THE JOURNAL FOR COMMERCIAL AIRCRAFT BUSINESS • ISSUE 128 • FEBRUARY/MARCH 2020

AIRCRAFT COMMERCE
THE JOURNAL FOR COMMERCIAL AIRCRAFT BUSINESS
www.aircraft-commerce.com
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AND THEN THERE WERE...

THE INDUSTRY ENTERS
UNCHARTERED TERRITORY
Used aircraft cross-border transfer age restrictions I Airline financial performance & cash reserves
IFE technologies & software for ancillary sales I Fuel burn variation with differing aircraft loads
ISSUE 128 • FEBRUARY/MARCH 2020

CFM56-5B maintenance management & SV inputs I 737 Classic freighter conversion resurgence

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 www.aircraft-commerce.com
Editor’s Comment
FEBRUARY/MARCH 2020
In the last issue of Aircraft Commerce, we said that 2020 would be a challenging year. That
EDITOR is now an understatement. The exponential spread of COVID-19 worldwide has brought the
CHARLES WILLIAMS (+44 1403 230 302)
charles@aircraft-commerce.com entire commercial aviation industry to a standstill in a matter of weeks. Travel restrictions
STAFF WRITER have been imposed by most countries and the largest aviation markets, at the time of
ROB HALL (+44 1403 213 112)
rob@aircraft-commerce.com writing, and more than 8,800 aircraft of the global fleet have been grounded. The main
MARLON MEJIA (+44 1403 213 108) OEMs have stopped production and deliveries altogether.
marlon@aircraft-commerce.com

PRODUCTION EDITOR
GEORGIA BIRRI Demand for air travel, even before travel restrictions were issued, had diminished by such a
SALES DIRECTOR large scale that the load factors had become unprofitable for the operation of a huge
KAT RONALDSON (+44 1403 213 117)
kat@aircraft-commerce.com numbers of routes, and so airlines had already suspended a good percentage of their
SUBSCRIPTIONS operations.
ANNE AHIER (+44 1403 213 110)
anne@aircraft-commerce.com

DISTRIBUTION
The challenges faced by airlines worldwide are not only the absence of revenue from
ANNE AHIER (+44 1403 213 110) operating their route networks. Even if aircraft are grounded, maintenance activities still
anne@aircraft-commerce.com
have to be carried out. Many aircraft have been parked in distant places that are very far
PHOTOGRAPHY
AIRTEAMIMAGES away from the operating base of the carrier. With an aircraft parked in a remote location,
www.airteamimages.com
the coordination of maintenance activities presents in itself a challenge. Further costs will
AVIATION IMAGES
www.aviation-images.com be incurred when these aircraft are reactivated.

We have also analysed the impact of age limitations for aircraft in the secondary market,
which has effectively been restricted or even prevented in many jurisdictions. This topic is
intrinsically related to the availability of suitable feedstock for 737 Classic conversions.

Major airlines have enjoyed healthy profit margins following consolidation and
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Contents
MAIN FEATURES
Used aircraft age limitations

4I
AIRCRAFT TRADING
Used aircraft age limitations imposed by many
4 Used aircraft age limitations. countries place restrictions on the secondary market.
Analysis reveals the real problem is the lack of an
ability to audit aircraft technical records.
FLEET PLANNING
11 Improved airline financial Airline financial performance

11 I
performance, stronger cash Airlines have experienced improved financial
reserves, and the implications in the performance over the past five years. Many carriers
sudden global downturn. have boosted their cash reserves. Will this be sufficient
to help them through the current downturn in global
traffic?
REVENUES
IFE technology for ancillaries

21 I
21 IFE technological developments, and
how they can help airlines stimulate
increased sales of ancillaries.
The latest IFE systems use a range of technologies.
These are improving passenger experience and are
helping leverage sales of ancillary products.

AIRLINE OPERATIONS
Fuel burn & varying payloads

27 I
27 The variation of aircraft fuel burn
with incremental passenger loads
and aircraft weight. Five aircraft
types are analysed.
The variation in fuel burn and cost of carrying
incremental passenger loads is analysed for five
modern generation aircraft types. These include the
737-800, A320neo, A321neo, 787-9 & A350-1000.

CFM56-5B maintenance & costs

34 I
MAINTENANCE & ENGINEERING The CFM56-5B has high EGT margin and on-wing
durability. This makes maintenance management
34 CFM56-5B maintenance relatively simple in most cases. Removal patterns and
management & shop visit inputs. shop visit workscopes & costs are examined.

48 Explaining the objective of Spec

Spec 2000 Work Package

48 I
2000 Work Package, and its aim of
aiding the seamless transfer of
maintenance data between IT
systems.
Spec 2000 Work Package provides guidelines for the
seamless exchange of maintenance data between
operators, MROs and M&E providers. The standards
of Work Package are reviewed.

