The airline industry is highly capital intensive and this intensity is spread across all aspects of this vast sector. This includes the financial demands in having access to a reliable fleet of aircraft; the necessity to have experienced personnel operating and managing that fleet; the requirement in having access to specialised infrastructure at locations that support the fleet – and also, the financial and technical ability in maintaining the fleet in order to satisfy the legal/regulatory, social and financial obligations in operating an airline.
While the above list of financial demands is not an exhaustive list, it is not hard to understand why the management of airlines are constantly looking for ways to reduce or minimise their expenditures across all facets of their organisations.
The cost of maintenance, repair and overhaul (MRO) of aircraft accounts for approximately 11% of an airline operating expense. A specific portion of this cost does include the fixed component of labour, however various advancements in technology has generated interest within the sector that provide possibilities of reducing these maintenance costs.
This article will first present a brief history on the technological aspects and methodologies of aircraft maintenance as well as looking at possible future technologies that the industry may use to reduce maintenance expenditure. By focusing on these trends, this article will also discuss the options and key performance indicators that an airline may explore when contemplating either older or newer aircraft for their fleet.
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Essentially, aircraft maintenance is the overhaul, repair, inspection or modification of an aircraft or aircraft component. As with all mechanical and systems based devices, an aircraft, and the components of the said aircraft, need to be maintained in order to safely and effectively carry out its duties. Due to the varied and extreme operating environments of an aircraft, and also to ensure the safety and integrity of an aircraft, the maintenance of any aircraft must adhere to global standards defined by the International Civil Aviation Organization (ICAO) and these standards are implemented and enforced by national and regional authorities around the world. This means that all maintenance tasks, work, inspections and even the personnel undertaking and inspecting the work all fall under specific and tightly regulated processes.
Aviation buffs may view the history of aviation as being full of stunning achievements and glorious photographic moments, the behind the scenes nature of aircraft maintenance though has been developing with changing and evolving methodologies that reflect technologies current at the time as well as priorities based on management and economic practices.
The first methodology for aircraft maintenance was based on the notion that each and every part of an aircraft required preventative maintenance. This time-consuming and laborious process consisted of disassembly, inspection, if necessary restoration and reassembly. Referred to as “Hard-time” maintenance, this methodology was focused on maintaining and overhauling all aspects of an aircraft over a given time or usage/cycle period.
As the industry evolved (and as the individual components of an aircraft became more advanced and reliable), it soon became apparent that the hard-time methodology was not ideal as specific components did not require maintenance at certain intervals. This resulted in to what is known as “On-condition” based maintenance. The principle behind this methodology is that the aircraft and respective components are allowed to operate without maintenance…subject to its condition. The condition of the aircraft and individual components were inspected and/or tested at pre-determined intervals in order to determine their suitability for continued operation. These inspections used specific criteria, eg, appearance, amount of wear, output parameters, performance indicators etc, and if the components matched the criteria then maintenance was not required. However, if an inspection or test identified a component that did not match the specified criteria, then maintenance was provided.
The third methodology developed after it was found the on-condition process was not optimal for certain technically advanced components. Labelled “Condition monitoring”, this process involves monitoring and analysing the parameters and condition(s) of individual components and to schedule maintenance based on the outcome of that monitoring and analysis. Condition monitoring is a form of predictive maintenance in that the analysis is used to determine when a fault or failure will occur. Modern aircraft use Aircraft Condition Monitoring Systems (ACMS) which allow organisations to monitor and control the status of the onboard systems and equipment, as well as variations to the flight conditions and to the operation of the equipment. These real-time systems are used to identify and predict when systems and/or components may fail and therefore maintenance is scheduled based on those predictions and analysis.
Regardless of the maintenance methodology used, all aspects of aircraft maintenance and overhaul require the airline, or contracted party, to have ready access to a large inventory of spare parts, components and mechanical equipment. For a Boeing 777, this could mean being able to access up to 3 million parts provided by more than 500 suppliers. An Airbus A380 though, has approximately 4 million parts from 1500 suppliers located around the world. The logistics, infrastructure and expense required to have ready access to such a large range of possible parts, and the specialised equipment required to assemble, install and test that inventory may prove to be prohibitive for many airlines or contracted maintenance organisations – particularly if the fleet consists of various types of different aircraft where the parts are not interchangeable.
