Журнал - The Engine Yearbook 2005

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ENGINE YEARBOOK 2005

traders started to put engines into

maintenance, a practice unheard of over

the previous two years. Values started

to climb and by the end of the second

quarter of 2004 JT8D-15 values crept

back to levels just below $500,000 for

freshly overhauled engines.

When trying to understand values for

newer engine types, it is important to

realise that the value drivers in today’s

market are not dissimilar to those of

previous engine markets. Supply and

demand are obvious, but utility, reduced

interchangeability, noise and emissions

and aircraft volatility are probably more

important when considering value.

The utility of an engine is the key to

understanding its value. At some point

the OEMs decided to introduce design

changes to engines that limited their

application to particular aircraft types.

One example is GE’s CF6-80C2 engine.

Although the same core engine is used to

power Boeing, Douglas and Airbus aircraft

there are some distinctive external

differences, one of which is the data plate

and that prohibits interchangeability

between the aircraft types. The cost of

converting an engine from one standard to

another for use on different aircraft types

is prohibitive.

A good example of this is the CF6-

80C2D1F. After September 11 the MD-11,

fall quickly out of favour. This was caused

by many different factors, but the most

obvious were MD-11 operators cutting

capacity and the bankruptcy of Swissair.

The aircraft was valued too highly for

parting-out and there was no secondary

market for the CF6-80C2D1F engine, as it

is specific to the aircraft type. This caused

the value of the engines to drop

dramatically. Freshly overhauled engines

that traded in 2000 for over $6 million

were trading in the mid-$3 million range.

Another variable affecting value is

emissions and noise regulations, a truly

double-edged sword. The JT8D has

been most significantly affected in this

regard and more recently it appeared

that the -200 series is likely to be the

next to be affected by government

regulators when they initiated a

programme to further decrease

permissible emissions and noise levels.

This has resulted in the JT8D-200 series

engines falling by 50 to 75 per cent.

CFM saw the tightening of emissions

and noise regulations to be an

opportunity and developed its so-called

‘green engine’. This engine was built

with a dual annular combustor (DAC) to

decrease emissions far below of the

proposed lower limits. Unfortunately,

the industry did not embrace the

innovation and the values of such

engines reflect this lack of enthusiasm.

In recent CFM56-5 DAC engine

transactions, offers for these nearly-new

engines have demonstrated a 30 per cent

value decrease over the OEM catalogue

price; for an engine with just a few

thousand cycles of operation since new!

Aircraft value volatility is perhaps the

most tangible of all engine value

drivers. In simple terms, if aircraft are

out of favour then so are their engines.

In 2002, there were over 100 CFM56-3-

powered B737s in storage worldwide.

Aircraft and engine values fell to all-

time lows. It seemed that these aircraft

fell out of favour because of the sheer

size of the surplus introduced by

United Airlines and US Airways when

they sought bankruptcy protection.

This caused CFM56-3 engine values to

plummet; parting-out companies to go

into an acquisition frenzy; and asset

owners and operators to struggle to

minimise book losses.

In 2002 a mid-life CFM56-3 could be

purchased for less than $2 million

(closer to $1.6 million) and there was no

shortage of sellers. By mid-2003 B737

aircraft started to be redeployed and an

immediate need for engines emerged.

Then in 2004, when Federal Express

announced its intention to convert up

to 150 B737 classics to freighters, the

market immediately bounced back.

Engines that were previously selling for

$1.6 million are now selling for $2.2

million and the price is still climbing.

Whether values are driven by supply

and demand, utility, reduced

interchangeability, noise and emissions

or aircraft volatility, the basics of the

market remain the same. If all variables

remained the same, price would be

driven by competition within the

market. Events such as September 11

simply accelerate the inevitable; they

do not drive the market long-term.

Longer-term changes in engine values

will ultimately be affected by the

introduction of new technology that

changes the way the market operates.

The latest innovation by Boeing is

the 7E7 which is a stage-flexible

aircraft that will produce 20 per cent

less emissions at a variety of engine

thrust ratings. There is a choice of

engines - those manufactured by Rolls-

Royce and those made by GE but, for

the first time, they are made physically

interchangeable (in pairs, with the

assistance of some software). The 7E7

therefore removes two engine value

variables as compared with today’s

engines; but will new factors come into

the reckoning as this new technology

is introduced, or will we simply adjust

the goal posts again? ■

EYB2005_2 7/9/04 10:05 am Page 29

ENGINE YEARBOOK 2005

When should part-life

engines be built?

