Aircraft operators increasingly subscribe to fleet management programs (FMPs) to ensure predictable maintenance costs, improved reliability and higher residual value. But operators are often leaving opportunity on the table and not receiving the full benefits available to them to maximize their investment and operational efficiency.
Aircraft operators want engines with high dispatch reliability, low maintenance burden, and predictable costs. They want full coverage and no hassles. They want simplicity.
Historically, FMPs were financial instruments structured to amortize the cost of engine maintenance over time. Other than an actual engine shop visit, limited additional value-added services were offered or expected. Today, FMPs are far more sophisticated. Under a typical FMP structure, operators transfer not only maintenance cost risk to their provider, but also spare engine coverage, line maintenance, and even end-of-life guarantees. As the scope continues to increase, operator expectations increase further.
Today’s FMPs are not simple. Simplicity means the maintenance service provider will assume important elements of risk: shop visit interval (time on wing), incidental costs such as foreign object damage, engine reliability issues, line maintenance support—including near-wing repairs—miscellaneous shop visits, and of course, heavy shop visits.
In a simple FMP, the airline’s operational and financial objectives are aligned with those of the maintenance service provider. It is the most predictable, lowest-ownership cost maintenance program. CEOs and CFOs can focus on delivering value to their customers and shareholders, and maintenance providers can focus on the engines. We all like simplicity.
Many CEOs assume their airline has this simple FMP coverage. In practice, they do not. Simple FMPs are uncommon. The simple concept has been diluted by constraints and requirements that are easy to cost, but difficult to value.
In a simple FMP, the service provider assumes the maintenance risk. An OEM like Pratt & Whitney can do this because we understand the motor and how it will perform in the operator’s home environment, we manage a sizable network of repair facilities, and we optimize the work done for each engine.
When a service provider prices a simple FMP, there is a transparent conversation about maintenance cost and its dependency on operating environment, ambient temperature, thrust rating, and mission profile. Rate matrices are common tools used to capture and bound this uncertainty for the mutual benefit of the operator and the service provider.
However, a significant, but less appreciated driver of maintenance cost is contract flexibility. Health insurance provides a relevant analogy. Insurance underwriters have parameters by which to provide coverage—choice of doctor, second opinions and preferred service providers. FMPs are no different.
The need for flexibility dilutes the simple FMP. Many airlines want the lowest maintenance cost possible, but also wish to retain full flexibility. They want to control when the engine is removed, which shop receives the engine, what the engine work scope includes and even the material selection. They want short-term coverage, with long-term extensions, and they want to be able to change the number of engines covered at any given time.
As a provider, we support such requests and can structure an accommodating service contract. However, these complicated FMPs constrain a service provider’s flexibility through more complex administration, more inventories, and higher maintenance costs. Complicated FMPs also give more responsibility back to the operator to monitor the fleet and make maintenance decisions. Moreover, the operator is now forced to assess near- and long-term impacts of not only their decisions, but of their service provider’s as well. Under this construct, the service provider is no longer providing a simple cost-effective FMP, and the operator doesn’t have the simple coverage expected.
There is a solution: work toward true full-service FMPs. Simple FMPs. We, as an OEM, have more engines under management, more data on engine performance, and more collective experience on our engines than even our largest airline customers. This positions us to tailor a solution to maximize your dispatch reliability accounting for your unique operating parameters. It is our core business.
Remove the constraints, let your service provider focus on all aspects of engine maintenance, and operators will have more savings and mitigate more risk in a simple, all-encompassing full-service FMP rate. Under this concept we all win.
Matthew Bromberg is the president of Pratt & Whitney’s aftermarket business.