Dave Higdon writes about aviation from his base in Wichita Kansas. During three decades in... Read More
New engines give older jets new life, but values equation is still a challenge
Two of the overriding appeals of newer products can be traced to two specific words: ‘New’ and ‘Improved’. In few places do these two words play more prominence than in business aviation.
As a general rule, airframe efficiency evolves and advances rather little from one model year of an airplane to a later year of that same model. Inside, however, many things tend to change. And those changes produce their greatest appeal to operators when they offer one of two benefits: better utility and lower costs.
In a world of pairs, those benefits tend to flow mostly from improvements in two areas: the panel and the powerplant. Powerplant advances typically offer more utility and lower costs through reduced weight and reduced maintenance spending, and can give an old set of wings a new lease on life. That new lease on life stems from the dramatic advances in engine efficiency and technology of the last two decades.
Many new-generation engines tend to weigh less while producing far more power than comparable-category engines of years ago – and they do so consuming less precious fluid fossil fuels overall, as well as per pound of thrust generated. Add the benefit of longer inspection intervals and lower overall maintenance demands in general, and a new engine can bring a number of gains to an older plane.
For the owner of one of these upgrade eligible jets, seizing the option of upgrading engines alone can provide mission improvements and costs savings at a level that may ultimately offset the investment.
While we’ll focus on the who, how, why and how-much questions of engine upgrades here, we must note that some of the panel updates available offer benefits worth their own consideration, even if their costs-to-benefit equations don’t immediately match those for engines. But we’ll consider those panel upgrades in a future issue.
The technology of then and now
In the beginning, jet engines for corporate aircraft evolved out of jet engines developed for the military – and those used by the military represented big evolutionary steps over the earliest turbine engines of the late 1930s through the late 1940s.
The so-called ‘modern’ turbojet engine consisted of several steps of in-line compressor fans, or stages, each squeezing combustion air into an ever small space to achieve ever higher pressures. Downstream of the final compressor stage the now hot, high-pressure air flowed into a combustion chamber or, as they’re alternatively called, burner can or combuster.
An array of nozzles sprayed atomized fuel into the combuster where it is mixed with the compressed air and burns in a steady fire; the combustion causes the gases produced to expand rapidly and exit the burner can. Downstream of the combustion process one or two so-called ‘power turbines’ are spun at high speed by the flow of hot gases.
But the majority of the pressure exiting the combustion ring exits the engine in a hot, noisy blast of air – and it is this hot, noisy, expanded combustion air that provides the raw power that moves the jet forward. The action of that hot air flowing from its high-pressure source in search of low-pressure relief is the source of the opposing reaction – the engine, attached to the jet airplane, moving forward.
The engine’s Specific Fuel Consumption, or SFC, is a measure of how much fuel an engine consumes to produce a measurable amount of work. In jet engines, the SFC is stated in pounds of fuel per hour per pound of thrust.
In the beginning, turbojets operated with relatively low pressure ratios and arguably high consumption of fuel. For example, the General Electric CJ610 engines used to power the original Lear 23 and many of its successors consumed nearly one pound of fuel per hour to produce a single pound of thrust.
Of course, the engine’s high-altitude thrust capabilities fell far below its sea-level output of about 2,900 pounds of thrust. So the sea level fuel consumption of about 2,700 pounds per hour dropped dramatically once the Learjet reached its cruising altitude. But even at those altitudes, that high SFC meant the Learjet needed hundreds of gallons to go a few hundred miles at its published cruise speed of about 480 knots.
In the 1980s, the high-bypass-ratio or turbofan began to sweep away the turbojet in civil and military aircraft. The turbofan was - simply put - a revolution born of simplicity. On the turbofan engine, a large fan up front ahead of the compressor inlet sucks in air, diverting a large share of that air through ductwork in the cowl that surrounds the engine. The air not diverted through the bypass section of the engine continues the same path as air on the turbojet – into the compressor section (the combuster), and out through the ‘hot section’ of the engine.
As the jet exhaust reaches the jet-pipe, it is mixed with that bypass air, which not only has cooled and muted parts of the engine, but on exit provides some nearly-free thrust to compliment that of the engine core. The ratio of air flowing through the bypass section to the air flowing through the engine core is known as the bypass ratio.
In general, turbofan engines also achieve higher pressure ratios before combustion. When coupled with the magic of all-digital electronic fuel control of a FADEC – Full Authority Digital Engine Control – the result is an engine that can weigh less, consume less fuel, and retain higher thrust through higher altitudes.
Williams International’s FJ44-2A, for example, used to re-engine the Learjet 25, produces 2,300 pounds of thrust, well below the low-end thrust rating of the GE CJ610 originally used on that airplane. Fuel consumption is where the newer engine truly breaks away from the older. The Williams FJ44-2 consumes fuel at about half the rate of the CJ610, per a SFC of just under 0.5 pounds per hour per pound of thrust, compared to 0.97 SFC for the GE.
And thanks to the FJ44-2’s superior fuel consumption and better high altitude power, the Williams engine can push along the Learjet 25 for more miles on 40 percent less fuel on board – which means a converted Learjet 25 can carry more in the cabin to travel farther than the jet as originally powered.
The Williams engine also delivers other benefits, such as far longer inspection cycle times and much reduced maintenance costs, as well as a noise signature measured at a fraction of the decibels produced by the turbojet.
The thrust of the matter
So you can see how and why, as engine technology advanced, planemakers adopted new designs to go with new engines, or simply adopted new engines to go into existing designs, in the case of upgrades.
The appeal of upgrading to modern turbofan engines can be measured in scores of dollars an hour in fuel-consumption numbers alone. Again, take our example, the stalwart GE CJ610 compared to the upstart Williams FJ44-2.