The use of ACMS allows organisations to predict with reasonable accuracy when specific parts or components need to be serviced and/or replaced. This is economically beneficial as it allows organisations to prepare, and order the required parts beforehand without the expense and logistics of carrying extensive inventory libraries. It is estimated that predictive maintenance increases aircraft availability (utilisation) by up to 35% – and having a quick turnaround in the maintenance process allows the airline to have the aircraft back in the skies earning much needed revenue. Any delays in waiting for the delivery of parts or components, and not having the aircraft carrying passengers and/or freight, will be a costly exercise for any airline.
This technical advantage of using an ACMS and the resulting big data analysis provides the ability for the dynamic planning and scheduling of the required maintenance events. Airlines are now able to predict or plan a maintenance event and to schedule an aircraft to be at a specific location that has the functionality, capacity and logistical ability to conduct the required maintenance – that is, having the required parts/components, infrastructure and appropriately qualified maintenance personnel in place and ready for the planned maintenance event.
Specialised aircraft maintenance locations, either airline owned or contracted maintenance facilities, are still required to have a range of inventory in stock in order to cater for specific or unplanned maintenance events. This inventory can be costly in terms of storage space as well as expenses related to the administration and management of it. One possible solution to this is Additive manufacturing. Also known as 3D printing, additive manufacturing is a process that creates a physical object from a digital design.
Two international aviation manufacturing companies, GE and Pratt and Whitney, are currently exploring ways in using this technology in their manufacturing processes. Benefits of this technology are said to reduce waste, speed up production, and enable designs that might not be feasible with conventional production processes. While both GE and Pratt and Whitney are focussing on this technology for their manufacturing processes, it is possible to extend on this technology by maintenance locations having the facilities to “download” or obtain a digital design of a specific spare part or component from either the manufacturer or supplier, “print” that part or component at their location, and then install the part in the aircraft that requires it. In time, this whole process could possibly negate the need for either airlines or contracted maintenance organisations in carrying a large inventory of parts/components, and therefore reducing their physical requirements in operating a maintenance location. This advance in technology can also reduce lead times in obtaining the spare parts and also increase part availability.
Additionally, the use of additive manufacturing can reduce the actual number of separate parts. Putting this into context, by using this technology, GE Aviation has eliminated 845 parts for its Advanced Turboprop Engine (ATP). David Joyce, GE Aviation president explains:
“using additive manufacturing for the ATP engine “represents an elimination of thousands of machining features and inspections, and hundreds of quality plants and procurement contracts.” The ATP will have no structural castings, as well as a “significant” weight benefit”.
The cost savings and weight benefit in reducing the number of parts, combined with the shortened delivery timeframes as well as the lessened need in warehousing a large inventory all prove to be advantageous to airlines and/or contracted maintenance organisations. No longer are aircraft laboriously maintained by technicians inspecting every single component – by using advanced monitoring processes, airlines are now able to predict when a part or component needs replacement and therefore able to schedule a maintenance event based on that analysis. Additionally, the advent of additive manufacturing may possibly lead to reduced costs related to a smaller spare parts inventory as well as the minimisation of required parts and reduced weight for aircraft in general.
The cost of maintenance increases as any aircraft ages however the actual age of an aircraft is difficult to define. The initial thought is that an aircraft age is simply defined by the chronological (yearly) age of an aircraft – however, as per recommendations from the Air Traffic Safety Board (ATSB), simply using the chronological measure excludes many important factors. The ATSB specify:
“aircraft age is a combination of the chronological age, the number of flight cycles, and the number of flight hours. Determining an aircraft’s age is made even more complex by the fact that individual aircraft components will age at different rates”.
Other variables include airframe fatigue (which occurs though repetitive cycles such as landings and take-offs) as well as wear, deterioration and corrosion. The environment the aircraft is used, eg, cold or warm climates, also affects the aging of operating components of an aircraft. These combined variables all need to be managed and catered for in relation to aircraft maintenance.
With the above in mind, as an aircraft gets older, and is used more, the probability increases of an overnight inspection finding something broken, cracked or worn and requiring rectification.14 This leads to the obvious question – that is, in order to save maintenance expenditure, should an airline purchase or lease new aircraft, or alternatively, should they continue to operate their older fleet?
In his book Between ROIC and a hard place: The puzzle of airline economics, Dichter claims “the return on invested capital (ROIC) is increasingly becoming the benchmark metric for airline financial performance”. Therefore, the logical thought would be, because of the less need and less downtime for maintenance, then newer aircraft will result in a higher capacity to fly and earn more revenue which in turn will increase the return on the invested capital.