With engine maintenance

accounting for a significant

percentage of total

operating costs, engine cost

management is of

paramount importance to

engine operators and owners

alike. James Bennett, vice

president sales and

marketing for TES Aviation

Group describes how the

building of part-life engines

can assist in this regard.

efore examining when a part-

life build should be considered,

it is important to understand

the rationale that has driven

operators to consider building such

engines in the first place. What has

motivated operators to fit parts with

some of their life already used? The

answer lies in the very high costs of

new parts.

OEM engine business models are

structured in such a way that the sale

of spare parts is vital to their

ongoing profitability. About two-

thirds of their revenue streams come

from new engine sales where about a

third come from the sale of spare

parts in the aftermarket. While there

are variations, most new engines are

sold at cost price because the OEMs

know that they have as many as 30

years of aftermarket sales to follow!

OEMs dominate the aftermarket.

Despite the emergence of PMA parts

and the growth of the surplus

material market, new OEM parts

comprise more than 80 per cent of all

parts supplied. This would probably

be less difficult to live with if the

annual cost of parts price escalation

was not so high. Over the last 10

years the US has seen an annual

inflation rate of about three per cent

where the average list price increase

has been between in the region of

five to six per cent per annum.

With materials constituting 70 per

cent of the cost of a typical engine

overhaul, aircraft operators continue

to be faced with higher material costs

at each maintenance event. A

workscope decision to use parts

which have some of their life already

consumed is an attempt to curb these

escalating costs as this material is

typically available on a pro-rata

basis.

However, there are a significant

number of factors that need to be

considered in the build-life decision.

From a technical perspective one

needs to consider the engine’s status

relative to: applicable airworthiness

directives (ADs) and service bulletins

(SBs); and engine performance in

terms of parameters such as exhaust

gas temperature (EGT), fuel flow,

rotor speeds, vibration and oil

consumption. Moreover, the

operator’s own engine maintenance

programme (EMP) should precisely

outline the steps required to best

maintain the engine at a shop visit.

When planning such work, the

airline should aim to create an

optimum workscope without wasting

money.

Taking the situation of a hot-

section repair, it may be concluded to

be uneconomical to invest in all

applicable ADs & SBs as well as new

life-limited parts (LLPs) and new HPT

blades when it may be possible to fit

part-run material. Why? Because it

could be near-impossible to justify

the parts costs when the anticipated

on-wing life is insufficient to obtain

the required return on investment. If

an operator knows that another

maintenance event will probably be

required in the short- to medium-

term then it may decide to build the

engine to suit this life.

However, it would be wrong to

suggest that only technical

considerations are of significance

when it comes to build life.

Commercial and operational

considerations linked to engine

ownership can be heavily influential

EYB2005_2 7/9/04 10:06 am Page 30

ENGINE YEARBOOK 2005

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in the build-life decision. Airlines

will frequently treat owned and

leased assets very differently and this

can create completely diverse

maintenance scenarios. For example,

if an engine is operator-owned the

perspective tends to be rather longer-

term. More focus will be placed on

asset value retention, and high

reliability over a longer operating

period will be considered paramount.

Each shop visit is viewed as an

investment with an opportunity to

enhance engine performance,

ensuring it will meet longer-term

operational requirements.

This approach usually results in a

significant investment in new

material. To minimise the subsequent

costs of ownership the engine will

need to stay on-wing for the longest

possible time between maintenance

events.

When an operator is considering

the management of a leased engine

the results will typically be

somewhat different. Since operating

leases typically range in length from

three to five years, more expedient

measures are taken regarding

maintenance events, as the

perspective becomes more short-term.

Little, if any, regard is placed on

asset value, unless a lease extension

is a real possibility. The preferred

method of covering maintenance

liabilities under a lease agreement is

to contribute a prescribed amount

per flight hour and per flight cycle

towards the cost of the next shop

visit, thereby creating a maintenance

reserve fund. The lessee then draws

down monies from this fund at a

shop visit. Again, the goal of the

lessee is to keep the engine on-wing

as long as possible thereby

contributing to the fund until the

point where engine removal is

essential. Judging from this, it would

appear there is little difference

Over the last 10 years the US has

seen an annual inflation rate of

about three per cent where the

average list price increase has

been between in the region of

five to six per cent per annum.

EYB2005_2 9/9/04 11:28 am Page 31

Though this is a complex task, with the

right engine management team the

operator can ensure that the workscope

is carefully tailored to meet specified

redelivery conditions. These invariably

permit engines to return with very little

life remaining.