FREIGHT BUSINESS
737 Classic conversion resurgence

57 I
57 737 Classics experience a rebirth in
The 737 Classic freighter conversion market has
passenger-to-freighter conversion experienced a resurgence over the past year. This
activity. follows a shortage of 737NG feedstock, following the
grounding of the 737 MAX.
4 I AIRCRAFT TRADING & THE AFTERMARKET
Aircraft age limitations have been implemented in many countries
worldwide. This has been a mechanical reaction by regulators with the aim
to conform with air safety standards. These limitations have impacted the
trading of ageing aircraft.
The impact of age
limitations on aircraft
remarketability
A
ge limitations or restrictions
implemented by regulatory
authorities in about 50
countries worldwide affect or
prevent the cross-border transfer (XBT)
of aircraft, as defined by the International
Civil Aviation Organisation (ICAO). This
means an aircraft that has previously
been registered in one country, cannot be
imported into another country unless it is
compliant with its age limitation rules.
The age limitations of each country
were initially introduced by regulators to
maintain the safety and airworthiness of
aircraft from their previous jurisdictions
that may be considered to be high risk.
Similarly, there are regulators and
operators in some jurisdictions that may
lack the capability to undertake
dependable audits of technical records for
used aircraft.
An aircraft’s age is not highly
correlated with safe operations, but the
ability to remarket aircraft in countries
with age import restrictions is severely
affected when such age limitation rules
are implemented. Their effects on aircraft
trading are illustrated here.
Definition
Age limitations are imposed by a
regulatory authority setting the maximum
age at which an aircraft can be added to
the country’s national register. They are
also known as ‘Non-Addition Rules’.
There is no framework or guidelines on
how to implement the limitations. The
age limit imposed is usually arbitrary and
depends on the regulator.
There are more than 40 countries
now have age restrictions in place, even if
they may be considered unnecessary.
These age limits have been progressively
AIRCRAFT COMMERCE
introduced following aviation safety
issues that raised concerns from
international bodies, including ICAO and
some of the large regulators like the
Federal Aviation Administration (FAA)
and European Union Aviation Safety
Agency (EASA).
Perhaps unsurprisingly, the existence
of an age limitation rule does not
effectively address the core issue of air
safety or compliance. For the most part,
these limitations only impair the
development of the air transport industry
in such countries.
Depending on the jurisdiction to
which an aircraft is being transferred, age
limitations can affect aircraft as young as
five years old. This is an age at which an
aircraft typically would not have
undergone its first major base check.
These limitations tend to be stricter for
passenger aircraft than for cargo aircraft,
although in some countries there is no
differentiation. The average age limitation
for those countries affected is 15 years for
passenger aircraft, and 20 years for
freighters.
In Indonesia, the age limitation also
incorporates a further restriction on the
aircraft’s accumulated flight cycles (FCs),
with a limit of 50,000FC. An aircraft
cannot be imported to, or operated in,
Indonesia if it has exceeded that
threshold.
Exemptions are granted in some
jurisdictions where aircraft are added to
the country’s national register on a case-
by-case basis. These exemptions are more
common for freighters than for passenger
aircraft.
“The age restriction is indeed an issue
for us in many transactions. It closes off
markets to some aircraft in our portfolio,
and has a major effect on the
development of aviation in those
territories,” says Juliet Hewitt, marketing
director at SkyWorld Aviation, which has
been involved in nearly 600 aircraft
transactions worldwide since 1996.
“Some types we trade naturally fall into
the ageing fleet category, so implementing
age limitations in certain territories has
an impact on the markets that we can
sell/lease to,” adds Hewitt.
Implementation basis
Most countries that have imposed age
limitations justify them on safety
grounds. If the structural maintenance of
a particular aircraft has been performed
in line with the programme specified by
the original equipment manufacturer
(OEM), and the technical records have
been properly audited, there should be no
need to impose these restrictions.
Some regulators, such as Thailand’s,
however, have imposed age limitations as
a ‘proxy measure’ in an effort to comply
with aviation standards. This happened
after the FAA downgraded Thailand from
a Category 2 to Category 1 rating in
2015, following findings by ICAO during
a routine safety audit. Category 1 means
that the country affected is not permitted
to operate flights or open new routes to
the US, until its Category 2 status is
reestablished.
The outcome of this audit temporarily
caused China, Japan and South Korea to
also ban Thai operators from conducting
charter flights or adding new services to
their countries. Thailand failed to regain
its ranking again in 2019.
On top of this, some regulators and
operators are perceived to lack the
capabilities to properly audit the
maintenance records of older aircraft. “If
ISSUE NO. 128 • FEBRUARY/MARCH 2020