While this may be a reasonable logical deduction, there are other aspects such as key performance indicators that need to be considered. US based Delta Airlines, for example, is known to have one of the oldest fleets of any American airline (with an average age of 17.1 years). With one of the oldest fleets, Delta reported that only 0.2% of their December 2016 scheduled operations were cancelled (this equates to 135 cancellations from 71,612 scheduled flights). Hawaiian Airlines reported the least number of cancellations in the same period – and in contrast, major airlines with younger fleets, American Airlines and United Airlines (American Airlines has an average fleet age of 10.3 years and 14.1 years for United) both reported a much higher cancellation rate.
While the reasoning for the above flight cancellations may vary, Delta reports that only 6.14% of those 135 cancellations were caused by circumstances within the airline’s control – that is, either maintenance or crew problems. The other cancellations were related to circumstances beyond Delta’s control – namely, severe weather, security issues, ATC and traffic etc.
From an operational performance point of view, the above statistics may imply that the simple notion of operating an older fleet may not cause excessive downtime in terms of aircraft availability.
Newer or start-up airlines, may also find it more beneficial to purchase an older fleet and therefore save on fleet acquisition costs. The basis for this reasoning is that older aircraft don’t need to generate higher revenue for seeking a return on investment when compared to the higher costs of purchasing newer aircraft. Using the example of Delta Airlines, Delta operates the largest fleet of the McDonnell Douglas MD-90 (first commercial flight was in 1992) in the world. Delta use these planes for their short haul routes. The current estimated purchase cost of a 1999 version of this type of aircraft is US$4.56 million – compared to the US$42.31 million for an Airbus A320. Basically, Delta do not need to fly the MD-90 as many times to receive a return on investment (or achieve better financial results) compared to an airline who decides to purchase newer aircraft. In terms of aircraft utilisation (or block hours of flight time in a 24-hour period), an equal amount of utilisation of an older, or cheaper aircraft compared to a newer model would equate to higher profitability for the older aircraft. This would apply for many airlines who may focus on a quicker return on invested capital.
The subject of maintenance costs does arise because older aircraft have a higher probability in being subjected to more maintenance related downtime – therefore reducing the potential for a quicker return on investment. However, without the need for a high aircraft utilisation rate when seeking a ROIC, operators of older aircraft can potentially afford a higher degree of aircraft downtime related to maintenance. Essentially, an airline is able to fly an older aircraft for less time (lower aircraft utilisation), and still afford an increase in possible maintenance time without affecting the financial return on that aircraft. In turn, an operator flying a fleet of older aircraft can achieve better financial results by increasing the aircraft utilisation rate.
Customer satisfaction though is a difficult and subjective form of measurement. Passengers rate airlines by a wide number of variables – such factors may include, pricepoint, reliability/scheduling/punctuality, comfort, ease of access, inflight service etc. Additionally, each passenger has their own benchmark for each variable which may not be the same as other passengers. Hence, the difficult nature of measuring customer satisfaction. Many organisations conduct annual surveys on airline customer satisfaction and each survey may look at different aspects. One indicator though is on time performance and many surveys use that as a basis for determining overall customer satisfaction.
Delta Airlines (with one of the oldest fleets in America) scores the second highest level of 81.4% in online arrival times compared to other American based airlines. This placing is consistent with a 2016 survey conducted by Forbes Magazine on the best US airlines for overall customer satisfaction where Delta also scored 2nd (behind Alaskan Airlines) ahead of major airlines with newer fleets (such as American and United respectively scoring 3rd and 5th places). Interestingly, the results in this 2016 survey echo the 2015 survey – meaning Delta, with its older fleet has been consistent in achieving a higher degree of satisfaction when compared to major airlines with newer fleets.
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Concluding, aircraft maintenance is not a stagnant process as various methodologies have been used throughout the history of aviation – from simply manually investigating every component of an aircraft to now using advanced aircraft monitoring systems that assist in predicting when a maintenance event should be conducted. This, when combined with possible technologies of Additive Manufacturing, will greatly benefit airlines and contracted organisations in reducing their maintenance costs.
Furthermore, the question on whether to upgrade the fleet of an airline is a complex issue. This article has focussed on specific key performance indicators relating to operational performance, aircraft utilisation and customer satisfaction and highlighted how Delta Airlines, with its fleet of older aircraft, has outperformed other airlines with newer fleets. By drawing on potential downtime related to maintenance of older aircraft, this article has shown that it is feasible for an airline to utilise older aircraft and still possibly expect a quicker return on investment.
The maintenance costs for an airline are a known and expected cost. Additionally, the start-up costs for any airline are significant in terms of acquiring or improving their fleet. The use of modern technologies and maintenance methodologies combined with a resource-focussed analysis in the use of an older fleet may prove to be beneficial for an airline wanting a more stable return on their investment capital.