- 25 Jun 2021
- Chris Kjelgaard
- Engines - Biz Av
After Rolls-Royce established its latest CorporateCare Enhanced program within the Business Aviation community, Tony Kioussis examines the value of Rolls-Royce’s expanded coverage…Back to Articles
During the 2018 National Business Aviation Association (NBAA) annual NBAA-BACE conference, Rolls-Royce introduced CorporateCare Enhanced, the company’s expansion of its highly-regarded, and widely-accepted, CorporateCare Long Term Service Agreement (LTSA) or Hourly Cost Maintenance Program (HCMP).
By expanding engine coverage to all maintenance and troubleshooting on the engine cowls, Thrust Reverser Units (TRUs), and engine build-up on the BR710, BR725 and the brand-new Pearl 15 engines, CorporateCare Enhanced® has enrolled over 1,400 engines as of this writing.
Now that the program has matured, this seemed like a good time to examine what additional value the coverage provides to new, as well as existing CorporateCare users who upgrade to CorporateCare Enhanced.
Table A notes the difference in coverage between what has historically been available through CorporateCare, versus what is now available through CorporateCare Enhanced.
By far, the biggest value offered by CorporateCare Enhanced is the pro-active nacelle and TRU inspections, designed to mitigate disruption and the high cost of nacelle and TRU repair due to wear and tear or corrosion.
By way of an example, suppose an aircraft unexpectedly requires repair to a Thrust Reverser Unit when the principal needs to use the asset. Table B details a typical cost range for corrosion repair for a single TRU, as well as the cost to provide alternative lift through four four-hour charter flights.
While CorporateCare Enhanced would cover all of the listed expenses, CorporateCare would only cover between 10% and 21% of those costs. Appraisal firms have long held the position that, at least through the first Scheduled Shop Visit, Long Term Service Agreements that fully cover the cost of Scheduled Maintenance increase an aircraft’s value by the amount of the Buy-In Fee for an uncovered aircraft that has accrued the same number of Flight Hours and Cycles.
Accordingly, while warranty provides potentially valuable Unscheduled Maintenance coverage during the aircraft’s early years of service, the asset’s value is concurrently being favorably impacted through CorporateCare Enhanced coverage.
Individual Covered Services
In valuing CorporateCare Enhanced, we also need to account for the individual covered services (detailed in Table A) to estimate the total additional value available through program coverage.
That figure might surprise a few people, as our analysis concluded the number equates to over $758,000 per year, excluding the unquantifiable (and possibly quite substantial) value for Engine and Nacelle Recommended Services Bulletin Support.
Keeping in mind the flight hour rate differential between CorporateCare and CorporateCare Enhanced is only about $100 per engine flight hour, the additional $80,000 in annual fees (assuming 400 annual flight hours) creates a value 9.5 times the additional cost for Enhanced coverage.
Furthermore, that value does not take into account two related, additional financial benefits:
If we include those two additional factors into our value equation, Chart A graphically demonstrates the total value offered by CorporateCare Enhanced. Even during the engine warranty period, the fees paid for coverage are less than the program’s total value.
By covering repair and replacement costs, and introducing key proactive nacelle-specific Service Bulletins and spares support during downtime, CorporateCare Enhanced has beyond doubt dramatically increased the value, and significantly improved the reliability, of enrolled aircraft.
Read more about Rolls-Royce CorporateCare Enhanced:
Read more about Engine Maintenance, including hourly maintenance programs, on AvBuyer's Engine Maintenance Hub.