we acquire an aircraft that has been
operated for several years and then place
it in another jurisdiction with a new
operator, our continuing airworthiness
management organisation (CAMO) and
maintenance history are transferred with
the aircraft to the new operator. It is
standard practice that the new operator’s
technical team audits the aircraft’s
technical records,” says Yuriy Tokarev,
director strategy and risk at Aerovista. “I
cannot recall any case when we had a
problem with the transfer of records in
terms of integrity and compliance.”
None of the international aviation
organisations like ICAO or the
International Air Transport Association
(IATA) have encouraged the
implementation of age restrictions.
Similarly, the largest regulators (FAA
in the US, EASA in Europe, Transport
Canada Civil Aviation (TCCA) and
National Civil Aviation Agency (ANAC)
in Brazil), where the large aircraft
manufacturers Airbus, Boeing,
Bombardier/DeHavilland and Embraer
are based, have not issued initiatives to
embrace the adoption of age limitations.
“We tend to see restrictions imposed
in regions where the regulatory oversight
is weak or incapable of enforcing local
regulations and compliance. Countries
implement these limitations, hoping that
they might keep an aircraft from falling
ISSUE NO. 128 • FEBRUARY/MARCH 2020
5 I AIRCRAFT TRADING & THE AFTERMARKET
out of the sky because it is ‘less worn out’
and if it is ‘young on paper’; meaning it
has a good and traceable maintenance
status,” says Brian McCarthy, vice
president of sales at Precision Aircraft
Solutions.
If maintenance is performed in line
with the OEM’s maintenance
programme, and the operator’s approved
aircraft maintenance programme (AMP),
then it is not necessary to impose an age
limitation The issue is that most
regulators have the capabilities to audit
the operators and airlines in their
jurisdiction, but unfortunately they do
not have the necessary resources to show
compliance.
Aircraft age and safety
ICAO has researched this topic with
several studies and the participation of
the Aviation Working Group (AWG)
formed by the main OEMs and the
largest lessors, and with insights from
IATA, EASA and the FAA. In March
2017, ICAO’s initiative for ‘promoting
safety and efficiency in cross-border
transfer of aircraft (XBT)’ was published.
A key finding of this working group
was that there is too much inconsistency
in the process for aircraft registration and
XBT transactions between different
countries. The different approach to
technical records and the interpretation
of airworthiness has led to an increased
number of jurisdictions implementing
actual or de facto limitations on aircraft
imports. Based on calendar age, these
limitations are more restrictive than the
data-driven and approved airworthiness
criteria established in the applicable
aircraft type certification.
The aviation industry has not fully
implemented the use of electronic
records.
Acceptance of analogue records
scanned in PDF format would be a good
start for standardising the process of
importing aircraft. The ICAO March
2017 paper considers that adopting
electronic paperless records that are
compatible between all available
maintenance functions and that
incorporate common data fields and a
limited number of formats, would
address language, legibility, record
completeness and other issues faced when
adding an aircraft to a new registry in
another country.
“Age limitation is the wrong
approach to ensure higher safety
standards. Even if a country like
Indonesia implements a very strict age
limitation policy, poor adherence to
safety standards in maintenance and
flight operation in that country cannot be
improved with younger aircraft,” says
AIRCRAFT COMMERCE
6 I AIRCRAFT TRADING & THE AFTERMARKET
NATIONAL AGE LIMITS FOR IMPORTED AIRCRAFT and the observed accident rates,” says
John Hansman, professor at the
Country Age limit Additional International Center for Air
years restriction Transportation at the Massachusetts
Institute of Technology. “The accident
rate for North America is essentially flat
Kuwait 5 years Importation up until 40 years of aircraft age.”
Iran 10 years Importation The incidence of WFD increases with
South Korea 10 years Implemented by operators age, but only a small percentage of
Japan 10 years Passenger and freighter accidents in aircraft that are older than
Mauritania 10 years Importation - both passenger and freighter 20 years feature aircraft age-related WFD
Ethiopia 12 years Assessed on a case by case basis as the root cause of an accident. WFD is
Taiwan 12 years Must be deregistered after 26 years not a high-risk factor on its own. The
Algeria 12 years No imports allowed for freighters LOV approach has been adopted by the
Pakistan 12 years Importation - both passenger and freighter FAA, EASA and other large regulators,
and is also supported by the OEMs. The
Venezuela 12 years Ranked Cat 2 by FAA
LOV is the total accumulated FC or FH
Nepal 14 years Importation
for which it has been determined that
Brazil 15 22 years for freighters WFD is unlikely to occur in the aircraft
Egypt 15 years Importation structure. If through engineering and
Mongolia 15 years In place since 2018 testing it is established that WFD will not
Bangladesh 15 years Importation occur, the LOV can be extended by the
Indonesia 15 years Must be deregistered after 50,000 FC OEMs in coordination with the regulator.
Mexico 15 years Importation There is no correlation between
Russia 15 years aircraft age and safety until year 18 of its
Turkey 15 years 20 years for freighters operation, but even after this the
Vietnam 15 years Importation correlation is very low at less than 0.002
fatal aircraft accidents per year.
Thailand 16 years 22 years for freighters
There is another inflection point with
India 18 years Limitation relaxed in 2019 down from 15
an increase in correlation between aircraft
Myanmar 20 years Must be deregistered after 25 years age and accident rate on aircraft more
Peru 20 years 15 years for freighters than 27 years of age. This rise, however,
Saudi Arabia 21 years is mainly driven by incidents in less
Nigeria 22 years developed regions, with Africa
Bolivia 25 years accounting for most of this variation.
The low capital costs of mid-life and
Source: ICAO and Country Regulators mature aircraft are a big factor
contributing to their deployment in
countries with weaker infrastructure,
crew training and regulatory oversight,
Tokarev. It is a fact that young aircraft could have accumulated more flight hours and where human factors are more likely
require less maintenance work, but an (FH) and FC than a 20-year old aircraft. to result in an accident. “If chronological
aircraft maintenance programme is Similarly, in some territories, age age is not a valid indicator of increased
designed around the economic life cycle restrictions do not apply to aircraft safety risk, then imposing conservative
of the aircraft. “The objective of a already in operation. An operator could age-based import restrictions reduces the
maintenance programme is to maintain be flying an existing fleet of 25-year old population of available aircraft and
the same level of safety standards aircraft, but be unable to import a 20- thereby increases the cost and reduces the
regardless of the aircraft’s age,” concludes year old aircraft into it.” access to air transportation for those
Tokarev. Another study by the ICAO states that impose such restrictions,”
The emphasis should be on Airworthiness Assurance Working Group concludes Hansman.
maintenance practices, and this requires (AAWG), titled ‘Analysis of the Impact of
coordination between regulators, OEMs; Aircraft Age on Safety for Air Transport
maintenance, repair and overhaul (MRO) Jet Airplanes’, explored the correlation Strictest jurisdictions
providers; and the asset owner. The FAA between Widespread Fatigue Damage At least 50 countries have officially
and EASA require operators to implement (WFD) and an aircraft’s age. implemented age limitations for the XBT
a Corrosion Prevention and Control It also analysed the operational Limits of aircraft (see chart, this page). Many
Programme (CPCP) in their AMPs to of Validity (LOV) for aircraft structures other countries have not implemented age
ensure the airworthiness of their fleets. and their implications for airworthiness. limitations, but still apply age restrictions
Many other regulators, however, have These serve as limits, over which an controls. An example is China.
just opted for a simplistic and non- aircraft should not be operated. LOVs The most restrictive age limitation in
procedural approach based on aircraft can be accounted for by FH or FC. The the world has been implemented by
age. It may therefore appear that these analysis took into account western-built Kuwait at five years, when an aircraft is
countries have not incorporated a CPCP aircraft with maximum take-off weights only at the beginning of its economic life,
into their aircraft AMPs. It is therefore (MTOWs) above 60,000lbs. The key and certainly in its first maintenance base
easy for these countries to implement an finding of the study is that there is no check cycle. “Perhaps this is due to
age restriction, but it is difficult to justify. correlation between the age of airframes political reasons or to limit competition,”
“After all, it does not make much of a and accident occurrence. says Tokarev. At the other end of the
difference if an aircraft is five or 20 years “In North America and Europe, the spectrum, Nigeria and Bolivia have age
old,” adds Hewitt. “Depending on its accident rates are low and there is no restrictions for aircraft older than 22 and
operational history, a 10-year old aircraft statistical correlation between aircraft age 25 years of age.

