Engine Overhauls: The Mistakes to Avoid

In the past two years, the average annual utilization of most business aircraft has shot up by 30-40% due to aircraft owners strongly preferring to fly privately from smaller airports rather than use airline services and large commercial airports.

This notable statistic, cited by Tom Mitchell, Executive Vice President of private aviation consulting firm Essex Aviation, has had a multitude of effects on the Business Aviation Maintenance, Repair and Overhaul (MRO) market. The effects of the strong growth in business aircraft usage have been, and remain, particularly marked for engine MRO.

According to Mitchell, they are greatly affecting scheduling of engine overhauls, overhaul turnarounds, and the availability of rental or ‘loaner’ engines that manufacturers or MRO facilities may make available to customers to help them keep their aircraft flying in the short term while their own business aircraft engines are being overhauled.

Critically, the growth in business aircraft utilization has also combined with global supply-chain issues to create moderate to severe shortages in the supply of new spare parts — particularly life-limited components — to replace run-out or damaged elements in engines. These parts shortages are preventing many engine overhauls from being completed in anything like a timely fashion, according to Mitchell.

At the same time, the increase in utilization is making the maintenance facilities which specialize in business aircraft MRO busier than almost ever before. Their backlogs for inducting engines for scheduled inspections or full overhauls are stretching out for months in many cases, according to Sean Lynch, Program Coordinator for Engine Assurance Program, which offers business aircraft owners hourly maintenance plans for their engines.

This industry background of parts shortages, limited (or non-existent) availability of loaner engines, and MRO facility workload is being compounded for aircraft owners by yet another factor, Lynch says — namely very high annual growth in the cost of new spare parts.

Lynch shares the example of one OEM which raised the prices of its engine program several times in 2022, so that by the end of the year there was an average 22% higher cost than December 31st of the previous year. And Lynch believes that OEM, and possibly others, will increase the prices of its offerings by another 8-to-10% in 2023.

Price increases in the past year for some complex engine parts have been even more extreme, according to Lynch, who has seen the prices of some fuel control units double over the course of a five-year period.

All of this is creating an operating environment for business aircraft owners in which it very easy for them to inadvertently make mistakes when planning overhauls or inspections of their engines. And those mistakes can end up costing owners a great deal of time and money.

Nevertheless, armed with a good working knowledge of current industry conditions, it’s possible for owners to avoid making the more common mistakes, helping prevent them from experiencing various operational and financial headaches.

Enrol With an Hourly Engine Maintenance Program

There is no question that hourly engine maintenance programs are expensive. Mitchell estimates that for most Light and Mid-Size business jet turbine engine types, program hourly costs per pair are usually in the $800-900 range. For Large Jets, costs can run to $1,200 per pair, per hour.

Enrolment in an hourly engine maintenance program is “a fairly significant line item for the owner, representing a large component of [total] operating costs,” Mitchell says. For this reason — and for some aircraft and engine types more than others — some aircraft owners prefer not to have their engines enrolled in hourly programs, often noting that they have the cash available to cover both scheduled and unscheduled engine maintenance events.

But for many owners, enrolment in such programs makes a great deal of sense. “As a primary positive point, an engine program provides a degree of insurance in the event unscheduled repairs are needed, and also acts as a fund or reserve that will inevitably be used to provide hot section inspections, mid-life inspections and overhauls,” says Mitchell.

“Considering the long-term relationship and enrolment involved, which includes considerable funding, ample due diligence should be applied to ensure that, when the time comes, funding for all potential repair events and remedying other performance issues will be available from the engine program provider you choose,” he adds.

Other important considerations suggest that, assuming the aircraft owner has researched the market thoroughly and has decided a particular hourly engine maintenance program is suitable, enrolment is an advisable step. This includes the fact that “for most of the popular aircraft types, it’s a given that the computed value of the aircraft includes current enrolment in an engine maintenance program,” says Mitchell.

“In fact, many market value assumptions would deduct from the presumed market value of the aircraft if its engines were not enrolled.”

Aircraft owners who decide not to Enrol their engines in any hourly engine maintenance program potentially face a variety of financial and operating exposures most would regard as being adverse. 

“Engine maintenance programs will normally fund both scheduled and unscheduled maintenance activities, with the exception of an insured event, as they occur,” says

Mitchell. However, those who are not enrolled in any hourly maintenance program are very likely to find themselves “at the back of the line” in terms of their chances of obtaining any parts which are in limited supply.

In fact, owners who are not enrolled in hourly programs face “higher margins on everything” billed by engine MRO facilities, according to Lynch. “Some of the best margins engine shops make are on non-program customers, because they don’t know what to look for and they aren’t managing large fleets of engines.

Non engine program customers are known as ‘retail’ customers, implying that they pay full retail prices for everything. “The best discounts [from MRO shops] always go to volume customers, and they are the maintenance programs,” says Lynch.

Non-program customers face a variety of stiff overhaul and repair costs that many, if not most, hourly programs cover within their core coverage areas. For instance, engine shops can charge anywhere from $18,000 to $62,000 to remove a pair of engines from an aircraft for overhaul or inspection and then replace them when the work is complete, according to Lynch.

If the customer can find rental engines to cover the period when his or her original engines are being worked on, then the removal and replacement cost is doubled, to cover the installation and subsequent removal of the loaner engines when the original engines are ready to be reinstalled.

