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Saturday, November 1, 2014

Maintaining Engine Maintenance Expenses

The costs associated with engine maintenance can prove to impact profit and loss calculations making accurate business profit forecasting difficult year-on-year, hence the growth of power-by-the-hour maintenance schemes now being offered.

By Andrew Drweiga, International Bureau Chief

Maintaining a PT6 turboshaft engine.
Photo courtesy Pratt & Whitney Canada

The bridge between a manufacturer simply supplying an engine to a customer versus committing to it with the operator was brought into the modern era by Rolls Royce’s Power by the Hour (PBH) concept in the early 1980s. While PBH has become a regular feature of supplier/owner maintenance agreements, Safran subsidiary Turbomeca is taking this a stage further with the launch in 2015 of its Boost (Bank Of Online Services and Technologies) program, a secure web-based engine fleet management application. With the after-market revenue sector increasing the focus of many corporate management teams; particularly with the slow down in the volume of helicopters being sold, anything that can ‘lock-in’ revenue over time is actively sought.

Turbomeca developed its own power-by-the-hour program called Support By the Hour (SBH). The concept was formulated at the end of the 1970s with the first customer, Heli-Union, signing up in the mid-1980s. Heli-Union founded its own JAR 145-certified (PART 145) technical centre outside Paris in 1985 and has been conducting maintenance operations for its own helicopters as well as those of other operators. The organization operates a mix of Airbus Helicopters from the Ecureuil AS 350 B3, EC 145, Dauphin AS 365 N and N3, and the SuperPuma AS 332 L1. Its customers include many in the oil and gas sector.

Franck Saudo, executive vice president, Operator Customers, believes that SBH is aimed at helping the company’s engine customers to insure their business through the management of risk and costs. Talking to Rotor & Wing last month, he said that in competitive markets, the management of cost is paramount with the possibility of operators passing on extra cost to their clients being unacceptable: “They want cost stability in their maintenance schedules and also unscheduled repairs,” he said.

With the SBH contract, Turbomeca’s customers pay an agreed cost per flight hour. The pricing is adjusted according to specific customer factors and it is not a “one size fits all” type of contract. “We take an element of risk when we issue a contract,” stated Saudo, although by now Turbomeca has been working at the formula and has a volume of experience at this type of forecasting. “The average customer signs up for between three to five years. An SBH maintenance contract also helps sustain the residual value of the helicopter,” stated Saudo.

Boost for Customers

About to begin the inspection of an Airbus Helicopter AS350. Photo courtesy Airbus Helicopter
The Boost program would now add a new dimension to the engine and maintenance services already provided by Turbomeca’s SBH. It is composed of e-engine logbook, technical publications and alerts. Basically, it’s an Internet-based engine management tool that helps operators monitor and control their fleet based engine maintenance.

“Boost is a tool to help monitor what our customers have to do; and it helps them meet regulatory requirements,” said Saudo. Applicable on an engine-by-engine basis, operators input their information and track maintenance schedules, browsing by activities or by fleet functions such as by an individual helicopter or engine or engine type.

Engine characteristics including remaining hours and cycles are traceable through an electronic signature. This means that operators can be confident of the engine maintenance that they need to perform.

“Operators make compiled decisions regarding which engines should be modified in a certain way,” said Saudo. “With Boost they are reminded to perform tasks, which reduces maintenance complexity.”

Boost will provide Turbomeca analysis together with access to findings of other operators through data input provided by other Boost users. The service will be available to Turbomeca’s existing SBH customers and is expected to go live next year. It will be an engine-by-engine agreement.

Both the FAA and EASA were involved to adhere to all necessary regulations, and customers provided input on the information they wanted to have at their fingertips. One of Turbomeca’s most recent PBH contracts is with long-standing Japanese customer Aero Asahi Corporation and its subsidiary Central Helicopter Service. The five-year extension contract signed on Sept. 29, covers Arriel 2 and 1E2 engines, although over 50 engines are maintained through the SBH program.

Hirofumi Iwashita, general manager, Procurement and Logistics, said, “The SBH contract allows for better control of operation cost as well as enhanced proximity support from Turbomeca.” Aircraft covered by the PBH contract are AS350B3/AS365N3, S-76C+ and BK117C2 helicopters. Roles include utility, EMS and VIP transportation.

Consultant’s Viewpoint

Bill de Decker, writing on behalf of the Conklin and de Decker consultancy, said that within the aviation industry, many of the program names currently available in the market, including Power-By-the-Hour, ESP (Eagle Service Plan - P&WC) and JSSI Complete, are all designed to offer an hourly fixed-price turbine maintenance and overhaul contract.The value of such an arrangement to operators has been reflected by the widespread uptake of such programs in rotary and fixed aviation. But de Decker poses several questions regarding how costs compare, the actual benefit of the programs and how they can help operators.

He stated that there is confusion over costs, particularly the difference between engine maintenance and hot section inspection and overhaul. “For one popular engine, the cost of the hot section inspection and overhaul is about $71.50 per hour, while the guaranteed maintenance cost is about $110 per hour. One possible conclusion is that the company providing the guaranteed maintenance program is making one heck of a profit,” he suggested.

The popularity of the comprehensive programs, said de Decker, is due to the fact that they include other cost items such as “consumables, maintenance of the accessories, recommended and mandatory service bulletins, loaner engines, coverage for premature removals, unscheduled maintenance and replacement of life limited parts.” According to his example, “if each of these additional coverage items is priced out, it increases the cost per hour from $71.50 to $114.50 and all of a sudden, the guaranteed maintenance charge of $110 per hour looks pretty reasonable.”

