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Cost recovery for a major check

Posted: Thu Feb 07, 2019 4:09 am
by Canuck600
Just wondering how long it takes to recover the costs for something like a D check where you spend say a million dollars on the aircraft? How many revenue hours would you have to fly to recover those costs? I assume having enough hours & cycles left on a frame to recover costs play a factor in whether the aircraft goes for the that major check or if it gets sent to the desert for scrapping.

Re: Cost recovery for a major check

Posted: Thu Feb 07, 2019 4:14 am
by strfyr51
the cost recovery is in the reliability after the check. It's not in a set time or trips,

Re: Cost recovery for a major check

Posted: Thu Feb 07, 2019 4:33 am
by Canuck600
I was looking more for how long it took to recover the money spent on the check. So it's considered just a cost of doing business with no figure of we need to keep the aircraft for x period of time to get what they paid for the check out of it?

Re: Cost recovery for a major check

Posted: Thu Feb 07, 2019 10:16 am
by Dalmd88
If the plane is a lease, there may be a end of lease check that has to be paid for. So that major check can not be recouped the way you are thinking.

Re: Cost recovery for a major check

Posted: Fri Feb 08, 2019 3:45 am
by Canuck600
Thanks

Re: Cost recovery for a major check

Posted: Fri Feb 08, 2019 7:27 am
by strfyr51
Canuck600 wrote:
I was looking more for how long it took to recover the money spent on the check. So it's considered just a cost of doing business with no figure of we need to keep the aircraft for x period of time to get what they paid for the check out of it?

It depends on to Whom the airplane OWNER is. Many times on a lease? the airplane must be returned with time remaining on an overhaul or to the next major check.

It makes the transition to a new program far less traumatic as the new Airline can just pick up the next due check. Before I retired from United, We brought on board quite a few China Southern A319's They were in good shape late model A319's. We put those airplanes through the equivalent of a C-Check changed the interior to our configuration and We're flying the Paint off of those suckers. I've taken airplanes out of the desert before and It's no joke. You have to look at damn near everything.

Re: Cost recovery for a major check

Posted: Fri Feb 08, 2019 7:32 am
by CARST
Canuck600 wrote:
Just wondering how long it takes to recover the costs for something like a D check where you spend say a million dollars on the aircraft? How many revenue hours would you have to fly to recover those costs? I assume having enough hours & cycles left on a frame to recover costs play a factor in whether the aircraft goes for the that major check or if it gets sent to the desert for scrapping.


I think you would have gotten more answers in th CivAv forum, as way less people read the TechOps forum...

I think we can guarantee that airlines will make such calculations. Be it for leased or owned aircraft. The situation for leased aircraft might be different as Dalmd88 pointed out, but also here, the airlines know about the check at the end of the leasing contract before signing the contract and will put this into their calculation if it is worth leasing the plane at all under these conditions. Most costs, including average costs for checks are known; except if an aircraft is totally new on the market (but then again you might get guarantees from the manufacturers for being an early customer).

For owned aircraft we know that airlines do these calculations. I don't have numbers and I'm sure we won't get them, because these are company secrets. But think about United and Delta retiring their 747s in the past years, while other airlines in Europe keep theirs flying. The reason for the "early" retirement was stated to be that the aircraft could have only kept in the air if DL and UA would have installed the "newly" required tank inerting system. Both airlines said that it is not worth doing so, because they don't plan to fly their airplanes long enough after the installation of the system.

You can read more on the system here (and why it was made mandatory to install it on all aircraft): https://en.wikipedia.org/wiki/Inerting_system

In other cases it was often mentioned that aircraft were send to the desert, because they were coming up for a D check and keeping them flying was not worth it, despite having some life left in some. Like I said above, we won't get exact numbers, and of course the numbers will also differ depending on aircraft type and airline. But we can be sure, that they make this calculation for every airframe in their fleet separately. The same will be true for smaller investments like cabin refurbishments (of course here it depends on if you can take over the seats, IFE systems and other equipment to other aircraft at a later point).

Re: Cost recovery for a major check

Posted: Fri Feb 08, 2019 5:00 pm
by Canuck600
I put it here because it seemed to be more of a technical/operation question.

Re: Cost recovery for a major check

Posted: Fri Feb 08, 2019 8:25 pm
by stephanwintner
Whether the aircraft is leased or owned, I imagine it also depends very much on the rest of the fleet & network. Which route pair(s) would the aircraft fly after the check, and what other aircraft in the fleet might fly that route if scrapped or sold instead (or, do you drop the route, I suppose - temporarily or permanently). Also, what other planes might fly while this one is off being D checked. How frequently can you offer those routes, and all your others, what are turnaround times, can you lease a replacement, when will Boeing deliver the next aircraft on the order book, etc. Alterations in frequency or gauge might be contemplated, temporarily or permanently.

If you are Southwest and only own 737's it's a bit simpler. But if the networks is complex, with many different types, it could have a significant ripple effect, I imagine. I think all those things affected the airlines during the recent Trent compressor and Pratt GTF issues, at least a D check is a predictable event.

Re: Cost recovery for a major check

Posted: Fri Feb 08, 2019 10:10 pm
by fr8mech
Canuck600 wrote:
I put it here because it seemed to be more of a technical/operation question.


You’re in the right place, in my opinion. In Civ Av you’d get a lot of uninformed guessing that would eventually turn into an A vs. B argument.

That’s not to say that there won’t be some guessing here, but it will tend to be more informed.

To the question...

When an aircraft is purchased or leased, the cost of maintaining that aircraft is factored in to the long term cost analysis of operating the aircraft, and the increase in those costs as the aircraft ages. Simply, an aircraft’s first C will be less expensive than its 4th C. Whether it’s worth doing that 4th C depends on how long the airline plans on operating that aircraft and how much they are willing to support it until its next C.

Actual C check costs are easy to determine, after the fact. It’s the money you spent on the C. While, there is lost revenue, that has probably already been figured into the cost of doing business as an airline.

The payback is more amorphous. I’ve no idea how much a ‘good’ C check will increase reliability in a particular airframe. The question is what that percentage increase is ‘worth’ to the operator. That’s where your payback comes in.

Everything in a maintenance operation costs money. Maintenance is a cost center.

Re: Cost recovery for a major check

Posted: Fri Feb 08, 2019 10:33 pm
by AirKevin
CARST wrote:
I think you would have gotten more answers in th CivAv forum, as way less people read the TechOps forum...

Given the nature of the question, if it was posted there, it probably would have gotten moved here anyway.

Re: Cost recovery for a major check

Posted: Fri Feb 08, 2019 11:21 pm
by Canuck600
Thanks fr8mech.

Does the depreciated value of the aircraft at the time play a part? I imagine if the estimate of what it's going to cost to do a check or a modification in the case of tank inerting is more then the current value of the aircraft the work won't be done & the aircraft is scrapped?

Re: Cost recovery for a major check

Posted: Sat Feb 09, 2019 1:07 am
by fr8mech
Canuck600 wrote:
Thanks fr8mech.

Does the depreciated value of the aircraft at the time play a part? I imagine if the estimate of what it's going to cost to do a check or a modification in the case of tank inerting is more then the current value of the aircraft the work won't be done & the aircraft is scrapped?


I'm not in the finance end of the business, just the muscle end.

I'm sure depreciation plays in there somewhere, somehow, but I couldn't really tell you how much. I mean, the aircraft may be fully depreciated, from an accounting point-of-view, but you'd need to look at how much time an airframe (hours/cycles) actually has left to determine whether a check, or some extraordinary, e.g. tank inerting, maintenance is worth it.