In talking to two operators of older Learjets – one flying the 25D, another flying the older 24 – their annual flying numbers could support modernizing their jets. Both typically fly 150 hours to 200 hours annually – and both would prefer to make their existing machines modern reflections of a new jet rather than invest in the higher acquisition cost of a comparable new jet.
A program like the $2.3 million cost to upgrade to Spirit Wing Aviation’s SpiritJet Learjet 25 conversion becomes attractive (www.spirit-wing.com). Fuel use, alone, shows off the dramatic difference in just that one area. At a long-range power setting, to make it simpler, the FJ44-2 equipped SpiritJet needs 128 gallons an hour compared to about 211 an hour for the 25 with its original engines. So at approximately $4 per gallon for fuel, the 83-gallon-per-hour difference equates to savings of $332 per hour of cruise flight – the difference is even more dramatic when you compare long trips.
The SpiritJet, for example, consumes 388 gallons less fuel on a 1,000-mile flight and about 200 gallons less on a 500-mile leg, compared to the same airframe still powered by the original CJ610 powerplants. That means a cost reduction of $1,550 for the 1,000-mile trip and about $800 on the 500-mile jaunt.
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 $332 per hour reduction in fuel costs equates to $66,400 per year; and at 250 hours, the savings come to $83,000. For a charter or corporate operator flying the industry-typical 350 hours per year, the difference comes to a massive $116,000.
Those, of course, are merely fuel-costs benefits. Factor reduced maintenance and faster climb times, and the ability to carry more payload on any given trip, and the savings increase. It’s a no-brainer pondering whether the upgrade make sense for such an operator?
Looking at the balance of payments
Let’s face it, though… dropping a couple of million dollars to update an already old jet may seem like overkill to some. In the case of most programs, however, the upgrade involves so much more than a mere engine swap.
For example, Spirit Wing Aviation upgrades systems across the aircraft, removes an aft-fuselage header tank, adds new pylons with appropriate changes in the mounting points, and upgrades panel equipment appropriate to the new engines. And a full panel revamp can be had with programs like the Sierra Stallion conversion of older Citations (www.sijet.com), or the 50-Dash 4 update to the Falcon 50 (www.50dash4.com).
According to conversations with brokers for this story, though, these are not upgrades suitable necessarily for investment purposes, or for a short-timer. In other words, upgrading for profit will work only if the investor can acquire the candidate jet at a huge premium below market. Additionally, as one broker noted, these types of upgrades aren’t smart if the operator plans on selling the upgraded jet within five to seven years.
Between tax depreciation and the cost-reduction benefits, another broker noted, three-to-five-year hold periods can work for the operator who already owns the jet to be refurbished.
Residual value and the elder jet
A year or two ago, with new jets often fetching more than their list price through brokers and position buyers, and with backlogs creating waits of several years for a new model, upgrades such as those offered by Sierra Industries, Spirit Wing and Premier Aircraft (50-Dash 4 re-engine program) made considerable economic sense.
Values for pre-owned aircraft held steady or increased incrementally because of the inordinately high demands for new business-turbine aircraft. So for the owner of one of those older Citations, a Sierra upgrade could be seen as more cost-effective than calling up Wichita and queuing up to wait on a new CJ1 or CJ2.
And when time came to sell, the residual value of the jet would combine with the value of the modern update work to produce a package with decent resale potential… Then 2008 happened.
In the course of the past year, everything about business aviation’s pre-owned and new markets got upended by an global economic meltdown that has observers and analysts making comparisons to the Great Depression that are downright frightening. Caught in this global economic cataclysm is business aviation – both new and pre-owned.
Planemakers across the spectrum are, as you’ve undoubtedly read, adjusting downward their production targets for 2009 and 2010. Order holders seeking to postpone orders (if they don’t outright cancel the order) are the catalyst, as those order holders seek to preserve cash or react to weak credit markets.
That problem has spilled over into the pre-owned market, where many companies keeping their commitments seek to sell down their existing holdings. The depth of problems for owners of older airplanes – those 10 years old and older – runs deepest of all segments.
Not only has the unsold inventory grown to numerical levels heretofore unseen, the percentage of the active fleet for sale has soared into the teens during the past eight months. The impact on values was predictable. Pre-owned jet prices are depressed, and getting more so as more jets come on the market.
And in the latest blow to pre-owned and new sales, alike, finance companies are getting more particular about the loans they’ll write.
First to lose out was the aircraft aged above 20 years; then the over-10 fleet got more difficult to finance. Down-payment requirements for older aircraft ballooned, as well. But financing for the jet over 20 years old has become ever more challenging as values of those jets continues to drop.
As the values decline, finance company executives worry that the older jet they just financed may decline in value below the principal loaned – bad news for everyone. And bad news for re-engining for re-sale.
Snagging an eligible airframe at today’s fire-sale values may make the package competitive, though. And for the owner of an eligible aircraft able to make a 20 percent to 30 percent upfront investment in the upgrade, finance money remains available.
With a small amount financed, the economic benefits of upgrading the engines on an old Learjet 25, Cessna Citation 500 or 501, and the original Falcon 50 can still make perfect financial sense.
“Regardless of whether they own or get it ‘right’ for a conversion, the owner needs to understand that this approach only really works to his advantage by deciding up front to keep the jet through the lifespan of a normal seven-year depreciation,” explained a broker with access to finance. “And it will make the most sense of all when resale time comes if the owner brings the panel into this century at the same time,” the broker added.
“Trying to sell old-style ‘steam-gauge’ panels in a world dominated by integrated cockpits is difficult enough now. You don’t want to be stuck with that at this point in the 21st Century – even with modern powerplants.”