AIRCRAFT COMMERCE ISSUE NO. 128 • FEBRUARY/MARCH 2020

8 I AIRCRAFT TRADING & THE AFTERMARKET
Even though age limitations are in
place in some developed countries like
Japan and Taiwan, they are more
common in countries where the regulator
has no reliable compliance structure or in
developing countries. “Age restrictions
are particularly prevalent in the Asia
Pacific region, generally at 15-20 years.
This is an area where there is significant
geographical opportunity for regional
carriers,” says Hewitt. “It is the wrong
approach. There’s no safety implication
for older aircraft, and this unnecessary
rule is stifling growth of smaller operators
and curtailing start-ups.” The
implications for financing aircraft in these
jurisdictions are evident. “Small, regional,
and start-up carriers in an undeveloped
jurisdiction simply do not have access to
funds, either through loans or leasing, to
invest in newer aircraft. If age limitation
rules mean that they cannot bring older
aircraft in instead, these carriers will find
it difficult to succeed,” adds Hewitt.
South Korea has a very strict
limitation capped at 10 years. It is true
that for some time the safety record of
airlines in South Korea was very low, but
this was mainly caused by a poor crew
resource management (CRM) and cockpit
culture. But it was not the regulator in
South Korea that implemented age
limitations; it was actually the eight main
carriers which jointly agreed in 2015 to
restrict themselves from importing any
aircraft older than 10 years into their
fleets. This measure is counterintuitive,
since the operators are denying
themselves access to equipment in the
used market, which increases their fleet
acquisition costs.
India has a growing domestic aviation
sector. A good percentage of India’s
enormous population is concentrated in a
AIRCRAFT COMMERCE
relatively small number of megacities,
while a lot of people also live in the
regions. India’s domestic aviation market
has not grown at the same pace as in
other developing economies. India
introduced age limit restrictions more
than two decades ago. They were recently
relaxed to allow importation of aircraft
of up to 18 years of age. This may allow
the market to flourish at a faster rate and
allow new entrants to better serve the
needs of the domestic and regional
markets.
Freighter vs passenger aircraft
The age limitations for freighter
aircraft have different dynamics than
passenger aircraft. Likewise, ‘Non-
Addition Rules’ affect narrowbodies
differently to widebodies. When a
narrowbody is converted it is usually
transferred to an operator in another
country than that of the original operator
of the feedstock, so the aircraft has to be
added to the new country’s registry.
“In contrast, widebody conversions
tend to remain with the original operator
of the feedstock, or an operator in the
same jurisdiction,” says Andy Coupland,
chief executive officer at Aircraft
Analytics. A key point is that age
limitations for freighters tend to be more
relaxed from a safety perspective, because
their main function is to carry cargo, with
few crew members on board.
The typical economic life of an
aircraft starts as an asset deployed with a
large mainline carrier. At the end of the
financial term or first lease the aircraft is
usually transferred to a second-tier
operator, or remains with the same
operator until it is fully depreciated. Then
there are three avenues for the asset:
ATR aircraft have supplemental type certificates
for freighter conversion. However, the age
restrictions of several countries could the market
for converted aircraft.
conversion, part-out, or permanent
retirement from service. “Ageing aircraft
are finding new roles, particularly in the
freighter market, or special purpose
applications (for example firebombers
and reconnaissance). We are increasingly
being creative in finding opportunities,
particularly in the freighter market, due
to fewer restrictions. For example, the
ATRs and Saabs have approved
supplemental type certificates (STCs) for
freight conversion so can cross over into
the cargo market,” adds Hewitt.
The EASA does not implement a
direct restriction as such in Europe, but
aircraft have to be EASA-compliant,
which requires compliance with noise
abatement rules and emissions. “These
noise restrictions apply more to heavier,
older aircraft. Fortunately to date, on the
regional trading side, Skyworld has not
met significant resistance to acquiring
aircraft due to noise. Of course inner-city
airports prefer to operate newer and
quieter aircraft,” concludes Hewitt.
Access to funding and ECA
There is a challenge for operators
based in countries that are not signatories
to the Aviation Protocol of the Cape
Town Convention. It is difficult for a
carrier that operates in a jurisdiction
where age limitations are in place and the
Cape Town protocol does not apply, to
finance aircraft.
Export Credit Agencies (ECA)
provide funding for aircraft at interest
rates below the minimum premium rate
to countries that are signatories of the
Cape Town convention. Non-signatories
have to pay a premium.
Start-up and small carriers in under-
developed jurisdictions are not the only
airlines at a disadvantage. Mainline
carriers in established markets face higher
barriers accessing finance. “Age
restrictions cause real hardship for flag
carriers, and put them at a disadvantage
in the competitive market place,”
continues McCarthy. Legacy carriers in
countries with booming, liberalised air
industries, and growing middle classes
have restricted access to credit, finance
and leasing facilities.
An example of one such country is
Peru. It is not a signatory of the Cape
Town convention, but has seen a boom in
passenger traffic due to new services
being offered by low-cost carriers (LCCs)
ISSUE NO. 128 • FEBRUARY/MARCH 2020

