By J.R. Wilson
The commercial airline engine maintenance, repair, and overhaul (MRO) market has been subject to several different tidal waves of change in recent years that have initiated a major restructuring in the who and how of MRO provision.
A turbulent global economy has pushed many airlines to — or over — the brink of bankruptcy, forcing cutbacks in service and maintenance, grounding hundreds of aircraft, requiring operators to look for more ways to reduce costs, and engine manufacturers to find new ways to increase revenues as new engine orders lag. It also has led to the introduction of new technologies — such as predictive engine condition monitoring — and steps toward systems that will be able to make minor repairs in-flight via telemetry.
Industry analyst Kevin Michaels of Frost & Sullivan predicts engine MRO spending will not return to pre-recession levels until next year — assuming a late 2003 recovery in the airline industry — and even then will fall nearly $2 billion below market projections made as recently as 2000. But with engine maintenance accounting for more than 30 percent of all airline MRO spending, increasing pressures to find new ways to cut costs are expected to push more and more airlines to seek outside providers rather than trying to maintain an internal MRO capability.
That interest in outsourcing has been further spurred by new generations of engines that would require new investments in training and equipment. At the same time, those new engines need far less maintenance than their predecessors, creating an even more difficult cost-benefit equation for the airlines but also putting a double hit on independent shops — higher investment coupled with less demand.
However, with an estimated $12 billion a year in engine MRO expenditures by the global airline industry — which still handles some 45 percent in-house — there are significant incentives for all MRO providers. For the moment, the trend has been for airlines to increase outsourcing, original engine manufacturers (OEMs) to increase their share of MRO work, and independents to increasingly disappear.
"Worldwide, there is an overcapacity," says Jim Keenan, senior vice president of commercial engines for Pratt & Whitney in East Hartford, Conn. "Not only is demand down because flying has been reduced, but pressures on the airlines have resulted in a lot of maintenance being deferred. A lot of airplanes are being parked in the desert, which creates opportunities to use their engines as spares that can be injected into the system and delay the need to overhaul others.
"Today's generation engine also enters the shop nominally about one-third as often as a typical engine 25 years ago," Keenan says. "So an engine delivered to a customer today will see many fewer shop visits and lower maintenance requirements than an engine delivered in the 1970s."
The development of in-flight engine condition monitoring, by original engine manufacturers and third parties, also has reduced downtime and helped make maintenance more specific to aircraft than it is to entire fleets.
Despite all that, Keenan says there will be a significant "ramping up" of engine MRO work once the airline business turns around. The question is, who will still be in business, with the right level of technology and trained mechanics, to handle that business?
"It remains to be seen," Keenan says. "Our customers in many cases still find it advantageous to maintain their own infrastructure, although the outsourcing trend is accelerating to some degree. Customers also have demonstrated an interest in seeing continued competition. At the same time, the OEMs have advantages the others may not." Steve Pearl, vice president and general manager of GKN Aerospace Chemtronics Inc. in San Diego says while the airlines may like having independents available to provide competition — especially as it affects pricing — the OEMs may prefer to be the sole source for engine MRO contracts.
"The OEMs are trying to gain a larger share of the market by buying or co-venturing with independents or pushing them out of business, seeing repair as a money stream at a time when new engine sales are down," he says. "So it's getting harder and harder to gain OEM approval to repair their newest engine components. They are increasing the cost of gaining approval, sometimes flat out refusing to grant approval because it is their strategy to capture that part of the market. That's something new, which wehaven't encountered in the past. But that's their call and there's not a thing you can do about it, even if the airline customers don't like it.
"An airline won't use an independent that doesn't have both OEM and FAA approval," Pearl says. "You can go around the OEM and develop your own repair capability and get FAA approval for that, but for something like a class-A critical part, such as a fan blade, you aren't likely to get FAA approval. So OEM approval on the type of component we repair is critical. In fact, Oem repair or repair by an OEm-approved shop is the most accepted across the board for all engine components, regardless of critical rating."
While GE, Rolls-Royce and Pratt & Whitney all deny they are trying to drive independents out of business, Keenan's point on the difficulty in getting their stamp of approval is evident in at least one class of engine — the new large-diameter, wide-cored fans, such as the PW4000, GE90 and R-R Trent 800 developed for the Boeing 777. Of those three, which Boeing says have roughly equal shares of the 777 market, only Rolls-Royce has approved an independent shop for MRO work — GKN Aerospace Chem-tronics.
"Almost all of the airline users of the R-R Trent 800 have contracted with Rolls for maintenance by the hour. Rolls has chosen us as an approved supplier, which is why we have the only approval on that engine," Pearl says. "In the past, the OEMs have allowed two or three repair sources to gain approvals — and pay for the licensing. Now, the OEMs are selling total repair, power-by-the hour packages; that's the strategy on all new engines coming out from all the OEMs."
