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Engine Upgrades
The art of getting new-generation benefits in older airframes.

Have you noticed how often people consider common sense solutions to challenges that don’t necessarily demand a ground-breaking answer/earth-shattering investment? So many cues drive us to replace what isn’t broken- believing that ‘new’ brings some inherent advantage- when too often systems upgrades offer the equivalent benefit gains at a lower investment in company resources.

An upgraded aircraft interior gives an existing airplane virtually every advantage found in a new one – and these days- that can include in-flight entertainment and connectivity solutions originally unavailable for the plane. It takes far fewer dollars to finance an interior overhaul than to purchase a new airplane. Likewise putting a new finish on the airplane- or upgrading panel equipment in the cockpit - these options all not only bring creature comfort benefits- they also can serve to boost the value of that expensive asset – improving the value quotient on two levels.

Of course- if you’re like anyone who buys petroleum-based fuels for any conveyance these days you’ve likely noticed the impossible-to-ignore: fuel costs are slowly- steadily climbing – and have been for months. They may well continue increasing until forces change the market equation.

Reducing fuel costs never goes out of style; turbine-powered aviation stands to benefit from groundbreaking work on alternative fuels shown to function as well as kerosene sooner than other fuel consumers; costs won’t necessarily be much lower – but long-term the supply should be (a) wholly domestically controlled and (b) more price stable.

Turbofan engines have enjoyed a progressive improvement in fuel efficiency- averaging annually about one percent per year going back 40 years. Today’s modern- electronically managed jets and propjets average about 40 percent less fuel consumption than powerplants of the 1960s. And that record is expected to continue over the next 20 years or so.

DANCE WITH THE ONE THAT BROUGHT YOU
Don’t run out just yet to put up the “For Sale” sign on the company airplane – at least- not if your goal involves gaining the fuel efficiency of something newer. Instead of selling out- you might consider buying up and making your current bird as efficient – or nearly so – as today’s newest- spending less in the process.

Consider an engine upgrade which- like interiors- paint and avionics- can deliver the majority of the benefits for a minority of moneys. For some airframes with some upgrades- the airplane may actually deliver gains that combine to exceed traits of a newer- higher-priced one. But upgrading an airplane at any point- from the panel upfront to the powerplants outside- should be undertaken with a grasp of some solid basics and a long-term strategy for the airplane.

That long-term view may include a short-term sale: as a set of systems collected in an airframe- taking into account the long-view when making all decisions about those systems helps assure that the outcome costs as little as possible while at the same time providing the maximum return on those costs. This month we examine some of the logic- reality and mythology behind upgrading engines.

THE FINANCIAL FUNDAMENTALS
If saving money on fuel remains perpetually popular- reducing costs overall also stays perpetually in vogue. As with so many worthwhile steps in life- it can cost money to save money. In the case of a powerplant transplant- spending money typically delivers a return in value with long-term impact beyond those numbers on the fuel pump.

Take some of the most-popular airframes of the past 20- 25- 30 years – straight-wing Citations- Falcon 50s- 20-series Learjets and King Airs for example. Many of those aircraft took significant value hits during the economic slide which began in 2008 and from the contraction of the pre-owned jet/turboprop markets that started about two years ago. These two phenomena contributed their own influences to the plunge in new-plane sales and its deleterious impact on factory output- workforce size- revenues and profits.

When supply trailed red-hot demand- almost anything still airworthy benefited from the value inflation that paralleled the overheated demand. As supply rapidly expanded- swelled by slowing sales- value erosion and finance complications- many of those same older aircraft suddenly found themselves undesirable – and just as rapidly- leaving many an operator with a plane they’d hoped and planned to replace.

Part of the collapse in value stemmed from a market-driven loss of desire for older aircraft; in part- the disaffection grew out of those planes’ higher fuel needs – due to older-technology powerplants – as well as the rapid fall from favor of the steam-gauge panel. Compound the market-interest collapse with a finance-industry aversion to older airplanes- and you have a convergence of value-robbing problems.