like VivaAir, which has the backing of
Irelandia Aviation, parent company to
Ryanair. In fact, the carrier’s A320 fleet,
leased from GECAS, is under the
Colombian registry, while aircraft
operated for LATAM Peru are under the
Chilean registry.
Tradeability of older aircraft
Age restrictions severely restrict the
trading of ageing aircraft. One of the
reasons behind expediting the launch of
the 737-800NG conversion programme is
that many markets are now blocked for
converted 737 Classics. “We have lost
several business opportunities due to
these limitations. For example, the
introduction of a 12-year limitation in
Pakistan meant that we had to drop a
project to source 737-300 Classics for
one of the country’s airlines,” says
Tokarev. “Aergo Capital mostly acquires
aircraft from established lessors. The
company had been quite active in placing
737 Classics until 2014-2015 when the
availability of assets within the proper
age range, generally younger than 20
years, significantly reduced. There were
still a certain number of 737 Classics in
operation with major airlines like
Southwest, but they were in a particular
specification and with a lot of
accumulated FH and FC in the range of
ISSUE NO. 128 • FEBRUARY/MARCH 2020
9 I AIRCRAFT TRADING & THE AFTERMARKET
70,000FH and 40,000FC, which caused
serious additional maintenance
expenses”.
This type of aircraft is in the
conversion threshold, but is not suitable
feedstock because of the issues described.
Similarly, they could still operate in
passenger roles, but age restrictions are
now so widespread that most markets are
not viable for these aircraft.
Some jurisdictions are sourcing
aircraft for remarketing purposes, but
there are challenges with aircraft arriving
from particular jurisdictions. “We made
several attempts to deal with Japanese
airlines, but their standard practice is to
squeeze all resources to the last drop, so
their aircraft are probably not even
attractive assets even for teardown
purposes,” says Torakev. “When we
looked at assets from Korean carriers,
there is no availability. There was only
one aircraft listed by one of the lessors
last year.”
This problem is also exacerbated by
the average of fleets worldwide. “About
half of the current active western-built
turboprops are now older than 15 years.
With the production of new aircraft cut
down to just one primary manufacturer,
this portion of aged aircraft will increase
during the coming years, leaving a gap in
the market and a virtual monopoly for
only one primary OEM,” adds Hewitt.
Impact on lessors & traders
The share of the leased fleet was less
than 5% of the total in the early 1990s. It
is projected that by 2020, nearly 50% of
the world’s airline fleet will be leased. As
a result, the safe and efficient transfer of
aircraft between borders is critical to
cross-border transactions in this space.
China has the second largest aircraft
fleet in the world, with about 3,200,
mainly western-built, aircraft in active
service. China’s regulator is the Civil
Aviation Authority of China (CAAC),
and importation of aircraft is subject to
compliance with the operations
certification for large airplanes CCAR
121. “There is not a defined age
limitation. All aircraft to be added to the
Chinese registry will be assessed
according to CCAR 121 and other
related regulations. This is on the basis of
individual assessment of each aircraft,”
says Yan Xue, member of the Board of
Directors at China Merchants Bank,
CMB Financial Leasing. “The importer
may have to make modifications to the
aircraft, and add and certify systems and
equipment to meet the CCAR121
requirements, but this is usually not cost-
effective.”
The process of introducing a used
aircraft to the Chinese registry is not just
limited to imports. “During operation,
AIRCRAFT COMMERCE
10 I AIRCRAFT TRADING & THE AFTERMARKET
the operator might find it hard to import
spares and maintenance items that can
fulfil the CAAC’s requirements,” adds
Xue. Overall, and despite the absence of
a fixed age restriction, there may not be a
good business case for introducing used
passenger aircraft to the Chinese market,
because of the need to comply with the
CAAC’s strict rules.
“An exception to this rule is
passenger-to-freighter converted aircraft,”
continues Xue. “Many retired 757s
equipped with RB211 engines that had
finished their economic life as passenger
aircraft in other countries have been
converted to cargo aircraft following the
CAAC regulations.” These aircraft can be
operated for as long as they comply with
the airworthiness requirements set out by
converted aircraft by the CAAC.
An example of this is a 757-200
airframe that was delivered in 1994 to
USAirways. It was retired by American
Airlines at the end of 2017, converted by
ST Engineering at Seletar Airport in
Singapore at the end of 2018, and
returned to operation with SF Airlines as
a 26-year-old converted freighter.
If the converted aircraft’s depreciation
profile is in line with the cost of
acquisition and conversion, it can be
operated until the end of its economic life
for as long as it complies with the
CAAC’s airworthiness regulations. This is
probably at year 35, which the industry
accepts as the standard economic life
cycle of an aircraft.
SF Airlines has a fleet of 27 757-
200SF(M) aircraft with an average age of
25.5 years, with the oldest being 31 years
old. It is expected that they will stay in
their fleet and will be retired from service
and be fully depreciated on the books
AIRCRAFT COMMERCE
after 10 years of operation. SF Airlines
has successfully inducted 757-200s in its
fleet from North American and European
operations in the Chinese register under
an XBT. It has also acquired 757-200s
from other Chinese operators. These
aircraft will have completed their full
useful economic life cycle when they are
retired.
“Operators have been given some
relief. For example, past operating
pedigree can be taken into account,” says
McCarthy. Each regulator, where age
restrictions apply, approaches them
differently. “Multiple past operators can
really kill an asset for import if it is close
to the age of consideration,” adds
McCarthy.
The aircraft’s past ownership is
referred to as its ‘pedigree’. “An aircraft
that has remained in service with a single
operator in a developed jurisdiction has a
higher chance of being remarketed than
an aircraft that has transitioned between
several operators,” continues McCarthy.
“The same principle applies when
aircraft, due to excess capacity or cash
constraints, have been sub-leased to third
operators. This is common in the holiday
charter market, or in the case of aircraft
that have been sub-leased by a carrier
based in a country where demand is
contracting, to a carrier in another
jurisdiction where demand for air travel
is booming.”
The aircraft’s jurisdiction also plays a
role. “Assets that have been operating
under EASA’s jurisdiction seem to have a
better acceptance,” adds McCarthy.
Lessors would take this into
consideration when placing an aircraft
into a jurisdiction with an age restriction.
“The stricter the age limitation, the
An 26 year old ex-USAirways 757-200, converted
by ST Engineering at Seletar Airport in
Singapore, was successfully placed on the
Chinese aircraft register. It is now in service with
SF Airlines.
younger the aircraft should be, so more
expensive values and lease rates apply.
When leasing or financing the aircraft we
are primarily looking at the customer’s
creditworthiness, and the situation in the
jurisdiction in case we need to repossess
the aircraft,” concludes Tokarev.
In summary
Age limitations have become more
widespread throughout the world. Some
countries implement them rigidly, others
are more flexible depending on the past
history of the aircraft.
There are some jurisdictions where
there is no explicit age restriction, but the
regulators nevertheless still apply them,
and in other cases the process of
importing aircraft is so difficult that their
transfer is simply not economically
viable. The rules tend to be harder for
passenger aircraft than for freighters, but
there are countries with no distinction.
There is no significant direct
correlation between an aircraft’s age and
safe air operations. There is no
methodology for implementation of age
restrictions and each regulator tends to be
arbitrary in applying these rules.
Sometimes they are implemented only for
political reasons.
Regardless, the implementation of age
restrictions is a handicap to the aviation
sector. They restrict the tradeability of
assets and reduce an aircraft’s useful
economic life. In addition, the
introduction of an age restriction
increases the cost of procuring and
funding aircraft. This is detrimental to the
development of air transport in
jurisdictions with booming demand for
air travel, but weak regulatory
capabilities. The introduction of age
restrictions is compounded when a
country is not a signatory of the Cape
Town Convention because access to
credit is harder, even through ECAs. Age
restrictions affect all types of operators,
depending on the country in which they
are based. Age restrictions are not the
right approach to safety, and can in fact
undermine it, since regulators rely on age
as an index for safety, and maintenance
may not be properly carried out.
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ISSUE NO. 128 • FEBRUARY/MARCH 2020

