hours ago) and read 4707 times:

Thanks guys. This was really informative.

User currently offline474218 From United States of America, joined Oct 2005, 6340 posts, RR: 9
Reply 9, posted (3 years 2 days 16 hours ago) and read 4653 times:

Quoting redflyer (Reply 5):
Why would a production certificate not allow for a used engine?

It would have to be written into he "production certificate" by the OEM since the regulatory agency don't have a problem with the use of used engines! The record keeping for the used engine has to be the same as a new engine. Additionally the used engine must be the same type as specified on the TCDS?

While not a commercial aircraft, when Lockheed restarted U-2 production in the 1980's to build the TR-1 version the J75 engine had been out of production for years. Engines were removed from stored F-105's refurbished and installed on the production line.


User currently offlinetdscanuck From Canada, joined Jan 2006, 12709 posts, RR: 79
Reply 10, posted (3 years 2 days 15 hours ago) and read 4636 times:

Quoting 474218 (Reply 9):
It would have to be written into he "production certificate" by the OEM since the regulatory agency don't have a problem with the use of used engines!

The OEM can't write anything into the production certificate, it's an FAA document. If such a stipulation was in there, the FAA/EASA/whoever would have had to put it there.

Tom.


User currently offline474218 From United States of America, joined Oct 2005, 6340 posts, RR: 9
Reply 11, posted (3 years 2 days 15 hours ago) and read 4622 times:

Quoting tdscanuck (Reply 10):
The OEM can't write anything into the production certificate, it's an FAA document. If such a stipulation was in there, the FAA/EASA/whoever would have had to put it there.
Quoting tdscanuck (Reply 4):
just that Boeing's production certificate doesn't allow it.

Now I am really confused, is it in Boeing "production certificate" or not?

Because we know the FAA allows it so why would they put it in Boeing's production certificate that it is not allowed?


User currently offlineSiren From United States of America, joined Aug 2006, 313 posts, RR: 11
Reply 12, posted (3 years 2 days 13 hours ago) and read 4579 times:

Quoting 474218 (Reply 11):


Now I am really confused, is it in Boeing "production certificate" or not?

Because we know the FAA allows it so why would they put it in Boeing's production certificate that it is not allowed?


It is in the production certificate. They put it into Boeing's certificate before the rule change occurred. The certificate stands as authorized. If a rule change occurs this does not mean that the certificate is automatically updated to conform with the new rules.

Further, Boeing has spent thousands of man-hours getting planes certified to rigorous standards. Any change in the certificate requires further certification work.


User currently offlineFabo From Slovakia, joined Aug 2005, 1219 posts, RR: 1
Reply 13, posted (3 years 2 days 13 hours ago) and read 4576 times:

Quoting Siren (Reply 12):
They put it into Boeing's certificate before the rule change occurred.

so, in theory, it may not apply for 787, as it is a new design that (i suppose) does not hold a production certificate yet?

Or is it possible that neither B nor FAA will elect to add this possibility?



The light at the end of tunnel turn out to be a lighted sing saying NO EXIT
User currently offlineSiren From United States of America, joined Aug 2006, 313 posts, RR: 11
Reply 14, posted (3 years 2 days 11 hours ago) and read 4539 times:

Fabo: in theory. That would be the logical course of action, that it may apply for the 787. We will see how it pans out...

User currently offlineRoseFlyer From United States of America, joined Feb 2004, 9635 posts, RR: 52
Reply 15, posted (3 years 2 days 11 hours ago) and read 4531 times:

Quoting Siren (Reply 14):
Fabo: in theory. That would be the logical course of action, that it may apply for the 787. We will see how it pans out...

Although this is beyond my area of expertise, I can say with 100% confidence, that Boeing will never deliver a brand new 787 or any other of their commercial jets with used/overhauled engines.



If you have never designed an airplane part before, let the real designers do the work!
User currently offlineredflyer From United States of America, joined Feb 2005, 4327 posts, RR: 28
Reply 16, posted (3 years 2 days 7 hours ago) and read 4449 times:

Quoting RoseFlyer (Reply 15):
Although this is beyond my area of expertise, I can say with 100% confidence, that Boeing will never deliver a brand new 787 or any other of their commercial jets with used/overhauled engines.

A hypothetical: Southwest has a gazillion 737's in their fleet with more on the way from Boeing. One of their in-service 73's experiences, let's say, a cockpit fire on the ground (a la Egypt Air) and the hull is a write-off. (For the sake of this argument, let's assume the insurance underwriters don't get involved.) The engines are perfectly fine since it's only the cockpit that was destroyed, and they are relatively new. Can't Southwest have the engines delivered to Boeing for re-fit on a production aircraft that's about to roll off the assembly line? Indeed, don't they and other carriers have other parts from retired aircraft re-fitted onto new ones, such as seats and other interior fittings? (I realize interior fittings may not have the same stringent requirements as engines do, but my point is that various parts are recycled onto new planes coming off the assembly line.)



