Engine Maintenance Programs: What's the Value?

What makes engine maintenance programs work for many owners and operators in Business Aviation? Can you quantify the benefits of program enrolment in terms of monetary value? Gerrard Cowan speaks to the experts...

Gerrard Cowan  |  27th February 2023
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    Gerrard Cowan
    Gerrard Cowan

    Gerrard Cowan is a freelance journalist who focuses on aerospace and finance. In addition to his regular...

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    What is the value of an Aircraft Engine Maintenance Program

    Engine maintenance can be costly, particularly in the case of an unplanned event. Engine maintenance programs give aircraft owners a predictable outlook on costs and peace of mind. But where, specifically, do they bring value, and how can owners ensure they choose the right option for their own aircraft?

    Engine maintenance programs are usually paid on an hourly basis, with a range of operators offering the services.

    For example, Engine Assurance Program (EAP) offers three levels of coverage. First is ‘comprehensive engine coverage’, which covers all scheduled and unscheduled engine maintenance requirements, including catastrophic coverage, remove and replace (R&R) services, and more.

    According to the company, most operators will receive full coverage with a yearly minimum of 75 hours. The second program is ‘proportional coverage’, allowing operators to access an engine maintenance program without a full buy-in, with EAP providing a proportionate level of coverage depending on aircraft use to that point. And the final layer is ‘catastrophic failure coverage’, which is limited to items such as failure of an engine before its next scheduled maintenance event.

    The market has been turned on its head over the course of 2022, says Sean Lynch, program coordinator at EAP. Previously, people would often remove their aircraft from engine maintenance programs when the value of their business jet fell to a certain level, perhaps $600,000 or less. But today that same aircraft could be valued at twice that amount.

    “You now can’t find spare engines out there,” Lynch explains. “People who weren’t on a program thought they could just buy an engine, but now they’re [finding themselves] grounded, or sending their engines through the [MRO] shop at great expense.”

    Dispatch Reliability

    Those operators who particularly value dispatch reliability have almost always been on engine programs, Lynch says. “When you have a wiring harness go bad in the Bahamas on a Sunday, becoming an engine expert by yourself, finding all the parts, and having them shipped is quite a process.”

    This is particularly true in the current market, where “you often just can’t find people locally,” according to Lynch. For example, EAP has had to fly maintainers from Lincoln, Nebraska to Van Nuys, California to work on engines.

    “A lot of great field service mechanics have quit and left the business, and the industry is not replacing them quickly enough,” he explains. “Also, the market has never been at this frenzied level of utilization. There's a shortage of support as far as parts and other things go, and there aren't enough field service guys.

    “EAP has over $12m in engines and engine parts in stock which helps us weather the delays and lack of availability.”

    Airplane Value

    Sometimes owners will leave a program and plan to build up funds themselves to cover a maintenance event, Lynch says. “And sometimes what happens is two or three engines come due for a heavy inspection and you’ve got a $450k problem – sometimes a $750k or $1m problem, per engine,” he adds.

    “The owner is then stuck trying to figure out where they’re going to come up with those funds – quite often, you’ll see those airplanes get parted out.”

    Much of the value of an airplane is in the engines, Lynch stresses, “and if they’re not on a program, there’s not much value there”. Such is the case that the banks and other financial institutions typically will not finance an aircraft if it’s not enrolled on an engine maintenance program.

    And when someone sells an airplane that is not on an engine program, a potential buyer is likely to try to establish how much it would cost to enrol it. “If it’s $800k, then that is deducted from the value of the airplane – so if it should have been worth $3m, the value is now $2.2m,” Lynch illustrates.

    No Budgeting Spikes

    Honeywell Aerospace offers its Maintenance Service Plan (MSP) program to cover all parts listed in its engine’s Illustrated Parts Catalogue, including life-limited components, says Nadya Krisko, Senior Director of Business and General Aviation, EMEIA at Honeywell Aerospace.

    The programs include MSP Propulsion for TFE, HTF and CFE engines; MSP HTF Nacelle program for the HTF Nacelle system; and MSP APU for Honeywell APUs fitted on business jets.

    Each program “covers all aspects of the maintenance cycle, from routine and line maintenance to scheduled and unscheduled events, including Service Bulletin application and rental units,” Krisko adds.

