A Must Have

It’s not very often that a story starts with a conclusion, but the more we spoke to the business jet engine movers and shakers about ‘pay-by-the-hour’ flight maintenance, the more certain it became that owners cannot afford to be without it. Its popularity is ever increasing, especially in these tough times as owners become nervous about receiving huge, unexpected bills associated with their aircraft’s engines.

Mike Vines  |  01st June 2009
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Mike Vines
Mike Vines

From aerobatics to airliners Mike has photographed the lot. After 40 years behind the lens he has seen...

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Business jet engines assurance by the hour

It’s not very often that a story starts with a conclusion, but the more we spoke to the business jet engine movers and shakers about ‘pay-by-the-hour’ flight maintenance, the more certain it became that owners cannot afford to be without it. Its popularity is ever increasing, especially in these tough times as owners become nervous about receiving huge, unexpected bills associated with their aircraft’s engines.

Each engine manufacturer has its own pay-by-the-hour program, and for most 50% or more of after-care business is generated this way. Some companies say that pay-by-the-hour business has increased since last December as it restores owners’ peace of mind with costs firmly locked down. There are no nasty hidden financial spikes, and a program dramatically improves the re-sale value of the aircraft, and the speed at which it can be re-sold.

Surprisingly most pay-by-the-hour programs start on delivery of a brand new aircraft and run in conjunction with the engine warranty. As one insider explained, “It helps fill in the gaps in the warranty.”

One firm believer, Berwind, a private investment management company, has already signed the first long-term Rolls-Royce CorporateCare agreement to support its BR725-powered Gulfstream G650, three and a half years before the aircraft is due for delivery. Its Director of Aviation, Kevin Boardman, says, “The residual benefits of CorporateCare alone make it a wise investment strategy…” Indeed, Rolls-Royce says that a massive 70-80% of all bizjets powered by RR engines are now on its CorporateCare program.


The history of pay-by-the-hour
The history of business jet pay-by-the-hour has its roots in the airline industry, and as one insider put it, “Decades ago a jet engine manufacturer was having trouble establishing reliability into its new generation of super-sized airliner engines, the result was that the lead airlines demanded some sort of assurance from the engine manufacturer.”

Pay-by-the-hour was born, and other engine manufacturers followed suit. Within the last two decades all engine OEMs have offered their own pay-by-the-hour programs for their indigenous business jet engines. The only independent company to offer such a service, for most business aircraft engines, is Chicago and Luxembourg-based Jet Support Services Inc (JSSI), which set-up shop around 20 years ago.

Companies offer varying depths of cover on all programs, and the advantage of all of them is that they are tightly monitored - thus giving added re-assurance to customers. Readers will not have to be reminded that the resale value of an aircraft is not so dependant on what it looks like, but on the existence of a full history of MRO work undertaken. Pay-by-the-hour monitoring is the ultimate in providing that information according to most people we talked to.

This overview attempts to show the programs that are available, stretching from the comparatively light-weight Williams International engines, to those powering the latest models of the Gulfstream 550 and Global XRS, the ubiquitous Rolls-Royce BR710.


Honeywell's MSP
This hourly engine and APU program is open to all customers operating Honeywell powered business jets. “Typically we sign an MSP contract directly with the business jet owner,” said Steve Gomez, Honeywell’s Technical Sales Manager for Propulsion and Safety Products.

“An hourly MSP varies with the engine type - if new, or if over a certain age threshold - and can be from say $125 per hour (inside North America) on a brand new TFE731-20-BR on a Learjet 45, to around $250 per hour (outside North America) on an older TFE731-3 engine, say on a Falcon 50,” he continued.

MSP is available in ‘Standard’ and ‘Gold’ programs. The ‘Standard’ program is comprehensive and covers all life-cycle parts and maintenance actions required on the engines. ‘Gold’ came about a few years ago in response to customer demand and includes unscheduled engine removals, sending an AOG team out, their expenses, and the shipment of engines etc. MSP Gold has a minor additional charge of $16.47 per hour over and above the Standard MSP rate for a typical TFE engine, explained Gomez.