As values plunged in this environment- financing solutions became ever more scarce and costly; finance issues fed what now worked as a perfect engine of inaction – perfectly good planes people no longer want sought by others unable to finance at prices acceptable to the seller seeking to shed the machine in the first place.

Sometimes- even sensible deals fell victim to the unwillingness of financial institutions to finance aircraft above a certain age. The victims first to face these unprecedented restrictions came off the assembly lines more than 20 years back; and some companies pulled the cut-off to only a decade.

To further compound this aviation ageism- financing companies boosted down-payment requirements to new levels. For some of the choosier loan underwriters- even brand issues come into play. Although the pressures on financial firms began to abate in the last few months- loans remain more difficult to obtain than before this started.

OWNERSHIP PROVIDES LEVERAGE
But for the owner with equity and an interest in enhancing the existing aircraft- money exists – think of this as either a refinance or a second mortgage- but usually a new note.

That new loan agreement will take into account any improvement in residual value brought by upgrades the loan finances – and the company will want to make sure there’s still recoverable value at the end of the note’s terms. From this equity- operators of qualifying aircraft may find an engine upgrade both financially smarter and operationally more efficient. Terms may require the owner of an eligible aircraft able to cover 20 percent to 30 percent of the upgrade costs – the higher the owner’s equity level the more attractive the upgrade.

With a relatively small dollar amount financed- the economic benefits of replacing the powerplants on an older Cessna Citation 500 or 501- a Learjet 25- King Air- or the Falcon 50 may bring both financial and operational gains.

Upgraders- financial firms- dealers and brokers concur on one key point- however: that for the investment to be worth making the owner should plan on keeping the upgraded aircraft through a full depreciation cycle – normally seven years. Following an engine upgrade with a update closer to the time of possible sale can help improve the market value by providing the prospective buyer with an option that’s relatively current in both power and panel. As one broker noted- “The old panel will get you there just like a new one – but new engines will get you there cheaper and with better residual value.

“Engine upgrades can recover nearly 100 percent of their costs in some instances – and pay with lower fuel costs in the interim.”

Most dealers cautioned- however- that it’s a myth that there’s big money in buying an upgrade candidate and spending the bucks needed to bring power- panel- paint and upholstery up to 21st Century specifications. Generally speaking- tackling these extensive projects for anything more than improving your own owned airplane could prove financially challenging if profit is the goal.

If improved utility- reliability and cost efficiency is the goal- and the airplane’s already yours – or was upgraded by someone with the expertise – the steps may prove worthy and cost effective.

COSTS VS. BENEFITS
In a world where we so easily dispose of so many goods in so many ways- spending to upgrade rather than replace may challenge some peoples’ instincts. But if you look around general aviation- among its major elements of success have been the durability of the aircraft and the adaptability they offer; replacing components and systems to keep them flying has a long and successful history.

You may well find that focusing on engines may seem to shortchange the overall upgrade potential. Engine upgrade companies recognize this as well- and in the case of most powerplant-upgrade programs- the vendor goes beyond a simple engine swap.

Spirit Wing Aviation (www.spirit-wing.com)- for one- upgrades systems across the base aircraft – a Learjet 25- including conversion of the engines to the Williams International FJ44-2. As part of the conversion the company eliminates a header tank in the aft fuselage- installs new engine pylons – and upgrades panel equipment appropriate to the new engines.

With programs for the Cessna Citation and Falcon 50- the vendor offers anything from the engine-update program to one encompassing avionics and interior. But the more into the airplane the owner goes in terms of upgrades performed and funds consumed- the more important becomes the plan for reaping the benefits and costs of the investment.

Doing this for profit is a low-return proposition for the normal owner – barring- that is- a real bargain on the base aircraft- bought at a huge premium below market. Furthermore- for the operator who plans to fix and keep- upgrades may make less sense if the plan involves selling the resulting jet within five years; seven to eight can greatly improve the financial returns.

Between tax depreciation and the cost-reduction benefits- another broker noted- three-to-five-year periods may suffice for an operator already in possession of the refurbishment candidate. Meantime- leading the way in the turboprop market is Blackhawk Modifications (www.blackhawk.com)- offering upgrades on King Airs- Cheyennes- Conquests and Caravans. Blackhawk’s overall philosophy – embraces the belief that improving the speed and efficiency of an airplane pays dividends - improvements include gains in climb rate- speed at altitude and total fuel efficiency.