It will come as no surprise that

balancing technical, commercial and

operational considerations is a fine art

which is often outsourced to

professional engine maintenance

managers who focus solely on this

aspect of operation. They have the

experience and knowledge to advise on

all aspects of engine maintenance and,

with the right critical mass, can add

substantial value to an airline’s or

investor’s operation.

Technical and operational

considerations are all very well, but

as in many walks of life, cash is

king. The airline industry in the last

few years has experienced

difficulties in this regard and these

have been well documented. Budgets

have been slashed across the board

and engine maintenance with its

high contribution to total

maintenance cost, has required even

closer technical and financial

management. These budgetary

restraints can also result in limited

workscopes. Add this to poor reserve

management and unscheduled

maintenance events, and operators

can be faced with little choice other

than to seek as low a final invoice

amount as possible, whether the

asset is leased or owned.

Case study

A case in point is a CFM56-3

engine shop visit undertaken by an

operator where 30 months remained

to redelivery. Following a detailed

review of engine status versus return

conditions, it was determined that

the build life for the engine needed

to be relatively high — say 7,000

cycles build life to see the engine

into transition to the next lessee,

thereby avoiding any further shop

visits prior to re-delivery. However

the operator was faced with two

other issues which prevented this

optimum workscope.

The first were the aforementioned

cash constraints. No matter how

appealing a higher build life might

have been in view of avoiding

another scheduled shop visit, the

operator was still faced with

replacing 11 LLPs, mostly in the HP

compressor and HP turbine and

therefore it decided to build an

engine with 3,500 cycles remaining.

The operator’s philosophy was simply

to spend what the budget permitted

and to worry about the subsequent

maintenance event later on! However,

with assistance from a suitable

material provider the operator could

source all the LLPs required at

market value, reducing their material

costs significantly. Though a slightly

higher build life would have served

the operator better (as close to the

7,000-cycles-remaining target as

possible), the fact of the matter was

that there was no guarantee of

locating the appropriate LLPs.

The second hurdle facing the

operator — namely material

availability — needs to be reviewed in

a wider market context to understand

just how problematic ineffective

material management can be. LLPs are

ENGINE YEARBOOK 2005

between this situation and that of an

owned asset. However, upon engine

removal, the workscope will, more

often than not, differ since it will be

driven not only by the time to next

shop visit but also by the status of

the maintenance reserve fund and the

proximity to redelivery.

When redelivery is imminent the

operator will wish to invest as little as

possible in order to just satisfy

contractual obligations at redelivery.

Airlines will frequently treat

owned and leased assets very

differently and this can create

completely diverse maintenance

scenarios.

EYB2005_2 13/9/04 12:54 pm Page 32

ENGINE YEARBOOK 2005

unique in that airlines can accurately

predict removal times and estimated

costs. This provides a significant

opportunity for pre-provisioning in

advance of maintenance events. With

LLPs accounting for about 25 per cent

of the list price of an engine and with

a buoyant surplus material market

seemingly offering the solution to all

the operators’ needs, it is no surprise

that airlines have geared themselves

up to more efficiently manage this

aspect of engine maintenance. While

there is a plethora of used parts

suppliers, operators need to whittle

down the number of suppliers they

wish to deal with so that they can use

this means of building engines with

confidence.

What inspires this confidence?

Typical qualities such as supplier

experience, integrity, reliance,

competitiveness and knowledge are

as important as ever, but perhaps

none are as important as quality (not

simply physical parts quality but also

the integrity of documentation). In

spite of the potential to source parts

long in advance, material sourcing is

frequently accomplished in a short-

term manner. When this is the case,

an operator does not need a reactive

supplier who is liable to err on

documentation quality and who does

not possess the technical knowledge

to ensure that material is of the

required standard.

Typically, documentation to be

provided with each part will include:

1 An engine data submittal (EDS);

2 Full on/off history;

3 A serviceable/overhauled release

certificate;

4 A non-incident/accident statement.

For such parts, holes do appear

within the back-to-birth trace

element of the paperwork when it is

carefully studied, and this can result

in a delay in part availability as the

gaps are filled and corrections made.

With experience of supplying

material to a significant number of

engines under long-term technical

management, TES rejects up to 80 per

cent of all parts offered because of

the inferior quality of

documentation. Operators must only

invest in used material when they

have total confidence in the supply

chain from which it came.