Adoption of new strategies and business models has seen airline profit
performance improve over the past five years. Many airlines have
managed to strength their cash reserves. With the unprecedented drop in
global traffic, can their cash reserves sustain them?
Improved airline financial
performance & survivability
I
n the past three to five years, airline
profitability has reached
unprecedented levels. Using the
standard measure of operating
margin, expressing operating profit as a
percentage of revenue, most airlines have
improved their financial performance over
the past decade. This increased financial
strength is welcome as the Coronavirus
pandemic worsens, reducing airline traffic
to a small fraction of usual volumes in just
a few weeks. This raises two issues: how
and why has airlines’ financial health
improved over recent years? and will this
improvement give them the financial
strength to survive the Coronavirus crisis?
Airline profitability
Airline profitability is based on the
difference between unit revenue, expressed
in cents per available seat-mile (ASM); and
unit cost, expressed as cents per ASM
(CASM). Passenger revenue per ASM
(RASM) is the product of average net fare
or passenger yield and revenue per
passenger mile (RPM), and passenger load
factor, plus other passenger revenues per
ASM. All revenues, including cargo, can be
referred to as total revenue per ASM
(TRASM).
All airlines have seen an erosion in
RASM/TRASM over the past four to five
years as competitive pressures and changes
in airline business models have steadily
pushed fares and yields downwards. Even
so, airlines have generally managed to
reduce CASM, which has increased profit
margins. These improved profit margins
have also been sustained over the past four
to five years, with the result that many
airlines have increased their cash holdings
and improved their balance sheets.
The historical performance of the
better-performing flag carriers saw
operating margins of 1-3%. Airlines that
achieved a 3% operating margin before
2010 were seen as doing well. Few carriers
ISSUE NO. 128 • FEBRUARY/MARCH 2020
11 I AIRCRAFT ANALYSIS & FLEET PLANNING
were able to generate such margins for
several consecutive years.
Business models
Airlines have transformed their
business models over the past 22-25 years
to overcome, and adapt to, competitive
pressures that have resulted in lower
passenger yields and cents per RPM. The
objective of new strategies is twofold: to
try to minimise the reduction in TRASM
compared to the reduction in passenger
yields; and achieve a larger reduction in
CASM.
The first change in airline business
models was the wider adoption of the low-
cost carrier (LCC) strategy. The catalyst for
this was the advent of the internet, which
allowed passengers to make their own
online bookings with credit cards. This
generated two main benefits for airlines:
large savings in multiple cost categories,
such as marketing, distribution and travel
agency commissions; reservations; issuing
paper tickets; revenue management; and
revenue accounting; and receiving cash
before travel rather than taking several
months to reclaim it post-travel.
The use of the internet for self-service
bookings has been used by all airlines. The
LCCs have always used high-density
seating, and secondary airports where
possible to reduce related fees and shorten
turnaround times to increase aircraft
utilisation.
Further game-changing developments
have been the introduction of self-service
check-in, providing another saving, this
time in the case of ground staff.
The next major development in airline
strategy came in 2015. This was based on
the practice of unbundling fares to provide
the basic fare, and then charge ancillary
fees for mark-ups such as reserving
particular seats or priority boarding, and
checking luggage into the aircraft hold.
This unbundling strategy has been used in
particular by LCCs, but then followed by
first-tier and full-service airlines.
The growing size and market share of
LCCs put competitive pressure on full-
service and first-tier airlines to adopt
different strategies, in particular to their
short-haul products. Like LCCs, full-
service carriers have changed their revenue
management strategies to accept higher
passenger load factors to counter or partly
offset declining average fares and passenger
yields. Full-service airlines typically
operated with load factors of 65-75% in
economy class, but these have now
increased to 80-85%.
Full-service airlines have also simplified
their short-haul products. Many have
dropped the standard meal service, and
replaced it with either complimentary or
paid-for snacks.
Another major change is that even full-
service airlines, that have not fully
unbundled their fares, now encourage
passengers to carry on luggage to minimise
the cost of, and time taken up by, baggage-
handling.
These measures have also aided quicker
turn times and improved aircraft
utilisation, again contributing to lowering
CASM.
Competitive pressures from LCCs have
led to a drop in average passenger yields,
so most full-service airlines now use seat
densification on their short-haul products
to help lower CASM.
Major airlines have changed to
simplified fare structures and lower fares,
and higher passenger cabin load factors as
a strategy to offset the steady loss of traffic
and market share to LCCs.
A second recent development in airline
strategy has been the adoption of measures
to improve the passenger experience with
new generation in-flight entertainment
(IFE) systems and technology. Reasons for
this include: improving the product
offering to increase passenger loyalty; and
using the systems to generate ancillary
AIRCRAFT COMMERCE
12 I AIRCRAFT ANALYSIS & FLEET PLANNING
revenues through the sale of airline and
non-airline products, such as IFE system
advertising, on-board shopping, buying
movies, using phone and email, and buying
destination-related products.
Traditional embedded IFE systems are
