Salomon Serfaty

8/2/2019 Salomon Serfaty

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CFM International Proprietary Information subject to the restrictions on the cover of this presentation

CFM, CFM56, and the CFM logo are trademarks of CFM International, a 50/50 j oint company between Snecma and General Electric Company

IATA Executive Financial Summit 2007

Engine Operating Cost

Reduction An OEM Perspective

S. Serfaty, CFM Marketing






How can engine operating costs be reduced?

Agenda

• Cost of Ownership Overview

• Engine Design: The OEM contribution

• The Customer and Operator contribution






150 SEATER - Range 500 Nm - 10 A/C Fleet

150 SEATER - Range 500 Nm - 10 A/C Fleet

Years0 0 00 00 00

T O

T A L Y E A R L Y C O S

T ( M $ )

ACQUISITION

FUEL

MAINTENANCE

Theoritical example

Engine Cost Of Ownership

Cost Distribution






Barrel:60$Fuel: 1,6$/gal

Barrel:100$Fuel: 2,7$/gal

Cabin crew : 10%

Landing fees : 3%

Navigation fees : 4%

Handling cost : 4%

Airframe maintenance : 8%

Cockpit crew : 19%

Landing fees : 4%

Cabin crew :

13%

Navigation fees : 4%

Handling cost : 4%

Airframe maintenance :

10%

Cockpit crew : 24%

Fuel cost : 36%

Engine maintenance : 5% Engine maintenance : 4%

Fuel cost : 48%

+25% COC

The Engine : a Large Part of the Operating Expense






150 Seater - Range 500 Nm – 10 A/C Fleet

150 Seater - Range 500 Nm – 10 A/C Fleet

Years Since EIS0 10 20

Y e a r l y

M a i n t e n a n c e

C o s t ( K $ )

SHOP LLPs

SHOP VISITS

2 SPARE ENGINES

ENGINE LEASE

LINE Maintenance

Theoritical example

(Life Limited Parts)

Engine Maintenance Cost Distribution







• Engine Design: The OEM contribution






Computational modelling is key

Performance

Durability

WeightReliability

Environment

Cost

Engine Design :

a Multi-Constraint Optimisation Process

C O M

P L E

X






20%

30%

40%

50%

60%

70%

80%

90%

100%

1955 1965 1975 1985 1995 2005 2015

2

3

4

5

6

7

8

9

Fuel burn Index

Fuel burn(l/100 km/PAX)

• Between 1960 and 2000, technological progress led to 70% reductionof aircraft fuel consumption

• Modern aircraft fuel consumption is between 3 and 5 l/100 km/PAX

Engine fuel consumption reduction






20%

40%

60%

80%

100%

120%

1990 1995 2000 2005 2010Years

D i r e c t M a i n t e n a n c e

C o s t L e v e l

Engine Shop Maintenance Cost Evolution

CFM 15 year Cumulative Engine Shop Cost110 – 150 Pax AircraftConstant Value

Design improvements, a big contributor to Direct MaintenanceCost reduction

- 40%

On-Wing Life Improvement

F i r s t O n - w i n g

L i f e ( h o u r s )

0

5,000

10,000

15,000

20,000

25,000

70's 80's 90's

Low by-pass ratiotechnology

CFM561980'stechnology

CFM561990'stechnology






D i a

g n o s t i c

s &

P r o g n o s t i c

s M i s s i o n

O p t i m

i z a t i o n

MaintenanceOptimization

Intelligent Engine

Maintenance procedures

Inventory

Product improvements

Fuel burn

Emissions

Acoustics

Reliability

A/C productivity

Lower costs

Intelligent Engine Technology






KITSKITS

Short Term (In service product improvement)

Medium Term (New technology/ New Product or upgrade)

TECH 56TECH 56

Long Term (Future products/ Technology Jump)

LEAP 56LEAP 56 TMTM

CFM56-3 time on wing

CFM56 Tech Insertion

CFM Product Strategy







• The Customer and Operator contribution






10% Takeoff derate

20% Takeoff derate

6604H COSALLM1101

Right rating and right takeoff derate

Are key to longer on-wing lives and lower cost

Engine OperationEffect of Takeoff Thrust

Benefits of Reduced Thrust and De-rate

• Lower Takeoff EGT

• Fewer operational events due to highEGT

• Lower fuel burn over on-wing life of engine

• Lower maintenance costs

• EGT Margin decrease slowly

-SFC kept at low rate

• Better Engine performance retention

-Longer engine life on wing

• Shop Visit rate decrease

• Improved flight safety

-For a given Take Off, engine stressdecreasing, probability of enginefailure decreases






Engine Fleet Management

EMO – Engine Management Optimization® is a trade mark of Snecma

Moteurs

Proper engine management is key to optimize engine on-wing life

– Engine trend monitoring.