“When an owner takes delivery of new Honeywell engines he’s protected by the warranty, but if enrolled on the MSP Program he can expect a discount while the aircraft is under warranty,” he added. “If the operator chooses not to enroll in the MSP program during warranty he can enroll when the warranty runs out, but if he chooses to do this he has to pay a buy-in fee and that can be substantial depending on the number of hours accumulated on the engines. So what we find is that most owners will take MSP as they take delivery of the new aircraft.”

Gomez observes that because of the current tough financial times, more people are becoming Gold Members to avoid sudden surprise bills. “People have come to accept the value of being protected with these programs, the peace of mind it brings, and the residual value enhancement in the aircraft it brings along with the predictability of budgeting. Once you know what your hourly rate is and you have a very good handle on the number of hours flown per year… you know what your exposed costs are on those engines.”

Remote engine monitoring is offered under the Zing program and provides recommendations based on data received from a Honeywell TFE731 Digital Electronic Engine Controller (DEEC).

The majority of the fleet powered by Honeywell engines is signed up to MSP says Gomez, payment is made monthly on the previous month’s flight hours. The company’s CFE 731 engines power the Falcon 2000, and its HTF 7000s are on the Bombardier Challenger 300.

He confirmed that MSP covered engines have an acknowledged value in the market place and will command a premium price. There is a transfer charge of $2,500-$2,700 to transfer the contract from one owner to the next. Honeywell will also advise non-MSP owners on the route to get their engines up to MSP standard which is a factory recommended configuration for each model, and offers deals on parts to help attain this.


JSSI Premium, select and Unsheduled-Only
Chicago-based Jet Support Services Inc, better known as JSSI, is the only independent provider of business jet hourly cost guarantee programs and covers both engines and airframes.

Its pay-by-the-hour programs cover just about all business jet engines and airframes. When World Aircraft Sales Magazine caught up with George Kleros, vice president, technical services, he said work on the template sheets for the Dassault Falcon 7X’s P&WC engines is taking place. “We will offer this but we can’t advertise it just yet.”

JSSI does take on aircraft that are over 20 years old but it really depends on the model, Kleros explained. As an example he said, “On the Hawker series, we would not cover the airframe on a Hawker 1A, 400, 600 or 700 series aircraft but we would cover the engines.”

He commented that the current financial crisis has increased enquiries and interestingly, the company has witnessed a change in the type of callers. “We’ve seen an increase in calls from the financial companies as these financial lenders now have assets they’ve received back, if you know what I mean? In order to re-market and sell the airplane they need to have some type of guarantee covering maintenance costs.

“To achieve this, they must have some type of hourly engine maintenance contract in place. Without this it’s very difficult for planners to come up with long-term cost projections because of un-scheduled maintenance, which could lead to 30-50% over-budget.”

JSSI’s ‘Premium’ and most comprehensive program covers all logistics and travel expenses for AOG. The next option, the ‘Select’ program, supports LLCs (Life Limited Components) compressor disks, and such. ‘Unscheduled Only’ is the minimum package offered by JSSI. The JSSI programs can, and very often do, start while the aircraft is early into its OEM Warranty and will come at a reduced rate. Once out of warranty the program reverts to the published rate. R&R (Remove & Replace) portions can be added to any of the programs.

As an indication of costs Kleros instanced the Williams FJ44 on the Cessna CJ1 - $35 per hour, for a Global or Gulfstream GV it would be nearer $300 per hour. A minimum contract is five years with the right to continue thereafter. JSSI’s rates come from an accumulation of data based on the average costs of overhauls, of hot section fix and un-scheduled factors. Conklin & deDecker supply the engine speculation numbers.

JSSI has two different cost regions, North America and the Rest of the World because of variation in maintenance labor costs.