generally too expensive for narrowbodies.
New generation systems, however, are
cheaper and can be provided with or
without external connectivity systems.
LCCs generally class ancillary revenues as
coming from extras added to basic
unbundled fares. These extras include
additional payments for preferred seats and
checked luggage; and non-airline products,
such as car hire and hotels, that are sold
through their websites during passenger
reservations. Some LCCs are now offering
more ancillary products through their IFE
systems, and so are increasing the revenues
generated from ancillary products. The
revenue from ancillary products is high
enough that some LCCs have been able to
reduce fares, while remaining profitable, to
stimulate further traffic growth and achieve
better economies of scale. Ryanair is one
such example.
The developments in airline business
models and strategies over the past 20-25
years have consistently been led by LCCs,
and followed by all types of airlines that
want to achieve reductions in CASM.
The second noticeable development,
however, has been the erosion of, and
downward pressure on, passenger yields,
and the potential threat to RASM. LCCs
had already put pressure on first-tier and
full-service airlines’ passenger yields in the
late 1990s and early 2000s.
There was a second noticeable drop in
first-tier and full-service airline passenger
AIRCRAFT COMMERCE
yields in 2014-2016, following the
widespread unbundling of fares. Some
major North American airlines saw a drop
in unit yield as large as 3.0-3.8 cents per
ASM over the two years to 2016. For
example, in 2016 Aeromexico’s unit yield
of 20.52 cents per ASM in 2014 dropped
to 14.88 cents in 2016, while Air Canada’s
yield per RPM fell from 20.95 to 17.08.
A decline of 1.1-1.4 cents per RPM
was experienced by most US majors in
2014-2016, and airlines around the world.
The drop in passenger yields during
this period is explained by many airlines
adopting the strategy of unbundling fares,
and offering basic fares at a lower level.
Extras, such as special seat reservations or
luggage check-in, were charged for and
categorised as other or ancillary passenger
revenues.
While it was not possible to offset this
drop in basic fares and yields with higher
cabin load factors, since load factors had
already been raised with changes in
revenue management, it was partly offset
by the sale of additional extras. This helped
underpin TRASM.
Some airlines have also increased their
volume of ancillary revenues as they have
adopted IFE systems to sell a wider range
of products in the cabin.
A final element of TRASM has been
revenues generated by belly freight, partly
helped by the increased capacity of modern
generation aircraft, especially widebodies
deployed on long-haul and intercontinental
route networks.
Fortunately for many airlines, the cost
of jet fuel declined over the same period. In
fact, the price of jet fuel peaked in 2014 at
almost $3.00 per US Gallon (USG) in the
Delta Airlines has recorded operating margins of
11.8-22.58% between 2015 and 2019. At the end
of 2019 its net debt was just 30.6% of annual
revenue.
US, and had almost halved by 2016 to
$1.51 per USG. This clearly generated
substantial and welcome savings, with
airlines’ TRASMs reaching a low level in
2016.
The price of fuel climbed to $2.25 per
USG in 2018, but declined again slightly to
an average of $2.05 per USG in 2019.
North America
The North American main passenger
market is categorised by three main
categories of airlines: the major full-service
carriers; the regional feeder airlines; and
the LCCs. The four major airlines in the
US are Alaska Airlines, American Airlines,
Delta Airlines and United Airlines. It also
includes Air Canada in Canada, and
Aeromexico in Mexico.
Regional airlines are affiliated with
major airlines through franchise
agreements, so they operate on behalf of
the biggest three major carriers as
American Eagle, Delta Connection and
United Express.
The LCCs have taken a growing
portion of domestic US traffic. The largest
US LCCs are Southwest, jetBlue Airways,
Allegiant Air, Frontier and Spirit Airlines.
Westjet is the dominant LCC in Canada,
while Interjet and Viva Aerobus are
Mexican LCCs.
The overall system capacity provided
by the LCCs now accounts for an
increasing portion of total ASMs generated
by all airlines in the US. The fastest
growing LCC in the US is Spirit Airlines,
which increased its domestic ASM capacity
by more than 40% from 2017 to 2019.
The increasing pressure from LCCs has
seen the RASM generated by US majors
drop from 2014 to 2016 to levels nearer
the LCCs. Despite this, US majors have
been able to reduce their unit CASM by a
larger amount, mainly due to the drop in
fuel prices over the same period.
The three major carriers have, however,
benefited from their mergers with other US
majors during the previous decade. This
consolidation has helped strengthen yields
and achieve cost savings.
This raises the issue of how sensitive
total CASM and operating margins are to
the average annual fuel price.
The result has been a widening of the
gap between RASM and CASM, and an
improvement in airline profit performance.
ISSUE NO. 128 • FEBRUARY/MARCH 2020
14 I AIRCRAFT ANALYSIS & FLEET PLANNING
NORTH AMERICAN AIRLINES FINANCIAL PERFORMANCE 2019 cargo and freight.
Delta has benefited from this
Airline Air American Delta United consistently strong financial performance
Canada Airlines Airlines Airlines by increasing the strength of its cash
reserves and balance sheet. At the end of
2019 Delta had $2.88 billion in cash (see
Annual revenue - $m 14,700 45,768 47,000 43,259 table, this page); as well as $17.3 in
Annual op. costs - $m 13,447 42,703 40,389 38,958 operating and finance lease liabilities, and
long-term debt. This left it with net debt of
Operating profit - $m 1,269 3,065 6,600 4,300 $14.4 billion, equal to 30.6% of annual
revenue.
Operating margin - % 8.6% 6.7% 14.1% 9.9%

