Flex: The evolution of TotalCare

Flex: The Evolution Of TotalCare

Mark Kerr, head of customer marketing – services at Rolls-Royce, talked to MRO Network at Engine Leasing, Trading & Finance about the next step in the OEM’s aftermarket offerings.

Traditionally, as an OEM, our service provision has focused on operators because engines in the sky are what drive the whole business, no matter which part of it you’re working in. Our aftermarket offerings, therefore, focused on helping airlines to generate the best value from them.

All of the services that sprang up in our portfolio  – gathering engine monitoring data, providing specialist line-maintenance support, troubleshooting advice, ensuring high quality build standards, extensive use of new parts – did so because they drive long and predictable time on wing.

It wasn’t until six or seven years ago, that we began to better consider the asset owners, whether they are aircraft lessors, engine lessors or financial institutions, in our aftermarket thinking and that brought about a change in the structure of TotalCare.

Initially, the programme offered only one option: amortising the refurbishment element of the service by dividing the cost of shop visits by engine flying hours across a set period. This enables airlines to pay a set regular fee that covers all maintenance events in that time period, rather than paying out a large sum for individual shop visits. This also means that there are typically flying hours occurring after the last maintenance event, but before the end of the contract, that lower the overall rate for everyone. It was popular because it gave a cheaper rate, but it didn’t really look after the engine as an asset. Today we call this offering TotalCare Term.

In answer to this problem, we came up with another structure where the refurbishment element of rate of payment is, in very simple terms, calculated by dividing the shop visit cost by the number of flying hours between shop visits.

While TotalCare Life, as the programme is known, is more expensive than our traditional approach it has become much more popular. Some still go for the cheaper rate and are prepared that when the contract terminates the engine is in whatever condition it is in.

With TotalCare Life, however, there is no end date to the contract, so it goes on as long as the customer wants. When an operator wants to move their aircraft-engine combination on, maintenance value remains in the contract and the next operator is able to pick up that value and carry it into their  contract if they want. This portable service provision is popular and asset owners are starting to get much more familiar with it.

Now we’re taking this owner-centred approach a step further with TotalCare Flex. This new programme, which is still in development, is about how to help engine owners release the value out of their asset just before it goes to the desert.

With Flex we’re attempting to develop a service offering for the final stage in an engine’s lifecycle. Our current proposal is that the owner tells us how long they want to run the engine and the value of the engine is discounted from service rate for that period – ensuring owners get the value of the engine and it is operational as long as they want it to be. At the end of the contract we own the asset. The concept is still a work in progress. We’re piloting it now and asking for feedback from owners and operators on whether it will work.

While our Flex concept is unproven, what it demonstrates is that we understand our customers constitute a much broader range of companies than those we traditionally considered. We know that the asset owners are customers and, in another way, so are appraisers and financial institutions.

We are also recognising that different customers’ requirements become prevalent at different stages of an engine’s lifecycle. At the beginning it’s generally the operator’s requirements that dominate, but at the end of an engine’s lifecycle we’ve seen that owners want to release the asset’s value, and that’s the perfect situation for deploying something like Flex.

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