– Avoid failure through early problemdetection.

– Define timing for water wash. – EMO - Engine Management

Optimization® application.

– Engine removal planning.

– Workscope definition and SB incorporation.






Engine Fleet Management - Staggering

Installed engineSpare engine

Shop Visit

WithoutStaggering Several Shop visits occur

simultaneously 2 spares

minimum required

With StaggeringNo overlap of Shopvisits 1 sparesufficient

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

Engine Staggering: Postpone Shop Visits and ReduceSpare Requirement






Maintenance Providers

CFM56 Worldwide SupportMaintenance Capability

CompetitionLimited Inventory

Adapted Contract

THREEITEMS TOKEEP LOW

SHOP COSTS






Shop Maintenance – Workscope optimisation

– TOW focus….Longer cycle– Workscope to maximize TOW

– LLP build optimization

–TOW upgrade incorporation

– Results in increased asset value

– Lower overal cost of ownership

– $/SV focus…Shorter cycle– Repair, used serviceable parts, and new

parts

– Targeted workscope– Lower shop visit cost

Maintenance Cost

$/SVFocus

$/EFH,TOW

Focus

$/EFH,With

Upgrade

-14%

-24%

Based on a CFM engineeringstudy

•150 million EFH•1000+ engines•4 of largest CFM56-3

operators

CFM engines provide flexible cost managementWork scoping decisions a key factor






Consequences of Non-CFM parts

Non OEM parts technical and financial risk to be considered

• PMA parts & DER repairs are moving

from low-tech to high-tech, safety-critical parts

• Significant potential to impact enginereliability and operability

• Instructions for Continued Airworthiness

do not apply• CFM is working with FAA/EASA to

address approval, certification &continued airworthiness requirements

• Residual Value affected(Recent appraisal evaluation)

OEM

Non-OEM

Acquisition Maintenance Disposition

Engine valuation life cycle

~ $200-600K, or~ 10-26% of CMVSource: Independent appraiser(IBA and Ascend) 2007assessment of CFM56-3 CMVwith PMA/DER material

http://genet.ae.ge.com/communications/photo_library_images/CFM56_component.jpg






Shop maintenance – Upgrade option

$/Yr/Eng

• Improves fuel burn 1.6%: $ 25K

• Improves Time On Wing 25-40%: $180K

• Reduces HPT material cost 50%: $ 30K – Materials, coatings, durability improvements

• Improves engine residual value $ 60K

– Adds $330-$600k residual value

(based on CFM estimate and Appraisers valuation)

CFM56-3 upgrade kit provides significant savings

ConventionalDesign ‘3D Aero’Design$ estimates are savings per engine per year based on 5 year ownershipfor typical operator flying 20.5K thrust, 3000 hours per year, 1.4 hr flightleg, 14% derate, optimized LLP; $1.80/gal fuel

Example of the CFM56-3 Core Upgrade






HPC Kit

LPTN1 Kit

HPT Blade Kit

Full /3 Upgrade

Fuel Burn TOW Durability Emissions Intermix DMC

Operators Can Choose Optimum Configuration for Their Fleet

√ √√√ √

√ √√√ √

√√ √

√ √√√ √√

CFM56-5-7 Tech Insertion Upgrades






Customer Business Case – Fleet Example

Upgrade Results in 14.62% Customer IRR

Upgrade Results in 34 Fewer SV’s Over 10 Years

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total

Do Nothing Stream 16 16 16 17 16 16 16 16 16 17 162

SV0 (upgrade SV) 16 16 16 1 49SV1 0 11 16 16 6 49

SV2 14 16 30

Upgraded Fleet Stream 16 16 16 1 11 16 16 6 14 16 128

Customer 10-year IRR 14.52%

"Do Nothing" Customer Spend NPV $102.144Customer Spend Upgrade NPV $100.557

Customer Net Spend NPV ($1.587)

DMC Improvement without Fuel Savings 11.1%

DMC Improvement WITH Fuel Savings 14.2%

Single Engine Break-Even Years w/ Upgrade 3.4

Fleet Break-eEven Years w/ Upgrade 5.5

Customer Benefit Analysis Customer Cumulative Fleet SV Cost ($M)

$0

$50

$100

$150

$200

$250

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Do NothingUpgrade






COST

THREE PLAYERS, ONE AIM:REDUCE COST

How Costs Will continue to be Reduced in the

Future?

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Salomon Serfaty

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