Turning to the benefits for operators, de Decker points out that the guaranteed costs help to smooth out major and unforeseen maintenance tasks. If the organization can afford the monthly payments, smoothing out peaks and troughs in engine maintenance helps clarify operating profits. A helicopter that can show a steady maintenance program is also a more attractive proposition for prospective buyers which can mean a higher residual sale price, thus providing a return on the through-life engine maintenance investment.

He concluded with a comment that in “most guaranteed maintenance agreements … loaner engines will be provided at no charge when your engine(s) are off the aircraft for repair or heavy maintenance.” With guaranteed advice and this kind of support included, operational stoppages leading to loss of operator revenue are more unlikely to occur.

The Variety of Choice

Manufacturers such as MD Helicopters offer programs like MD Power, which applies across its entire range of helicopters, where different levels of coverage are offered. MD Power also expands beyond the engine: “Since MD Power protects most critical systems and subsystems, the program reaches far beyond engine repair expenditure coverage.” It will also replace contracted parts and components within the fixed rate of minimum charge.

Pratt & Whitney’s Eagle Service Plan (ESP) has two levels of Gold and two levels of Silver. Where there is a risk for the insuring manufacturer is when a helicopter is used for a variety of tasks making its life-pattern difficult to predict. Where one helicopter may be used constantly for the same type of task, in the same environment and lifting similar loads on a regular basis, it would be more difficult to predict the wear and cost cycle for a helicopter that continually changes use and location. A helicopter used for tourism would be easier to predict than one used for general utility duties, where loads, mission length and operating conditions may change frequently.


Keeping up on the maintenance of an Arriel engine. Photo courtesy Turbomeca
PBH is something of a standard now. In May Airbus Helicopters and the maintenance organization of ADAC Luftrettung, ADAC Luftfahrt Technik (ALT), agreed to a parts-by-the-hour service contract which would cover ADAC’s new fleet of EC145 helicopters.

The 10-year deal specifically addresses the requirements of the 14 EC145 T2 helicopters that ALT will be required to maintain. The package is worth around $31.5 million (€25 million) and covers technical services provided at fixed costs.

“The availability and safety of our helicopters is absolutely fundamental to our daily missions in Germany,” said Thomas Hütsch, chief executive officer of ADAC Luftfahrttechnik, adding that the organization needed fast and efficient maintenance to live up to this commitment.

Guillaume Faury, president of Airbus Helicopters underscored that his company’s aim was to retain “the satisfaction of our customers over the entire lifecycle of their helicopters.” ADAC’s current fleet is made up of more than 50 helicopters, most of them from Airbus Helicopters.

On Feb. 13, 2012, the two organizations signed a 10-year power-by-the-hour service agreement with fixed maintenance costs. At the time, ADAC operated 45 Airbus helicopters for emergency medical services (EMS) making up a mixed fleet of EC145, EC135 and BK117 models. A year earlier, ADAC had confirmed its requirement for 25 EC145 T2s to replace the aging BK117s. The parts-by-the-hour agreement represents a commitment of more than $100 million (€80 million). One of the latest customers of Pratt & Whitney Canada’s (P&WC) engine management program is Milestone Aviation Group. Also signed in February, a $75 million 15-year contract means that Milestone’s leasing customers worldwide now have access to P&WC’s Flexible Turboshaft Engine Fleet Management program.

At the start of 2014, Milestone had 143 aircraft and had leasing contracts with 26 operators in 20 countries. With an investment of more than $2.2 billion and a prospective order book over $3 billion, its operator customers span the usual sectors of civil aviation as well as emergency and law enforcement services. Milestone operates through 100 percent lease financing.

The customized engine maintenance support initially applies to 25 helicopters powered by P&WC PT6C-67C engines, although the intention is to expand the program to include PW210S, PW210A, PT6C-67E, PT6B-37A, PT6T and PW207C engines. Milestone has over 160 P&WC engines across its fleet.

Matthew Harris, Milestone’s chief operating officer, commented that the arrangement “created a flexible offering that best meets the support requirements” of his company’s leasing operators. It was, he said, a deal that helps customers “to preserve their capital, reduce their risk and improve their cash flow.”

PBH for Military, Too

In February, Heli-One gained approval from the UK’s Ministry of Defence (MoD) through its Maintenance Approved Organization Scheme (MOAS) to support the Puma HC2’s Makila 1A1 engines. The RAF is fielding 24 modernized HC2 Pumas through a contract with Airbus Helicopters.

Based on Contractor Logistic Support (CLS), based on the best practices of the commercial oil and gas sector, Heli-One is tasked with maintaining 100 percent availability under a PBH contract. The MoD is pleased with the arrangement which allows cost forecasting based on planned flight hours logged through a dual Royal Air Force (RAF) and Heli-One reporting system.

Kevin Charles, Heli-One sales director for Europe and the Middle East said: “Customers depend on us to help achieve and maintain optimum mission readiness in the safest, most cost-effective manner possible, in all types of operating environments.”

Although not a specific engine support package, AgustaWestland provides its own maintenance cost per flight hour program called the Complete Overhaul and Material Program (COMP). The main aspects of this are: spare parts for scheduled and on-condition maintenance; the overhaul of T.B.O. components (labor and materials); replacement of parts at the expiration of the retirement life limit; the repair/replacement of faulty components; together with updated technical bulletins and other avionics support.

There is also a clause for the mutual termination of the contract at 60 days notice. However, it does not include labor costs, parts valued less than $250 and costs associated with ‘misuse or abuse of the helicopter’ (although how and who determines this would need more detailed scrutiny).

Related: Maintenance News

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