And if after removal the engines are sent to the OEM or one of its licensed facilities for overhaul or inspection, shipment of the removed engines to and from the actual repair facility can cost non-program customers anywhere from $1,000 to $15,000 each way. Post-repair testing of the engines in a test cell will cost non-program customers the same again, says Lynch.

Scheduling the engine removal and replacement work at a location other than the MRO shop itself is likely to prove another headache for non-program customers, Lynch warns.

While it used to take only a few days for a team from the MRO facility to arrive at the location where the aircraft’s engines were to be removed, it can now take up to three weeks, because of the large volume of work every BizAv MRO shop is handling.

If the MRO shop selected for the overhauls or inspections can’t handle removal and replacement of the engines itself, it will have to sub-contract another company which does have the capability to perform the work. That may introduce additional cost and will almost certainly add several weeks to the total turn-round time required for the engine overhauls or inspections to take place, says Lynch.

Accessing Loaner Engines as Turn-times Grow

The decision of whether to enrol in an hourly engine maintenance program also bears upon another mistake made by some owners in today’s heated Business Aviation market. These owners may assume they will automatically be offered, or easily locate loaner engines to power their aircraft while its original engines undergo an inspection or overhaul, but that is absolutely not the case today.

Aircraft owners are “most unlikely to get rental engines if they are not on an hourly engine program,” Lynch warns. Even then, in current market conditions, the availability of rental engines from the OEM or third-party program provider is by no means certain.

Owners whose engines are not on hourly maintenance programs must try to obtain rental engines from anywhere they can, Mitchell adds, meaning that in some cases they may have to ‘cannibalize’ engines or deal with “entities that you wouldn’t want to know”.

The ability for owners to obtain loaner engines is all the more acute given that many make another common mistake in assuming MRO market conditions remain the same today as they were pre-Covid, three years ago. Aircraft utilization has increased so much that all BizAv MRO facilities are seeing a substantially greater throughput of maintenance work on engines and aircraft, and are having to schedule inductions longer and longer in advance.

Maintenance facilities have so much work now that they are limited by the availability of mechanics. At the same time, according to Lynch, supply-chain challenges have slowed the delivery of many parts by OEMs so much that some parts “for specific engine models are taking three to four times longer” to reach the MRO facilities where those parts will be used as replacements in engines being overhauled.

These delays have increased engine-overhaul turn times from the three to four weeks that overhauls typically took a year ago to anywhere from eight to 20 weeks, according to Lynch. “So, it is absolutely critical to have the rental engines blocked out” as guaranteed to be available from the maintenance-program provider, he says.

However, Mitchell says that even owners whose engines are covered by hourly programs should be cautious and find out in advance exactly what support their maintenance program really offers in terms of rental-engine support.

“Be aware of proposed guaranteed support for programs regarding rental engines,” he says. “With demand fluctuating due to increased utilization of private aircraft, supporting loaner engine pools can be challenging for program providers. Accordingly, it is wise to understand commitments that program contracts offer.”

Other Mistakes to Avoid

Check the Balance: Mitchell points out that, when acquiring an aircraft that’s already enrolled with an engine maintenance program, the buyer should understand that the payments the previous owner has already made into the program may represent a sizable fund of accumulated engine- maintenance reserves.

These could cover the cost of a pending hot section inspection, mid-life inspection or even an overhaul.

As a result, he says, even if the new owner intends in the longer term not to continue having the aircraft’s engines covered by any maintenance program, they should find out the size of the maintenance reserve accumulated in the existing program. If it is sizable enough, the owner should delay leaving the program until all pre-funded major inspection events or overhauls have been accomplished.

Be Thorough: Another important and potentially expensive mistake some owners make when performing a pre-purchase inspection on an aircraft they’re about to buy is not to check carefully that the engines have no existing internal damage or condition issues, which can be determined quickly by performing a borescope inspection in each engine.

If the borescope inspection finds that issues do exist, the fact the prospective new owner has identified them before taking ownership of the aircraft may allow them to argue that any repair claims should fall under the current owner’s insurance and require that the repair and cost should be addressed and covered by the current insurance underwriter.

However, if the prospective new owner does not perform a borescope inspection during the pre-purchase inspection, any engine issue experienced later that could be traced to the period of prior ownership could create a challenging situation for the new owner, and the insurance carrier may well be able to successfully argue that it should not cover the prior situation.

Check all Replacement Parts: A potential mistake that owners of new aircraft covered under an engine program may make is not to check the condition and operating history of replacement parts provided for the engine by the program, warns Mitchell. Owners should always review the total operating time and vintage of any replacement part provided.

Hourly engine maintenance program contracts do not always stipulate that a part of equal usage or vintage, or a preferred newer part with equal or higher mod status, will be provided. Owners should demand, if possible, that the program provides a replacement part in new, or at least equivalent, condition.

When You’re the Airplane’s Final Owner...: Lastly, those who expect to be the final owner of an older aircraft may find that the resale value of the aircraft declines to the point where it is worth less than the cost of continuing to pay into the engine maintenance program.

In such cases, if a major engine problem occurs, the best option for the owner might be to look for serviceable replacement engines that have enough LLP green time to last the aircraft for the rest of its limited remaining operating life.

More information from:
Engine Assurance Program: www.eap.aero
Essex Aviation: https://essexaviation.com

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