    “By enrolling onto an MSP program, the aircraft owner ensures maintenance cost will not exceed their budgets, with fixed and predictable program cost. The program eliminates budgeting spikes and unexpected high cost on unscheduled failures that cannot be predicted.”

    Indeed, Krisko highlights that the programs provide wider coverage than the original warranty, while those who sign up on entry into service are offered preferential rates. “As an engine or APU gets older, maintenance costs tend to grow, so staying on a maintenance plan until the equipment is ‘sunset’ brings huge value into maintenance budgeting,” she added.

    Krisko suggests operators pay attention to the small details when they’re considering engine maintenance program enrolment, including whether it includes retroactive Service Bulletin coverage, Life-Limited Component coverage, annual minimum hourly requirement and services, and the technical quality of the service center network supporting the program.

    Savings Percentages – Both Cost and Time

    According to Delray Dobbins, who oversees sales and global strategy for Pratt & Whitney Canada’s Eagle Service Plan (ESP), a typical OEM engine plan should save 15-30% when compared with a Time and Material (T&M) approach to events like hot section inspections and overhauls, when calculated over one overhaul cycle.

    These savings percentages increase if the engine encounters an Aircraft on Ground (AOG) or unscheduled event that is covered by the program, since these would otherwise be expensive unplanned events.

    “The engine program can protect the owner against unscheduled events like AOGs – and AOGs that are covered by an engine program often recover faster, because resources like spare engines move more quickly,” Dobbins highlights. 

    “And of course, when the engines are due for an overhaul, the program covers the cost of the overhaul as well as lease engine costs,” he adds.

    According to a spokesperson for General Electric, T&M customers can expect a 60-90 day induction wait time to enter an MRO shop for servicing with a turn time of 120-200 additional days following induction.

    General Electric offers OnPoint and CFM LEAP VIP programs for operators of its engines and says that such downtime is eliminated for operators enrolled with a program like OnPoint.

    “Loaner engines are provided, including all logistical services for ancillary related needs associated with the loaner engines, transportation both ways, removal and installation, on-site maintenance and repair team support, and any necessary import or export licenses,” the spokesperson highlights.

    Ultimately, however, individual and fleet operators must determine the level of risk and unpredictability they are prepared to expose themselves to when choosing a service program. “The value is in the availability and lifetime utilization of the asset itself,” the spokesperson summarizes.

    “It may not be the best option for an owner to be stuck with payments while its asset sits on the ground.”

    Enrol (and Stick with a Program) From the Start

    While, according to Stacy Hollis, Engine Service Sales for the Southeast US at Duncan Aviation, engine maintenance programs could be seen as “expensive insurance plans”, he stresses that enrolment “adds a lot of value to the engines and the aircraft as a whole”.

    It is beneficial to be on the program from the outset for several reasons; it can cut costs over the long-term, while increasing the pedigree of the engine – if the engine is on a program from birth, you know it’s the manufacturer’s [or program operator’s] responsibility if something is unserviceable, or if there’s a catastrophic failure”.

    Owners should enrol on a program and stick with it, Hollis suggests, adding that he has seen operators come off a program after several years, only to be confronted with an expense that could run into hundreds of thousands of dollars.

    “They say they never should have gotten off the program, because they end up with a half-million-dollar expense that they did not save for.”

    The GE Aerospace spokesperson recommended that operators consider value first, and then time. “When picking a service program, owners need to consider the residual value of the asset over time, along with the availability of the asset based on the program they choose.”

    Owners could be in for a rude awakening when they want to use the asset and it is sitting on the ground, or the value of the assets is not what they expected, the spokesperson warns.

    Ultimately, when buying an aircraft, it’s important to pay a lot of attention to the most expensive aspect of the value of the aircraft, which is its engines. “And if the engines are not on a program, the buyer had better know what they're doing,” Lynch warns.

    “If they have an engine problem shortly after buying it, that problem is going to be expensive – and in this market the airplane is going to be down for a while if you don't have anyone representing you.”

    More information from:
    Duncan Aviation: www.duncanaviation.aero
    Engine Assurance Program: www.eap.aero
    General Electric: www.ge.com
    Honeywell Aerospace: https://aerospace.honeywell.com
    Pratt & Whitney Canada: www.pwc.ca

    Read more articles covering Business Aviation Engines

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