jetblue-tailfins-blueberries.jpg JetBlue

MTU V2500 Overhaul Deal Helps JetBlue Hit Cost-Savings Goal

JetBlue signs a new contract with MTU that gets it close to its cost-cutting target.

A new contract with MTU Maintenance for IAE V2500 overhauls has helped JetBlue hit its long-term goal of cutting at least $250 million from its annual costs by 2020.

The 13-year agreement, announced July 23, covers JetBlue’s older, or “pre-Select,” V2500-A5s that power about half of its Airbus A320ceo-family fleet. The airline has 130 A320ceos and 63 A321ceos.

"Our target has always been to make sure that cost-per-maintenance event is in line with the market,” said JetBlue CEO Steve Priest. "I'm obviously not going to get into any specific details about the commercial arrangements, except that we have been very diligent about the process we've gone through. We've taken the required amount of time to make sure we've got the very best deal for JetBlue. And I'm very happy to be partnering with MTU again.” 

The airline and MRO provider have worked together for years, including a 10-year V2500 overhaul deal signed in 2005 and a separate component agreement inked in 2014.

With the new MTU deal in the fold, JetBlue is projecting that its 2020 run-rate savings from its Structural Cost Program (SCP) will be $257 million, up from $199 million projected at the beginning of the year. 

Launched in late 2016, the program’s goal was to cut $250 million-$300 million in annual expense within four years. JetBlue has said that about 40% of its $800 million annual technical operations expense is on engines, making it a logical place to look for cost savings. The carrier targeted maintenance-related cost-savings initiatives of $100 million-$125 million as part of the overall total. The MTU deal combined with other agreements gets it about 80% there. 

Among the other contributors: a revamped engine-services agreement with GE that targets CF34 engine life-limited parts (LLPs) costs, factoring in JetBlue's plans to retire its Embraer E190 fleet. It is replacing its 60 E190s with Airbus A220s, starting next year.  

The last major deal is an overhaul contract on the SelectOne engines that power the rest of its A320ceo family. Priest says that JetBlue is making “significant progress” on that agreement and expects to have it in place this year. 

It also has agreements in place with Pratt & Whitney to overhaul the PW1000G geared turbofans that power its A321neo and future A220 fleets. While these deals don’t count towards the SCP target—JetBlue just received its first A321neo last month—they help set up the carrier for long-term unit cost predictability.

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