“We process 10,000 invoices per year so we get to see invoices from every repair facility in the world and know which are the best for quality and price,” Kleros continued. “It allows us to be very accurate with our numbers. We know what the squawk factors are (un-scheduled items) so we know, for instance, what the risk of turbine disk failure is for a particular engine model, it may be 12% in one line, it may be zero in other engines and potentially as high as 50% over a period of time in another model.”


Pratt & Whitney Canada's ESP
This pay-by-the-hour program is available on all business jets powered by P&WC engines, at the point of purchase of a brand new aircraft from the airframe OEM, or at a later date. It is offered to owners or operators of new or used P&WC engines that are intended for normal passenger/freight transport operation.

To be eligible for enrollment the company says engines must have been maintained in accordance with all applicable P&WC maintenance manuals, service bulletins and recommendations. Used engines may be required to meet certain minimum service bulletin standards prior to being enrolled.

The company’s Eagle Service Plan (ESP) may be transferred to subsequent owners/operators, provided the previous operator has not received reimbursement for his participation in the plan at the time of sale, and has fulfilled all obligations under the program agreement. A new agreement will be required and an adjustment to the hourly rate if the new operator’s utilization differs.

When asked about hourly costs, P&WC said it does not provide its rates for general publication, but is happy to provide ESP hourly rates on request and on a case-by-case basis.

Like every other pay-by-the-hour program, ESP members pay at the end of each month after a monthly report is filed from the operator with the actual number of engine operating hours and cycles flown for that month. If preferred, members can negotiate quarterly, half yearly, or annual pre-payments based on average utilization, or pre-payments based on a block of hours. ESP cost varies on the thrust (power) of the engine, the type of maintenance required and maintenance intervals. Maintenance work can be carried out at any of the six P&WC Service Centers or nine Regional Service Centers as well as specific independent Designated Overhaul Facilities around the world.


Rolls-Royce's Corporatecare
Rolls-Royce introduced its pay-by-the-hour CorporateCare for business jet engines back in 2002. An integral part of the program is monthly engine monitoring where customers download engine data to a laptop and then send it via the internet.

“We are looking at several different options for the future on this,” said Steve Friedrich, Rolls-Royce vice president, sales and marketing for corporate and regional engines. CorporateCare is available from new, and customers can also enroll after the aircraft has entered service.

“It’s not a big deal getting on the program after the aircraft has entered service,” said Friedrich. “We cover Tay 611-8 (which are on the Gulfstream GIV and GIVSP), the Tay 611-8C (G350 and G450), and the BR710 (on the GV, G550, Global Express, Global XRS and all the Bombardier Global products), AE3007C and C1 for the Citation X and Embraer Legacy 600.

“CorporateCare is capturing 70-80% of all new delivery aircraft which our engines are on. People want to get right onto the program because of the residual value benefits, and the fact that their maintenance costs are capped. Frankly it’s a lot cheaper than going on time and materials. Most customers take CorporateCare from delivery of the aircraft as it compliments and supplements warranty.”

All scheduled and un-scheduled shop visits are included, as are all freight and logistics, lease engines, spare parts for regular line maintenance, engine health monitoring and technical publications.

“It’s an all inclusive program,” Friedrich underlined. “We listened to our customers and included pretty much everything. The only thing we don’t cover is line maintenance labor and FOD. We have had customers with FOD damage and we still respond and worry about the billing later.”

As an idea of the hourly rates, Friedrich exampled a Citation X engine (AE3007) by the hour: “In the US customers would pay $223.55 per hour but elsewhere rates differ depending on geographic location. The current financial climate is working for us and there are two reasons; owners and their financiers like to see this kind of agreement… It protects the aircraft’s residual value, and they know all the known costs going forward. The engines are the most expensive single items on the aircraft,” he emphasized.


Williams International's TAP
The Total Assurance Program (TAP) offered by Williams International is available on all the company’s engines and is offered at delivery, in service, and at major maintenance events. The company also offers a transfer program to the next owner for no fee.