My other home is a Piper Cherokee 180C
User currently offlineMarkC From United States of America, joined Apr 2006, 259 posts, RR: 0
Reply 17, posted (3 years 2 days 5 hours ago) and read 4402 times:

You guys sure that the OEM's can swap engines between operators. I work for an OEM, but no on the engine lease side of the business....the overhaul side. And I have never heard of one operator accepting another operators parts, let alone the whole engine. Not to say it does not happen. I just do not have direct knowledge.

But lets say that one operator has engines in terrible condition, like a certain mid east airline, and one has great condition engines, like a certain Korean peninsula airline. As an aside, this may not be due to maintenance practices, but operational environment (yeah, right). The worse engines are more likely to prematurely fail before a normal maintenace removal. And airlines hate unscheduled removals, especially at outstations. I can't see an airline that makes long runs across the pacific accepting engines that are affected by microscopic high altitude sand. And, if you've seen the insides of those engines, you would agree. Other engines might be close to LLP replacement, and who would take one of those.

The one thing I see in favor of operator swaps is that the operators would not have to purchase spare engines. They typicaly purchase 10% extra.

Comments?


User currently offline474218 From United States of America, joined Oct 2005, 6340 posts, RR: 9
Reply 18, posted (3 years 2 days 4 hours ago) and read 4387 times:

Quoting MarkC (Reply 17):
You guys sure that the OEM's can swap engines between operators. I work for an OEM, but no on the engine lease side of the business....the overhaul side. And I have never heard of one operator accepting another operators parts, let alone the whole engine. Not to say it does not happen. I just do not have direct knowledge.

But lets say that one operator has engines in terrible condition, like a certain mid east airline, and one has great condition engines, like a certain Korean peninsula airline.

First they are not the operators engines, they are owned by the leasing company.

The operator does not accept an other operators engine, they get engines owned by the leasing company.

As for your example of an operator with engines in terrible condition, that can not happen with the "power by the hour" leased engines because the leasing company is responsible for the maintenance not the operator.

Further, you say you work in the overhaul side for a OEM. Does it matter what shape the engine coming into your shop is in, other than the cost of the overhaul? You are going to replace all the worn parts and so when the engine leaves your shop it is as good as new?

Suggest you read the follow for more information:

http://www.airleaseintl.com/wp-conte...irLease-Power-by-the-Hour-2011.pdf


User currently offlineStarlionblue From Greenland, joined Feb 2004, 17039 posts, RR: 66
Reply 19, posted (3 years 2 days 4 hours ago) and read 4384 times:

Quoting MarkC (Reply 17):
The one thing I see in favor of operator swaps is that the operators would not have to purchase spare engines. They typicaly purchase 10% extra.

Power by the hour and other forms of leasing have huge advantages for the operator. By paying a fixed price per hour of engine time, the carrier is guaranteed a working engine. No uncertainties regarding maintenance cost. No extra cost for prematurely failed engines. No need to carry a stock of engines.

As a carrier, they would not care about which engine it was as long as they are guaranteed it works. As 474218 says, the leasing party is guaranteeing that an overhauled engine is up to spec regardless of previous operating environment. What else could the carrier ask for?



"There are no stupid questions, but there are a lot of inquisitive idiots."
User currently offlineFabo From Slovakia, joined Aug 2005, 1219 posts, RR: 1
Reply 20, posted (3 years 2 days 3 hours ago) and read 4374 times:

Quoting redflyer (Reply 16):
Can't Southwest have the engines delivered to Boeing for re-fit on a production aircraft that's about to roll off the assembly line?

As the engines are not owned by the hypothetical WN, they will not do this (unless we are not talking about OEM anymore). However, engine owner might want to swap some dead engine with those.



The light at the end of tunnel turn out to be a lighted sing saying NO EXIT
User currently offlineMarkC From United States of America, joined Apr 2006, 259 posts, RR: 0
Reply 21, posted (3 years 2 days 3 hours ago) and read 4363 times:

Quoting 474218 (Reply 18):
Suggest you read the follow for more information:

First of all, your comments are interesting, and I certainly am not argumentative, just curious.

I read it, and, its an old engine. This certainly was not offered on a new jt8 airplane. And, they address my concerns about LLPs and performance degridation. (high egt) Yes, in this case I go along with it. I kind of think this is totally different from a GP7200 power by the hour program, but, I'll admit I do not know.....yet.

Quoting 474218 (Reply 18):
Further, you say you work in the overhaul side for a OEM. Does it matter what shape the engine coming into your shop is in, other than the cost of the overhaul? You are going to replace all the worn parts and so when the engine leaves your shop it is as good as new?

No, 2 different parts can be servicable and still be in completely different conditions. As such 2 servicable engine can be in completely different shape. If I was allowed to post a passage from an OEM overhaul manual, I would. But, I'll paraphrase: While individual components may be operated at the limits of servicability, having many parts in this condition will have a cumulative detrimental effect on performance.

