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Airline E&M Asia Pacific - Managing Mature Assets 4 March 2015 1 MTU Maintenance
Managing mature assets
Wim van Beers, VP Marketing & Sales Asia
Airline E&M: Asia Pacific Conference
Singapore, 4 March 2015
Airline E&M Asia Pacific - Managing Mature Assets 4 March 2015 2 MTU Maintenance
Who is MTU Aero Engines?
MTU Group: Sales 3,914 M*
* Provisional figures - subject to supervisory board approval
Commercial MRO
A leading engine MRO service provider
Global network
Integrated repair solutions
Key programs: V2500, PW2000, CFM56, CF34,
CF6, GE90, PW&C engines
and IGTs
~33%
Commercial OEM
V2500 CF6
PW2000 GEnx
GE9X GP7000
PW4000 LM2500
PW1000G LM6000
PW300/500/800
Key engine programs
Military OEM/MRO
EJ200 F404
RB199 F414
TP400 GE38
MTR390
~14% ~53%
Airline E&M Asia Pacific - Managing Mature Assets 4 March 2015 3 MTU Maintenance
Development of engine MRO pattern over time
1980s 90s e.g. CFM56-3
Narrowbody engine technology Illustrative scenarios
1960s 70s e.g. JT8D
30 yrs
9 -12 shop visits*
Hardly any OEM-LTSA OEM share
Airline E&M Asia Pacific - Managing Mature Assets 4 March 2015 4 MTU Maintenance
Engine management over the life cycle
4
MRO alternatives
Asset management focus Increased surplus availability Focus on cost/SV and customized life builds Tailored MTUPlus Mature Engine solutions
MRO focus
No/hardly alternatives to classic MRO No/limited surplus material Focus on cost/hour and on-wing times MTUPlus repairs and MTUPlus workscoping
Source: MTU/ASM, Feb. 2014 1 Including military applications
CFM56-3
JT8D-200
AE
3007
PW4
-94
CF6-80E
PW4000
-112
PW6000 V2500-D5
V2500-A1
CFM56
-5A
RB211 -524
CF6-501
CF6-6/80A GP7000 Trent 900
GEnx
GE90B
SaM146 Trent 1000
CF34-3
CFM56-21
CFM56-7
V2500-A5
GE90G
Trent
800
JT9D
JT8D
Trent 500
PW4000
-100
CFM56-5B
CF34-8
Trent
700
CF34
-10
CF6-80C
CFM56
-5C
RB211
-535
PW
20001
New / in production fleets Mature fleets Sunset fleets
MRO demand +/++ +++ ++
Note: Analysis based on proportion active aircraft vs. program peak
MTU Maintenance portfolio
Non-served portfolio
# active engines
Airline E&M Asia Pacific - Managing Mature Assets 4 March 2015 5 MTU Maintenance
Challenges for operating aging engines
MRO
OP
ER
AT
OR
S
OPERATIONS
High(er) fuel consumption at high/increasing fuel price level
Low(er) reliability
Decreasing OEM focus
Customized workscope
Low(er) on-wing times leading to more shop visits
High(er) LLP usage and cost
Access & quality of used material
To reduce cost consider alternative MRO solutions and alternatives to MRO
COMMERCIAL
MRO
Low(er) lease rates
Book value expectations
Market demand decreasing
LE
SS
OR
S / B
AN
KS
Maintenance reserve
optimization
Legacy lease return conditions
Alternative approaches to recover
residual value
Airline E&M Asia Pacific - Managing Mature Assets 4 March 2015 6 MTU Maintenance
Repairs
30%
Material
57%
DAT**
10%
New
47%
Used/
serviceable
25%
PMA
3%
LLP
25%
Fees
2%
Repairs
22%
Material
70%
DAT*
7%
New
64%
Used/
serviceable
8%
PMA
1%
LLP
28%
Fees
2%
Shop visit cost split per narrow-body engine technology
New engines
Source: ICF SH&E 2013 Engine Parts Repair Study, weighted average, NB only * Disassembly, Assembly & Test
Sunset engines
% of material: % of material:
Material New Used/serviceable PMAs
Repairs DAT* Other/Fees LLPs
Repairs and USM usage is key to reducing shop visit costs for mature engines
SV cost: $1.9m SV cost: $3.0m
Airline E&M Asia Pacific - Managing Mature Assets 4 March 2015 7 MTU Maintenance
Measures to reduce engine operational cost & maximize asset value Focus aging engines
Engine cleaning (compressor wash)
OPERATIONS: Measures to defer /avoid shop visits*
Condition monitoring
Procedure adjustments (derate take off)
On-site maintenance
Instant power (exchange/ leasing)
SHOP VISIT: Measures to reduce cost and/or maximize asset value*
Material management (used/new)
MTUPlus repairs (improved perf.)