Another benefit of effective

material management is the ability to

value and re-market off-coming

material. Often neglected, and mostly

written off at zero value, this

removed material can provide much-

needed cash generation for an

operation. When an engine

experiences a shop visit and a

decision is made to build it to a third

of its life, an operator not only has

an opportunity to save considerable

material costs by using serviceable,

run material but also to fully utilise

the removed inventory by either

storing it ready for a planned shop

visit prior to lease return or

immediately re-marketing it and

appeasing an ever attentive financial

director.

Many airlines and lessors are now

in partnership with such material

managers whose profiles almost

exclusively comprise:

■ a dedicated team managing a wide

variety of engine types;

■ an established company in engine

trading;

■ inventory management experts,

efficient and accurate in:

■ valuing removed material;

■ pre-provisioning for shop

visits;

■ significant inventory levels ready to

dispatch; and

■ GTAs from the OEM — with

technical and commercial support.

If these criteria are met then the

operator is safe in the knowledge that

the quality of the material being

sourced meets the required optimum

industry standards.

To summarise: when should an

operator consider a part-life engine

build? It is important to take into

account the technical issues that need

to be addressed at the maintenance

event, evaluating whether they are

conducive to a part-life build.

Commercial and operational factors

need to be integrated with these

technical considerations and, provided

this is effectively managed by an

external organisation or by the operator

itself, the necessity of (or lack thereof) a

part-life build should become apparent.

Budgetary constraints and maintenance

reserve status may also dictate how and

when the engine can be built. Once the

decision to build a part-life engine has

been taken, it should only proceed

when there is sufficient confidence in

material availability and the associated

supply chain. ■

EYB2005_2 13/9/04 12:55 pm Page 33

ENGINE YEARBOOK 2005

Sharing the customer’s

vision

In order to better support

the customer, it is important

to look at situations from the

customer’s point of view.

Rolls-Royce describes its

latest developments in repair

development and customer

response.

f you are part of a commercial

organisation dependent upon happy

customers, it is vital that you tailor your

approach, your business philosophy, to

meet the customer’s needs as much as your

own. Mission statements, visions and value

sets typically highlight the need for

satisfied customers and the importance of

maintaining that relationship to the benefit

of your own bottom line. But how many

organisations involve their customers in

developing those mission statements,

visions and values? In order to be the best

in its field, the technical support and

operations team at Rolls-Royce did just that.

“If you look through our values, you’ll

come across the word ‘hate’,” says Sharron

Magowan, head of repair services. “That’s

an emotive word, one you’re unlikely to

find in any other set of values but it fits in

exactly with our view and the views of

our customers — we hate operational

disruption and cost.” Magowan is part of

an organisation that came into being just

over a year ago and, from its outset, she

was determined to involve the customer at

every step. “If you look at our mission —

the delivery of world’s best product

attributes, technical services and

operational excellence, cost effectively —

and our vision and values you’ll realise

that they’re real. These aren’t focused on

our own needs; we sat down with our

customers and developed real-world

solutions to real-world customer needs.

“Yes, like any other organisation we’ll

protect our intellectual property but,

fundamentally, we’re an open

organisation that is determined to work

together with our customers to meet their

needs. We’re customer-focused, customer-

facing and that’s key to our success in

this business,” she says. That ‘hate’ of

operational disruption and cost is a

common theme to the repair services

team. In a competitive industry, they are

making a name for themselves by the

way in which they respond, not just by

the results of their actions.

Magowan continues: “We pride

ourselves on our ‘open-book’ approach to

repair development; we welcome and

positively encourage ideas and suggestions

from the field and from our customers.

We’ll work closely with our customers,

joint venture companies and vendors to

develop competitive and technically

excellent repair capabilities. As a

company, we are extremely open to the

sharing of technical data. Open any Rolls-

Royce manual and you’ll find published

comprehensive repair details. This

approach is quite different from other

OEMs. Eighty per cent of all of our repairs

are non-source controlled and this is

important since it enables our overhaul

bases to perform these repairs without

special approval or clearance from Rolls-

Royce. In addition, we actively resist the

development of proprietary repairs as

these become effective barriers to our

customers and overhaul bases. I firmly

believe that both Rolls-Royce and our

customers benefit more from an open and

competitive repair network.