I'll give you an example. High compressor stators and blades all have blend limits. If you ever put a majority of these at max limits together in the same engine, it would be extremely succeptable to surge, which would probably lead to an unscheduled engine removal (UER). And it would all be perfectly serviceable. And not revealed by the test cell results which have perfect airflow. This would be especially true in a JT8 where limits have been slowly expanded over time.

Overhauled engines are never as good as new. No operator would pay for perfect, or even 90% of perfect egt. One of the big tricks in the business is the put as little money into the engine as possible and still meet contract egt. Engineers who can do this can write their own paychecks.

I have no knowledge of these programs on new engines, but I happen to know the ex manager of my OEMs engine lease pool who now is a salesman. He would know. I'll try to meet with him next week as curiosity has gotten the better of me on this issue.


User currently offlinetdscanuck From Canada, joined Jan 2006, 12709 posts, RR: 79
Reply 22, posted (3 years 2 days ago) and read 4327 times:

Quoting 474218 (Reply 11):
Now I am really confused, is it in Boeing "production certificate" or not?

Yes, according to RoseFlyer.

Quoting 474218 (Reply 11):
Because we know the FAA allows it so why would they put it in Boeing's production certificate that it is not allowed?

An AC is a universally applicable document that provides *a* way to show compliance. There is no requirement by anybody that you follow the AC. And, as noted by RoseFlyer, the chronology is backwards...the restriction came first, then the AC.

Quoting Fabo (Reply 13):
so, in theory, it may not apply for 787, as it is a new design that (i suppose) does not hold a production certificate yet?

The 787 has its production certificate; it was granted at the same time as the type certificate. It's not a separate certificate, it's an amendment to Boeing's existing production certificate (certificate # PC700...something like 50 years old now).

Quoting Fabo (Reply 13):
Or is it possible that neither B nor FAA will elect to add this possibility?

Yes.

Quoting redflyer (Reply 16):
Can't Southwest have the engines delivered to Boeing for re-fit on a production aircraft that's about to roll off the assembly line?

Not if the production certificate says they must be new parts.

Quoting redflyer (Reply 16):
Indeed, don't they and other carriers have other parts from retired aircraft re-fitted onto new ones, such as seats and other interior fittings?

That's Buyer Furnished Equipment (BFE), which is a somewhat different process. Engines are not buyer furnished equipment.

Quoting MarkC (Reply 17):
You guys sure that the OEM's can swap engines between operators.

Yes.

Quoting MarkC (Reply 17):
And I have never heard of one operator accepting another operators parts

It happens fairly frequently...as airlines get leaner, pooled spares are becoming more common.

Tom.


User currently offlineTristarsteve From Sweden, joined Nov 2005, 4007 posts, RR: 34
Reply 23, posted (3 years 1 day 18 hours ago) and read 4294 times:

Quoting 474218 (Reply 18):
Does it matter what shape the engine coming into your shop is in, other than the cost of the overhaul? You are going to replace all the worn parts and so when the engine leaves your shop it is as good as new?

This never happened when I was involved in Engine Overhaul.

When an engine came into the shop, its condition was assessed and the records studied,
then we had a meeting. A decision was taken as to how many hours/cycles the engine should have
on delivery. Maybe there was an LP shaft that had 2000 cycles left, but the rest of this system was OK.
Then the rest of the engine would be worked to meet this limit. This was our engine and our shop
and our companies money and we tried to be best at economics.
No need to change an LP shaft that had 2000 cycles on it. It was cheaper to remove the engine again.
The engines never left the shop as good as new.


User currently offlinebond007 From United States of America, joined Mar 2005, 5416 posts, RR: 8
Reply 24, posted (3 years 1 day 16 hours ago) and read 4266 times:

Quoting Starlionblue (Reply 19):
Power by the hour and other forms of leasing have huge advantages for the operator. By paying a fixed price per hour of engine time, the carrier is guaranteed a working engine. No uncertainties regarding maintenance cost. No extra cost for prematurely failed engines. No need to carry a stock of engines.

Agreed, but they are paying for those 'huge advantages' of course!
Overall, as in any renting or leasing agreement, the costs will likely be much higher over time for the operator but with those advantages you mentioned.

Jimbo



I'd rather be on the ground wishing I was in the air, than in the air wishing I was on the ground!
25 Starlionblue : The cost may be higher but the risk may be lower. Given that risk costs money...
26 RoseFlyer : With the production system set up as it is. The engines are already ordered almost 1 year before final assembly. Boeing would not take the used engin
27 Tristarsteve : In my airline, although some of our engines may be leased, we have technical control. But we in Line Maint handle other carriers. An A340-600 had an e
28 mrskyguy : PBH's are really nothing novel or new.. though they provide advantages to the end-users in predictable (and somewhat more controllable) spend. It's al
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