Optimize the number of spare engines for your aircraft fleet – Not an easy answer

When it comes the point to dimension the number of spare engines required to serve a fleet it’s never an easy (and single) answer. 

For the big extent of World commercial airlines to maintain operability and aircraft dispatch reliability at high levels is a must. To comply with this widespread requirements operators must retain a minimum availability of spare engines to serve both scheduled and unscheduled removals without the need to ground aircrafts waiting for engines. However due to the elevated price of these assets, disregard of the type of fleet, it is desirable the number of spare engines shall be adjusted as closely as possible to avoid excessive capital expenditure and unwanted warehouse wastes. [1] If an airline has sufficient spares in stock, then the risk of not having an engine available when needed is effectively minimized. The cost of holding under-utilized engines, however, is correspondingly high. This means that airlines need to balance the cost of holding spares against the risk of not having an engine when needed. 

There are a number of individual subjects to analyze in order to get a holistic approach to answer the question: What would it be the perfect number of spare engines fitting in to my airline? Under my perspective, a summary of main areas are required to be addressed is here detailed:

1.      Know the typical costs associated to spare engines – Disregard if it is an engine owned or rented, costs associated to these assets are built by ownership costs (amortization if owned / daily fee if rented) + maintenance reserves (usually given in $/flight hour). Specific figures depend on engine model and utilization, where operator should seek for competitive offers in the market.

2.      Analyze your current and future fleet utilization – Even if it doesn’t seem to be a difficult tasks for some individuals, it becomes of paramount importance to accurately know current and future fleet utilization. Usually shop visits are scheduled at similar engine Time Since New for a given fleet, provided similar utilization and operational environment. This is particularly true for young fleets under total support coverage. Knowing fleet utilization, plus the expected time on wing, will allow us tentatively set in the calendar each engine expected removal (it will be finally adjusted depending upon engine health condition evolution). That means we will be able to plan beforehand when the spare engines needs peak season will arrive.

3.      Work towards streamlined engine removal plans and long term forecast – The goal for some operators is to build up what is called “Staggered Removal Plans”. That means try, as much as possible, to not match a significant number of engines at shop at a time. “Significant number” will always be dependent on the fleet size. As well feasibility of the operator to anticipate-removal/extend-life of part of the fleet depending on health status – this is a key tool only available for experienced operators!. For airlines with a route structure featuring a variety of different “average flight durations” and different engines ages, it becomes easier build up staggered removal plans allocating scheduled removals at different times. Quite the opposite for airlines with most homogenous routes and engines with similar ages. At the end of the day the right solution for fleet staggering will depend on airline maintenance economy problem solving when trading-off engine life extension/reduction vs. associated costs of spare/lease engines.

4.      Take in to consideration yours/World fleet reliability with your specific engine model – Engine fleet performance and in-service reliability is a key parameter to analyze when you’d like to dimension your spares pool. Engines also fall for shop visit under unscheduled circumstances. The ratio of engine MTBUR, fleet utilization and average time to repair will also enlighten number of spare engines will be required to support operations minimizing aircraft on ground periods. A sufficient control of these variables is a good kick-off point to dimension the pool of spare engines through more sophisticated calculation. At the next level, when having a remarkable volume of reliability data and the fleet is big enough, make use of simulation techniques and Montercarlo analysis with a sufficient number of iterations makes the assessment even more relevant. Summarizing, spare engines needs to cover scheduled removals can be assimilated more to a deterministic model problem solving. While spare engine needs to ensure operation against engine unscheduled removals can be assimilated more to a stochastic model problem solving.

5.      Accurately assess your associated costs to operations disruption and loss of profit due to ground your aircrafts – This is a difficult exercise every airline should complete, proved to be useful to successfully complete wide-scope of internal projects, not only to size the pool of spare engines. Airlines have to be aware of total operational disruption costs per seat per minute of delay. Plus loss of profit per revenue pax/kilometer for each flight not operated, considering known direct and indirect operating costs. This assessment will give us a rough idea how much will it cost us to not reliable maintain our daily operation, also due to lack of having spare engines on time.

6.      Calculate the perfect balance between owned assets, and short/mid/long term leased engines – This subject consists to determine the perfect balance between capital expenditure and operational expenses. Identify the number of engines will permanently be required during the time in service in our airline can orient towards determine what is needed to be owned/long term rented. On top of it, normally additional spares could be leased on short/mid term basis to cover peak seasons. Anyhow liquidity, cash flow constrains, additional coverage on MRO support agreements, or fleet phase in/phase out evolution amongst others will also determine the effectiveness of purchase additional engines as spare vs. lease. As a side remark is worth to mention [2] the incredible cost of acquiring engines has left airline companies almost dependent on leasing, financing or borrowing to acquire those engines.

7.      Account for repair TATs, logistic TATs, and realistic times it will take you arrange all required paperwork to lease an engine (never underestimate) – Each operator must have under close control the repair + logistic TATs, plus the time it particularly takes to them the engine removal and installation (full QEC vs bare engine shall also be considered). This average periods of engines unavailability will highly affect the number of spares required. Additionally, something very important is the time it takes to complete the attached parperwork to any single leasing contract: The review and final agreement may delay for days between airline and lessor, unless some anticipated work is already done beforehand the AOG occurs. You should never underestimate this process, unless you can accept an aircraft grounded for some time waiting to receive an engine.

8.      Set a confidence level for fleet availability – Additionally each operator has to determine their own confidence level to have a spare engine always holding for the removal to come. It should be tailored for each airline availability profile needs.

9.      And finally compile everything in to your own business case aimed to answer the global question

If you would like me analyze in detail your particular case I will be more than happy to be of help. In this case do not hesitate post your comment or drop me a msg.

I?aki Azcoitia

 [1] . Aircraft Commerce – Issue No. 90, October/November 2013

[2]. Serap Zuvin and Baran Sozer Attorneys, Serap Zuvin Law Offices