Repair vs. replace (salvation)
Optimized fleet/LLP management
Tailored workscoping
Unscheduled (e.g. FOD)
LLP expiry
Hardware/ performance
TRIGGERS
DRIVERS
Cycle length
Operational parameters
Operating environment
* Decision by airline and/or MRO
Airline E&M Asia Pacific - Managing Mature Assets 4 March 2015 8 MTU Maintenance
Alternative solutions for aging engines
MTUPlus Mature Engine Solutions
Smart repair Instant power
Lease
Engine lease ful-filling operator needs
- identical configuration - required LLP cycles
Lease at daily/ monthly rate
On-wing engine exchange
Sale and lease back
Salvation
Engine teardown
Parts evaluation
Parts repair
Parts certification
Parts management
Storage
Re-marketing
Asset/part purchase
Maintenance
Optimized engine repair driven by - required rem. cycle - minimum cost - residual value
Tailored workscoping
Used material usage (including LLP mgt)
Module swap
Exchange
Exchange engine ful-filling operator needs
- identical configuration - required LLP cycles
Purchase at current market value
On-wing engine exchange
Financing
Modular integrated solutions based on custom-tailored analysis and consultancy
Airline E&M Asia Pacific - Managing Mature Assets 4 March 2015 9 MTU Maintenance
Salvation Understanding the material market
Properly valuing the engines (as the sum of the parts) is essential for understanding and maximizing value and for selecting the proper strategy
Fan / booster LPC
airfoils
Slow mover
Fast mover
HPC
airfoils
Com-
bustor
HPT
a/f
LPT
airfoils
Accessories
Value in teardown engines
Mature
Sunset
LLPs
used parts price [% CLP]
100%
0%
20%
40%
60%
80%
pro rata value*
Airline E&M Asia Pacific - Managing Mature Assets 4 March 2015 10 MTU Maintenance
Maintenance Smart repair solutions
Example: Maximization of CFM56 residual value (> 4,500 cycles remaining)
CMV: $650K
Options
Sale
as-is
Trust
upgrade
Refur-
bishment
Results Customer benefits
Market value $ 950,000
Invest $ 35,000
Residual value $ 915,000
Benefit* $ 265,000
Market value $ 1,650,000
Invest $ 485,000
Residual value $ 1,165,000
Benefit* $ 515,000
Market value $ 2,100,000
Invest* $ 1,295,000
Residual value $ 805,000
Benefit* $ 605,000
* MTU compensation depending on service (commission fee / revenue participation) CMV: Current Market Value
MPA/EOL run
MTU release tag (no refurbishment)
MTU utilizes its sales channels to market the engine as is
Engine upgraded from -B1 to -C1
MTU release tag (no refurbishment)
MTU utilizes its sales channels to market the engine
Engine PR + upgrade -B1 to -C1
MTU release tag
MTU utilizes its sales channels to market the engine
Intelligent assessment leads to enhanced return on engine asset values
CFM56-3B1
CMV: $200K
CFM56-3B1
Airline E&M Asia Pacific - Managing Mature Assets 4 March 2015 11 MTU Maintenance
Instant power vs. smart repair
Example: Airline-owned CF6-80C2 B1F
Smart repair
LLP shop visit
2.2 M$ + LLP cost
Long-term perspective +2,000 cycles
Mid-term perspective between 1,100 and 2,000 cycles
Short-term perspective up to 1,100 cycles
Instant power: Exchange
Sale of engine as-is to MTU and purchase of exchange engine from MTU
Instant power: Lease
Sale of engine as-is to MTU and lease of engine from MTU
1k
6k
3k
18k Cycle/FH
Options MTU advise
Optimized MTUPlus Mature Engine Solutions for each and every requirement
0k
0k
1
2
3
4
M$
6:1 ratio and 4,000 FH/year 0 LLP time left Looking to operate 1,000 / 2,000 or
3,000 additional cycles
2k
12k
Airline E&M Asia Pacific - Managing Mature Assets 4 March 2015 12 MTU Maintenance
Summary: True benefits for aging engines
MTUPlus Mature Engine Solutions
Creative solutions
truly focused on
mature engine needs
Alignment with
customer objectives
and budget
One-stop
provider
Independent support
to maximize
residual value
Transparent cost
structure for strategic
planning
Innovative material
sourcing for significant
cost reduction
Airline E&M Asia Pacific - Managing Mature Assets 4 March 2015 13 MTU Maintenance
Summary
Identifying the most cost-effective strategy is best performed by an experienced and independent provider
that is in a position to offer real alternative solutions
Engine technology and age have a large impact on potential maintenance strategies
Lower MRO cost for ageing engines can be achieved by intelligent USM usage, however in some cases instant
power solutions may be more economical than MRO
High-tech repairs further offer considerable material
savings, longer parts life and better engine efficiency
Customization is key to maximizing benefits
there is no solution that fits all!
Airline E&M Asia Pacific - Managing Mature Assets 4 March 2015 14 MTU Maintenance
Anytime, anywhere, we care!
For further information, please contact:
Wim van Beers, VP Marketing & Sales Asia
Office: +49 511 7806 2390
Cell: +49 176 1008 1202
mailto: [email protected]