Are your engines on an engine program? Should they be?
Mente Group’s VP sales Delray Dobbins spent 23 years in aviation with Rolls-Royce. He knows exactly what to look for in an Engine Maintenance Program.
When looking to acquire a plane, it is common for buyers to look primarily at aircraft with an engine program. Once that box is checked, buyers tend to move on down the list of other qualifications.
In determining if an engine maintenance program is right for them, it is helpful for a buyer to consider which is more likely to occur first during their ownership: whether they plan to sell the aircraft in a few years or if the engines will be due for their normal shop visit. Depending upon the scenario, an engine program may or may not be the right choice. A lot of times, the deduct at market for not having an engine program can sometimes be worse than the engine shop visit itself.
The lack of an engine program can affect the market value on some mid-time aircraft by more than 50%. For example, a GV at 6,000 hours not enrolled on an engine program could see a $5.5-6.0M deduct at market from what would normally be a $9-12M aircraft. Mid-time Citation Excels and Hawker 800’s are other good examples of aircraft exposed to losing 50-70% of their value when not enrolled on an engine program.
In the mid to large cabin aircraft segment, engine programs are a cost-effective solution for probably 80% of owners. So, when is an engine program NOT a good solution? Low utilization operators often find that the minimums on the programs are not a good fit. However, not having an engine program should be weighed against any funds that the previous owner may have invested into the program.
Because engine programs can exceed half the value of the aircraft, it is worth asking a few more questions about the engine program and what is, and is not covered. Lease engines, shop visit labor, corrosion, and AOG support with troubleshooting are some of the first questions that should be asked.
Engines are engineered to stay on-wing longer than ever before. The G650 engine and the engines on the new G500 and G600 are designed to go 10,000 hours before their first shop visit. We will likely see the amounts invested into some engine programs over time approach $10M over the next 10 years. The increased interval of 10,000-hour shop visits (think 20-40 year intervals) on some of the new aircraft also increases the risk of corrosion over time. Engine programs vary on corrosion coverage, which is an important detail because many surprises at engine overhaul are often due to corrosion. While your engine program may cover 100% wear and tear, one turbine wheel rejected for corrosion can easily be $175K.
Every situation is different and many factors affect whether one should start or continue an engine program. “After a lot of analysis on different engine programs for owners, even I am sometimes surprised at the result,” says Delray.
Next topic? Does your engine program cover Life Limited Components (LLC’s) sometimes called Life Limited Parts (LLPs)? Should it? Some engine programs always cover LLCs, on other programs LLC coverage is optional. “And I’ll make an argument in one case, where it mostly doesn’t matter,” says Delray as he hints at more to come on engine programs.