He says Chem-tronics has retained a better position than many of its competitors in this declining market by focusing on the smaller class of new technology engines, such as the CFM56-3 and -7 on the 737s, CFM-56-5As on the Airbus 320 and CFM56-5B on the A319, and CFM56-5C on the A340.
"My prediction is within five years almost all of the airlines in the U.S. will be offloading engine maintenance to OEMs or to independent engine overhaul shops because of the high cost of labor in the U.S. and the union constraints the airlines have," They will find it cheaper to offload all that work and, like Southwest, concentrate on flying airplanes," Pearl says.
GE, Rolls-Royce, and Pratt & Whitney have taken slightly different approaches to the changing MRO market, although all three are seeking a greater share of the pie. Each also has implemented its own form of engine monitoring.
Electronic monitoring of large jet engines is becoming the norm for commercial aviation today.
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GE has entered into a number of licensing agreements with major independents, Rolls-Royce has concentrated on joint ventures with its major airline customers and P&W has created five engine overhaul and repair centers among its more than two dozen MRO facilities around the world.
Next-level technology
On the engine monitoring side, GE is using already available data sources to measure real-time engine performance against company standards. But the company also is looking to the next level of technology.
"You have to start with data acquisition. Using ARINC, we have the ability to collect data and perform some remote diagnostics and use it in a predictive manner to take pro-active action. That's the current state of the art,"says Russ Shelton, general manager for MRO marketing for GE Aircraft Engines in Evendale, Ohio. "What we're driving toward is two-way air-ground communication, where corrective action can be taken through remote control, but we are a long way from doing that. The analogy I like to use is from Formula One (auto racing), where last year the pit crew was able to correct a valve problem in a car, using telemetry, without the driver having to come off the course."
Overall, Shelton says he believes airlines are most likely to find a power-by-the-hour maintenance agreement with an OEM to be in their best interests.
Experts at General Electric are using available data sources to measure real-time engine performance against company standards. Pictured above, a technician overhauls a GE 90 engine.
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Rolls-Royce has created a global network of 16 engine repair and overhaul facilities, but has concentrated much of their effort on joint ventures centered on Trent engines for the Airbus A330/340/380 and the Boeing 777, says Jim Sheard, Rolls-Royce's director of marketing and business development in Derby, England.
Rolls-Royce also has had considerable success with the power-by-hour approach, which enables airlines to save on spare engine support and provides services such as repair of accessory units and remote site rescue, which can be of considerable importance to those flying into remote locations.
"An especially important aspect is what we call Aeromanager, a web system that allows a customer to dial in and look at the status of his engine as it passes through the overhaul shop and cycle. We can exchange information on work scope for a particular engine," Sheard adds. "We're looking to broaden the number of functionalities in Aeromanager because the customer likes that kind of on-line system. We currently have 150 customers for that."
For engine health monitoring, Rolls-Royce has formed a 50/50 joint venture with SAIC in San Diego. Data Systems & Solutions (DS&S) in Reston, Va., was created in February 1999, combining two decades of Rolls-Royce engine health experience with SAIC's expertise in IT systems. SAIC also brought along the U.S. Air Force as a customer — about half the joint venture's predictive services business is commercial, with half the remaining defense work coming from the Air Force.
"One of our customers went from a 94 percent dispatch reliability to about 98 percent, not by increasing maintenance but by reconfiguring it to attack those problems that were causing reliability issues," says Louise Pattison, marketing manager for DS&S predictive services. "We call all this Core Control."
The company's engine health monitoring services cover all Rolls-Royce commercial engines produced since the 1970s, as well as V2500 power plants built by International Aeroengines (a consortium led by Rolls-Royce and Pratt & Whitney).
Electronic monitoring
"We are in the process of developing technology that will enable us to monitor any engine, regardless of manufacturer," Pattison says. "We are perfecting a method to take actual data from service to create a model for normal operation, then use our experience to do alerting on what needs to be done, which makes it unnecessary to get all of the engine's performance data from the manufacturer. We get it instead from the actual engine performance readings collected by the airliners in operation.
"We recently had a customer get a new engine type on which a pilot reported a problem and they feared the engine might need replacing. But we had seen the problem before elsewhere and showed them where they could make a simple replacement in a bleed valve and turn the engine around in about an hour."
While the company is headquartered in the U.S., the actual data crunching is based in Derby, England. For most operators of newer aircraft and engines, data are transmitted using ACARS directly to Derby and processed in real time, with any needed alerts going out right away automatically. Human technicians for quality control review all alerts and make certain the airline or the OEM has followed up on them.
"GE offers some services similar to our engine health monitoring and probably services more engines because of the size of the fleets, including CFM, on power-by-hour deals. Companies like SmartSignal are a bit more niche, focusing on health monitoring," Pattison says of her competitors. "The main difference between us is we don't just do health monitoring, but offer a wider range of services to help airlines improve the reliability of their fleet and maintenance services."
Patterson's team designed for Rolls-Royce a sophisticated long-term forecasting model they use to optimize their spares business. This looks at engine shop visits over a period of about 20 years, what kinds of reworks have been needed, etc., so they can best estimate the spares they need to manufacture. DS&S also provides Rolls Royce with in-service data collection and management.