“Customers really appreciate our

‘technical variances’ scheme, and we have

a within-20-day response as standard for

turbo-machinery but, if it’s an aircraft on

the ground then we’ll be there within the

day. To be able to respond like that, to be

there for our customers, helping to provide

technical solutions (including repair

schemes and technical variances) and

expert advice is what we’ll strive to do at

every opportunity — it meets their needs

and therefore our own. We will, in every

circumstance, help customers out of a tight

spot. It should go without saying that this

sort of response is essential.”

EYB2005_2 7/9/04 10:15 am Page 34

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ENGINE YEARBOOK 2005

But it is not just in terms of its

innovative use of local teams that Rolls-

Royce excels: huge advances have been

made in the application of new

technologies in the field of repairs. “We

say we’re delivering world’s best repair

technical solutions,” states Magowan,

“and a great example of that is borescope

blending, best visualised as key-hole

surgery.” On-wing, in-situ blend repairs to

compressor blades with foreign object

damage (FOD) via this ‘key-hole surgery’

have helped reduce costs of ownership for

one major customer by $10 million.

Maximising the use of technology is

enabling improvements which can offer

big gains in time and savings. We

continue to work with our customers,

partners and vendors to push the

boundaries and develop better and more

cost-effective technology.

“The latest generation of engines has, by

definition, the latest generation of

materials and we have to continuously

improve our repair technologies to

maintain our high standards. While these

advances are being made and we strive to

innovate in terms of service support and

technological applications, we also know

that our customers demand minimum

disruption, maximum value and world-

best service solutions. As an OEM we also

Delegating authority to local teams

boosts the speed and quality of response,

and Rolls-Royce manages this through its

global network of facilities which includes

Hong Kong Aero Engine Services (HAESL),

Singapore Aero Engine Services (SAESL)

and Texas Aero Engine Services (TAESL).

Not only do they assist in a timely fashion

but they also offer high professionalism

and boast regional knowledge and

understanding. SAESL’s satellite repair team

will be fully operational in late 2004. This

local support network is close to

Magowan’s heart — she set up the first

satellite repair team in HAESL before

returning to Rolls-Royce in Derby as repair

service manager and subsequently being

promoted to head of repair services.

have complete control over design and

manufacture; we know the impact of one

part not only on its ‘neighbour’ but on the

engine as a whole, something that third-

party spares manufacturers do not have

any visibility of,” says Magowan.

According to Magowan the Trent 900 as

a prime example of this. This is the launch

engine for the Airbus A380 and is due to

go into service with Singapore Airlines in

Spring 2006. Although still in development

— with certification due in October 2004

— repairs are being collated so that by the

time the engine goes into service the target

of 300 repairs will have been achieved.

“That repair requirement will be

generated from Trent family service

experience and Trent 900 development

running,” explains Magowan. “Those

repairs will be prioritised to meet criteria

such as on-wing maintenance repairs and

reducing the maintenance cost of high-

cost components.”

Ensuring the solution is designed in at

this stage of engine development is vital

but Magowan still stresses the importance

of listening to the customer. “Open a

Rolls-Royce manual and you’ll find the

repairs detailed. Look at the development

programme of our engines and you’ll find

the consideration given to ensure repairs

that are much easier, quicker and cost-

effective. Most importantly, we will listen

to and work with our customers and

members of our repair network. Come

and talk to us - we hate operational

disruption and we’ll work with you to

develop an appropriate solution!”

Around-the-clock service

A new-style customer response unit,

available 24-hours-a-day, seven-days-a-

week to provide airlines with coordinated

and proactive support, has been launched

by Rolls-Royce in Derby, UK. The

operations room, located in Trent Hall 2

and manned round the clock by teams of

six on a three-shift rotation, was an

initiative within the 2003 airlines business

re-organisation, emerging as part of the

technical services and operations unit

under director Paul Craig.

Rob Hill, head of operations room,

explains: “We wanted to raise our

response and fleet monitoring to a level

which reflects the needs of the expanding

global customer base. We knew this type

of team-based unit worked well when the

"Yes,like any other organisation

we’ll protect our intellectual

property but,fundamentally,

we’re an open organisation that

is determined to work together

with our customers to meet their

needs…"

—Sharron Magowan, head of

repair services, Rolls-Royce.

EYB2005_2 7/9/04 10:16 am Page 36

ENGINE YEARBOOK 2005

organisation needed to be on high alert to

provide response in emergencies, but the

problem was that we followed a pattern

of creating it in the short-term and then

disbanding. The obvious step was to

organise ourselves at that heightened

level on a full-time basis.”