One singular element of Blackhawk’s product line is its focus on the simplicity of its upgrades- and almost all of Blackhawk’s engine upgrades involve relatively simple bolt-on engine swaps involving no airframe modifications – only the engines themselves and the instrumentation for each powerplant.

Although not exactly an exception- Blackhawk’s partnership with legendary airframe-enhancer Raisbeck Engineering (www.raisbeck.com) does offer operators the option of employing performance- improving airframe modifications with Blackhawk’s powerplant upgrades.

MAKING CENTS OF UPGRADE CONVERSIONS
Today’s modern high-bypass-ratio turbofan engines benefit from decades of incremental improvements – enhancements in air flow and fuel control- thrust recovery and bypass bleed-air use. At about 40 percent more fuel efficient than engines of four decades ago- these powerplants consume about half the volume of fuel needed by their predecessors.

New engines also benefit from lower overhaul costs- longer overhaul and inspection periods- and continuous trend monitoring to help spot problems before they actually occur. Yes- new jet engines are unquestionably expensive – but they deliver long-term savings in their reliability and frugality.

As one example of many- take a look at the stalwart GE CJ610 that originally powered the Learjet 25 and the older 24 – many of which continue to fly. Examples we found annually fly 150 hours to 200 hours – and given their size matches for their owners’ needs- these airplanes would both deliver the benefits of something new for less money under a program similar in costs to the $2.5 million price tag cost of a Spirit Wing Aviation Learjet 25 conversion.

With fuel costs the largest single element in operating a business jet after the purchase costs- the SpiritJet upgrade delivers significant savings. Employing a long-range power level- a SpiritJet powered by two FJ44-2 engines consumes about 128 gallons of Jet-A per flight hour – down about 40 percent from the 215 gallons per hour burned by the 25’s original powerplants.

At $5 a gallon for fuel- the 87-gallon-per-hour cruise-flight difference equates to a saving of $435 per hour; the difference grows dramatically when comparing full trips thanks to the FJ44-2’s better consumption numbers during climb and on long trips. On a 1-000-mile trip the difference can total about 400 gallons; more than 200 gallons on a 500-mile leg typical of the average business jet leg.

At our same $5 per hour- that fuel-use drop amounts to about $2-000 – or two bucks per mile – on the 1-000-mile leg- and more than $1-000 on the shorter flight. In both cases the jet was set to average 417 knots for the trip- and cruise at around 475 knots.

For the operator flying 200 hours per year- the $435 per hour drop in fuel costs totals $87-000 at year’s end. The savings jump to $108-750 at 250 flight hours annually - and if you’re using the airplane at the industry average level – about 350 hours per year – the savings come to $152-250!

These savings are solely in fuel costs- however. Factors with additional savings include lower maintenance costs- shorter climb times- and (usually) the capability to heft more load on every trip. These benefits – maintenance- in particular – can add up to tens of thousands more per year. Add depreciation benefits- the possibility of other incentives- and the combined investment begins to look sensible – particularly for the operator satisfied with the size and runway capabilities of the upgradeable airplane.

THINK- PLAN- ACT – AND LONG-TERM
If you own an eligible Cessna- Falcon- Learjet or King Air (among others) the options exist for you today. Engine upgrades are available and avionics options have never been better. But consult first – with the people who fly and maintain the airplane- with the vendors offering the upgrades- and with your tax and accounting experts. Then make a call to your banker- armed with your equity and your interest in making more of the current bird – and making it do for longer.

You could well get the airplane you wanted without ever signing a new registration form- qualifying crew on a new airplane- or subjecting yourself to the vagaries of trying to sell the old to buy the new.

In the end- isn’t getting there – as efficiently and cost-effectively as possible – the whole point of the plane? Now- take a look at that aircraft in your hangar and remember why you first bought it – and then treat it to a makeover that will make you feel like you got that new plane you wanted- after all.

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