Frank Smith, vice president, Customer Support for Williams International, says the pay-by-the-hour TAP cost of an FJ44-3 on a Cessna Citation CJ3 costs $126.82 per hour in North America and $139.14 for the rest of the world (not extended warranty). Warranty depends on the engine, and varies from two years and 1,000 hours for smaller engines, up to three years and 2,000 hours. TAP take-up across the fleet is above 50% according to Smith.

Customers pay monthly for hours flown, and the contract is for three years. Cost varies by the engine model but does not get more expensive as it gets older.

“We are seeing increases in TAP enrollments since the credit crunch bit, but I won’t say it’s a significant increase,” Smith revealed. “The TAP program saves customers money, and they get instant support. There are no issues on whose paying for what. If something happens we have to make it right.

“TAP takes out all the emotional distractions for our customers as they know that it’s our responsibility to take care of it. This is of real benefit for the customer as it covers AOG; if it’s a part needed we’ll send a team out to fit the part; if it’s an engine replacement we’ll send the engine out with our response crews, and we can field ten teams at a time if needs be.”

Smith says that his company is talking with different airframe OEMs to incorporate TAP programs inside ‘aircraft nose to tail’ programs. He promises that details will be released this year and it will benefit customers as they won’t have to pay at two different locations.


GE Onpoint Solution
This pay-by-the-hour program was introduced in 2001 and according to Bill Hoernschemeyer, general manager, Corporate Aviation Sales, GE Aviation, is becoming more successful each year. “Last year I signed up an additional 33 customers,” he offered. “In the early part of the year I was finding a lot more interest from owners wanting predictable maintenance costs. Those joining the program are a mix, with some taking the program from delivery, while others join later – the majority are probably older aircraft.”

When asked if OnPoint had different grades of hourly assurance, Hoernschemeyer said, “It is flexible, and what we’ve found, on both the CF34 on the Challenger 604/605 and with the CFM-56 engine powering BBJs and ACJs, is that the owners want everything - they want the full-up program. We don’t really have Gold, Silver or Platinum grades, we can change our programs, but I’d say that 99.9% of customers want everything in the hourly maintenance deal, and this has been pretty constant ever since the program was introduced.

“We’ve only got one or two customers who have opted for something different from the full program. We passed the 100th CF34 OnPoint customer mark in 2007, and now have 131 signed-up. I work a lot with brokers and they find the program very valuable, especially as aircraft get older and owners want to know future costs.

“Our program is price-based on the operating parameters of the owner and the age of the engines, and tailored exactly to the owner’s operations. The hourly costs of covering CF34s varies and is a complicated equation of the engine’s age, its cycle times, the degree of utilization and flight leg lengths, so it can be from say $60 per hour on a brand new Challenger 605 engine up to $300 on the old Challenger 601s which are scheduled maintenance engines.”

Is there an enrolment fee for older aircraft, World Aircraft Sales Magazine asked Hoernschemeyer? “There is no enrolment/management fee, but depending on the age of the engines and where they are relative to an overhaul, there could be a buy-in to catch up on hours. We structure this so that the buy-in would not be due until the time of a scheduled shop visit thereby allowing the owner to keep his money, but know exactly what it’s going to cost when it goes into the shop.”

The company is currently in discussions with Honda Aero Inc to offer this pay-by-the-hour maintenance on the new GE-Honda HF120 engines which will power the HondaJet. The company is also looking at extending OnPoint to its other business jet engines currently in development.


Embraer's EEC
Pay-by-the-hour is offered for the P&WC PW535Es on the Phenom 100 and 300 models under the Embraer Executive Care (EEC) program for the whole aircraft. Owners can alternatively join Pratt & Whitney Canada’s Eagle Service Plan (above) directly. One of the first Phenom 100 air taxi fleet operators has chosen to deal directly with P&WC, said an Embraer spokesman.

Legacy 600 owners with their Rolls-Royce AE3007A1E engines already deal directly with Rolls-Royce under its CorporateCare program, while Lineage 1000 (GE CF34-10E7 powered) customers will deal directly with GE under its OnPoint solution pay-by-the-hour program.

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