The changes involved union agreement

to new working patterns as well as a

culture change by some in the wider

organisation who tended to bypass the

former system, preferring to use their own

network of personal ‘experts’ to find

solutions. “That not only caused

confusion, but also it sometimes led to

tasks being undertaken inappropriately -

for instance, work which wasn’t covered

by terms of individual contracts,” says

Hill. “One of the intentions under the new

system is to impose the discipline of a

single point of contact inside Rolls-Royce.

We need to control the flow of enquiries

and to be totally disciplined about

monitoring the status of our responses.”

One important trait is certainly being

retained and encouraged. The experts

manning the operations room are exactly

that: typically, highly trained service

engineers who in many cases have

experience of being based as field

representatives with customer airlines.

They appreciate the importance of

providing immediate and practical advice

based on a degree of independent

decision-making.

“Team members will continue to have

the capability to go outside maintenance

manuals to authorise technical variances,”

says Hill. “This in no way compromises

safety, but we will continue to place

implicit trust in their actions. It’s a level

of empowerment airlines appreciate

because it produces practical solutions.”

Phase one on the path to creating the

operations room began with establishing

the initial team in April 2003. Members

worked in a ‘virtual’ ops room

environment, developing tools and

structures, designing and commissioning

the final scheme. Phase two involved the

gradual addition of more tasks to the

workload, and this is to be followed by a

more detailed review of the processes

and organisation.

The operations room is made up of two

distinct areas. A ‘front desk’ crew reacts

to customer calls on subjects such as

requests for technical assistance including

remote-site rescue situations potentially

involving the provision, for instance, of

lease engine cover. Meanwhile, a ‘back

desk’ team concentrates on forward

planning and strategy, predicting issues

involving fleet management, engine

health monitoring and constant updates

of the fleet database. This allows accurate

tracking of, for instance, ‘on-watch’

engines, precise planning of spare and

lease engine availability; and provision of

real-time information on progress of

engines through repair facilities using

internet tools such as aeromanager.com

There can be no doubt that the growing

demand for TotalCare packages in recent

years reflects the central importance of

customer service agreements in the

business model. There is also no question

that the operations room will aid the

smooth running of such service provision,

benefiting airlines and improving the

bottom line for Rolls-Royce — a classic

win-win situation. ■

EYB2005_2 9/9/04 11:40 am Page 37

ENGINE YEARBOOK 2005

Managing the maintenance of leased

engines

As the engine leasing market

has matured, more

sophisticated methods of

micro-management have

been developed and better

understandings of prevailing

market conditions have

come about. Jon Sharp,

president & CEO, Engine

Lease Finance Corporation,

shares some of the wisdom

that he has gained in this

regard over the years.

ngine Lease Finance Corporation

(“ELF”) is what its name suggests

- a leasing company that finances

spare engines and leases them to the

world’s airlines and maintenance

providers. Leasing companies operate

throughout the world in many markets,

from car and truck rental through

containers, rail rolling stock, aircraft,

aircraft engines and ships; it is no

accident that there is a particular

emphasis on transportation equipment,

for several reasons. Obviously, the

equipment’s very transportability

facilitates both the repossession of the

asset, in the event of a lessee default,

and its prompt redeployment elsewhere.

And its worldwide standardisation

mitigates any localised economic

volatility.

Also the size and growth of the

transportation market is well-researched

and widely forecast based upon world

and regional GDPs, thus enabling the

lessor to predict the future economic

utility of the asset it is considering

investing in. The lessor can therefore

predict with some certainty the future

value of its investment and can set

policies for depreciation and risk-

hedging, and also define an exit

strategy. A leasing company with a

clearly thought-through and

implemented strategy will roll over its

assets on a continual basis and will

stand or fall by exiting from its assets at

values which exceed or fail to achieve

book values.

Whatever the macro-economic

forethought and planning, however, the

whole strategy may fail if the values of

the assets are undermined by

inappropriate maintenance. The

efficient leasing company will, by

virtue of a deeply-researched

understanding of the asset class, set in

place appropriate management systems

and controls designed to ensure the

maintenance of value in the asset, its

suitability for being remarketed to the

next lessee and its eventual disposal at

profit.

Commercial aircraft engines are

simply another class of asset to which

the above principles apply. However, by

their very nature, the issue of proper

maintenance on aircraft engines is more

important than on most other asset

classes. This is because the percentage

value of an engine that depends on its

A leasing company with a clearly

thought-through and

implemented strategy will roll

over its assets on a continual

basis and will stand or fall by

exiting from its assets at values

which exceed or fail to achieve

book values.

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