Costs Associated With Airline

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
M
a
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i
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y

/

A
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F
a
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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
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
N
R
/
R

F
a
c
t
o
r

Aircraft Age
NR/R Factor
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
N
R
/
R

F
a
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Aircraft Age
4A Check C Check D Check
A different picture if check type
is considered!
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
N
R
/
R

F
a
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o
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Aircraft Age
A checks do not show any increased NR 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
N
R
/
R

F
a
c
t
o
r

Aircraft 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
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
N
R
/
R

F
a
c
t
o
r

Aircraft 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
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
R
o
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e

L
a
b
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r

M
a
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i
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F
a
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t
o
r

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
R
o
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i
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e

L
a
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M
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F
a
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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
R
o
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e

L
a
b
o
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M
a
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u
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i
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F
a
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t
o
r

Aircraft Age
ageing bump
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
R
o
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t
i
n
e

L
a
b
o
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r

M
a
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F
a
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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
0.4
0.6
0.8
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
+
N
R

L
a
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A
g
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g

/

M
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F
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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 1
st
, 2
nd
, 3
rd
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

5
0
,
0
0
0

1
0
0
,
0
0
0

1
5
0
,
0
0
0

2
0
0
,
0
0
0

2
5
0
,
0
0
0

3
0
0
,
0
0
0

3
5
0
,
0
0
0

4
0
0
,
0
0
0

4
5
0
,
0
0
0

5
0
0
,
0
0
0

5
5
0
,
0
0
0

6
0
0
,
0
0
0

6
5
0
,
0
0
0

7
0
0
,
0
0
0

7
5
0
,
0
0
0

8
0
0
,
0
0
0

8
5
0
,
0
0
0

9
0
0
,
0
0
0

9
5
0
,
0
0
0

1
,
0
0
0
,
0
0
0

C
u
m
u
l
a
t
i
o
v
e

Q
t
y

C
o
m
p
o
n
e
n
t
s

(
%
)

Q
t
y

C
o
m
p
o
n
e
n
t
s

(
F
r
e
q
u
e
n
c
y
)

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
C
o
m
p
o
n
e
n
t

R
e
m
o
v
a
l
s

p
e
r

Y
e
a
r

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
C
o
m
p
o
n
e
n
t

R
e
m
o
v
a
l
s

p
e
r

Y
e
a
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 1
st
removal is a lower cost than subs removals, ie: repair cost increases with age
Proportion of 1
st
/ 2
nd
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
C
o
m
p
o
n
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n
t

A
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g

/

M
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y

F
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o
r

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
U
S
D
,
M
i
l
l
i
o
n
s

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
U
S
D
,
M
i
l
l
i
o
n
s

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
0.2
0.4
0.6
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
A
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/

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F
a
c
t
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(
U
S
D
/
E
F
C
)

Core Booster/LPT LLP Total
21
Looking at a cost per EFC
The steps represent the
ageing effect
Modifications
We havent 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
0.4
0.6
0.8
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
+
N
R

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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
September June 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
D
i
s
p
a
t
c
h

R
e
l
i
a
b
i
l
i
t
y

<
1
5
m
i
n

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 2
nd
D check
Ageing region where
variability increases and DR
decreases ~0.1% per year
Recall that Line Maintenance labour didnt 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 dont 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
TBECapability 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: enquiries@tbeinternational.com
or
tbemstein@tbeinternational.com (direct)

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