Many of Pratt & Whitney's repair facilities also are joint ventures, which share a common goal with the OEM's wholly owned shops — sign airline customers to flight management program (FMP) contracts, their version of power-by-hour, along with similarly structured material management programs, under which they provide key hardware and other materials to the customer's own shop on an hourly schedule.
"If a customer has their own overhaul shop, we contract to provide key hardware or other material on an on-the-hour schedule. We've seen a dramatic growth in that business," he says.
As with the other OEMs, Pratt & Whitney also is looking to in-flight monitoring and developing future technologies to support in-flight repair.
"We do engine condition monitoring with our own systems, which go back several generations, and we work with our customers to optimize and improve those," Keenan says. "And we have accelerated the rate at which we modernize that capability. Our newest systems have a high degree of technology and troubleshooting capabilities built in. Our desire to improve and modernize those systems has only accelerated with our entry into and growth in fleet management because that is essential to our ability to manage engines on a per hour basis."
Cutting-edge fault isolation tools, root cause management, and corrective isolation have allowed them to identify problems on-wing, often before the flight crew knows about it, he explains, which enables them to deal with it before it forces an unscheduled shop visit. The next step, now being studied, involves telemetry-based solutions.
"Our deployed system looks at historical shift patterns within the engine. Understanding from our data base when a certain shift happens in relationship to others may signify a problem, so we have automated the process of identifying a trend shift or fingerprint and speeding up the process of finding the root cause and driving it to a maintenance solution," Keenan says. "That is a ground-based system, although we are able to link to onboard systems as airplanes fly to receive data, compute trends and go through fault isolation to identify the root solution and be ready for a plan of action when the airplane reaches its destination. We also have the capability to receive specific messages from the engines on the airplanes to trigger alerts on anomalies we want to be aware of, so it is more than passive monitoring."
Pratt & Whitney has also created an Enterprise Resource Planning (ERP) capability, based on a software platform from Germany's SAP AG, that Keenan says has increased the OEM's ability to maintain engines at a lower cost, which he considers one of the most important overall factors in today's environment.
There are exceptions, however, with one of the most aggressive being Delta Air Lines, which not only is bringing its own engine MRO work in-house, but also actively seeking to take on that of other airlines. Delta also has entered into a major working relationship with SmartSignal.
In January, Delta concluded a two-year beta test of SmartSignal's equipment condition monitoring (eCM) and signed a multi-year, multi-million dollar fleet-wide agreement to implement it. For Delta, in-flight engine monitoring on its own aircraft is but one element in a wide plan to become a major player in the engine MRO arena.
"Engine maintenance is a core competence and we're going to grow that, not just to maintain our own aircraft and engines, but other carriers', as well. We're planning to do close to $300 million in non-Delta maintenance this year — about half of that on engines," says Walter Taylor, managing director for process and technology engineering at Delta in Atlanta. "We don't have a separate company and no plans to create a maintenance subsidiary for that purpose; we just do it in-house as part of Delta Air Lines maintenance."
He says the airline is aggressively developing an IT strategy to support the MRO business by bolstering six maintenance capabilities:
- the core is supply chain maintenance, with SAP providing overall financials, inventory and warehouse management, and shop scheduling solutions;
- technical documentation, making sure the mechanics do the right work and consolidating all the OEM materials and making certain the right materials are available at the right time;
- configuration management, currently using a legacy system, but evaluating an SAP solution and Maintenex from Mxi Technologies in Ottawa;
- maintenance planning;
- maintenance execution; and
- SmartSignal condition monitoring of the aircraft real-time in flight; currently used only for engines, but plans to expand that to APUs, flight control systems, air conditioning, pneumatics, etc., in the future.
"All of the first five are about working on the airplane in an optimum manner," Taylor says, "the sixth is about monitoring before things break so we can do pro-active maintenance."
SmartSignal is important to that effort because it does not reside on the aircraft, but rather uses data that can be more easily collected in-flight from more data pickups built into newer airplanes and engines.
"Delta is looking to be more than a traditional airline. Mainline is good for us and allows us to do other things with our connection carriers," Taylor says, adding the MRO business was simply too good an opportunity for Delta to pass up. "We were good at it and could make money at it. About five years ago we were asked to do some maintenance by other airlines and decided it was a huge growth area. Some carriers are looking to get out of the maintenance business, even for their own aircraft, but we are good at it and want to grow that element."
"We're not acquiring, so far as maintenance shops are concerned — it's all internal growth. And we're starting to get into some engines we don't operate at Delta, such as the CF-34s on RJs, although we typically stick to maintenance we do on our own mainline — P&W 2000, 4000, 219s, CFM-56, R-R Trent and GE. Most of ours are GE and Pratt."
Taylor says the OEMs are partners and competitors in engine maintenance, but they also must compete with successful surviving independents and other airline-based operations, such as Lufthansa Technik.