Year-end cash - $m 1,600 3,800 2,880 2,760 United Airlines

Cash as % annual 12%
operating cost
Airline
WestJet
Annual revenue - $m 2,971
Annual op. costs - $m 2,749
Operating profit - $m 222
Operating margin - % 7.5%
Year-end cash - $m 1023
Cash as % annual 37%
revenues
American Airlines
American Airlines, including mainline
and regional operations, is the largest
carrier in the US, both in terms of revenue
passenger mile (RPM) traffic volume and
ASM capacity.
American’s performance over the past
four years is a good indicator of how
airline operating margins have improved.
Low fuel prices meant that 2016
should have been the best or close to the
best performance any airline could have
had. American’s operating margin was
13.2% in 2016, but steadily fell to 6.7% in
2019. This compares to an operating
margin of just 0.8% in 2010.
American generated an operating profit
of $5.3 billion in 2016, and a profit of $3.1
billion in 2019. Its total CASM was higher
in 2019 than 2018, despite fuel prices and
the fuel cost per CASM being lower in
2019.
The difference in total annual
operating costs due to changes in fuel price
is explained by American Airlines using a
total of 4.3 billion USG in 2014, and 4.54
billion USG in 2019, as a result of growth
in operations. In contrast, its highest
annual expenditure on fuel was $12.6
billion, falling to a low of $6.17 billion in
2016, and rising again to $9.39 billion in
2019. The difference in annual fuel
expenditure due to peaks and lows in unit
fuel price shows an airline’s sensitivity to it.
9% 7% 7%
jetBlue Southwest Spirit
Airways Airlines Airlines
8,094 22,428 3,830
7,294 19,471 3,329
800 2957 501
9.9% 13.2% 13.1%
1,300 4,070 1,080
16% 21% 28%
While American has, like most other
airlines, improved its overall performance,
it has higher debt levels. At the end of 2019
it had just $280 million in cash, while its
investments brought its total to $3.8
billion. These are equal to 8.9% of annual
operating cost (see table, this page).
Meanwhile, its debt and finance lease
and operating lease liabilities totalled $33.4
billion, taking American’s net debt position
to $29.6 billion. This is equal to 64% of
annual revenues of $46 billion.
Delta Airlines
Delta Airlines is marginally smaller
than American, with a mainline jet fleet of
more than 900 aircraft. It has consistently
achieved a high operating margin.
Delta’s best year was 2015, with an
operating margin of 22.5%, and an
operating profit of $7.82 billion.
Its operating margin has gradually
declined over the past five years, but was
still 14.1% in 2019, generating $6.6 billion
from revenues of $47 billion in 2019. Over
the period its operating margins have
ranged from 11.8% in 2018 to 20.1% in
2016.
In 2019, Delta’s revenues of $47 billion
were split as follows: $36.9 billion (78.5%)
came from cabin ticket sales; $5.37 billion
from loyalty awards and travel-related
services; US$ 1.3 billion (2.7%) from
ancillary businesses; and $0.75 billion from
United’s overall operation is similar in
size to American’s. United has been
consistently profitable since 2010, although
it recorded a low operating margin of just
0.2% in 2012, two years after its merger
with Continental.
United’s best year in terms of absolute
operating profit and operating margin was
2015, with $5.17 billion at 16.2%. In the
past four years operating margins ranged
from 7.8% in 2018 to 14.0% in 2016. The
airline generated an operating profit of
$4.3 billion in 2019 (see table, this page).
Despite fluctuating fuel prices, United
has consistently maintained a good
performance, although its operating
margins are not as good as Delta’s.
United had cash reserves of $2.76
billion, and another $2.2 billion in short-
term investments at the end of 2019. Its net
debt position was $19.0 billion at the end
of 2019, equal to 44% of annual revenue.
US LCCs
LCCs in the US clearly also benefited
from the low price of fuel in 2016, and
their unit CASM has fluctuated each year
with the changes in average fuel price.
Despite the lower yields that resulted from
their strategy of unbundling fares, LCCs’
operating margins have improved.
Allegiant Air
Allegiant Air has remained steadily
profitable since 2010. The size of its
operation has more than doubled, and
revenues have grown from $635 million in
2010 to $1.84 billion in 2019.
Allegiant recorded its highest operating
margin of 26.4% in 2016. This declined to
about 13.5% in 2018, but rose again to
19.8% in 2019. It generated an operating
profit of $364 million in 2019.
Allegiant Air had cash reserves and
short-term investments totalling $458
million. Its net position is $963 million,
equal to about 50% of annual revenue.
jetBlue Airways
jetBlue Airways has steadily grown
since 2010, and has been consistently
profitable. In 2010 its revenues of $3.4
billion has grown to $8.1 billion by 2019.

AIRCRAFT COMMERCE ISSUE NO. 128 • FEBRUARY/MARCH 2020


Spirit Airlines generates a higher portion of its
revenues from ancillary products than any other
carrier. It also has one of the highest operating
margins in the world; recording a performance
of 19.1% in 2019. It held $1.08 billion in cash and
cash equivalents at the end of 2019, equal to
28% of a full year of operating costs.
jetBlue’s best year of 2016 saw it
generate an operating profit of more than
$1.3 billion on revenues of $6.6 billion, an
operating margin of 19.7%. This is one of
the highest operating margins recorded by
any US carrier from 2010 to 2019.
In 2019 its revenues of $8.1 billion
generated a profit of $800 million, an
operating margin of 9.9% (see table, page
14). This was an improvement on 2018’s
disappointing result, when unit CASM had
climbed by 1.4 cents to 12.13 cents. Unit
cost was down to 11.43 cents in 2019.
jetBlue had $1.3 billion at the end of
2019 in cash, cash equivalents and short-
term debt; equal to 16% of annual
revenues.
Southwest Airlines
Southwest Airlines is the biggest LCC
in the US, with revenues almost three times
the level of jetBlue, the second largest.
Southwest has been consistently
profitable since it began operations in
1973. It has also maintained an impressive
performance since 2010. Operating margin
peaked at 18.5% in 2016, but has steadily
declined every year to 13.2%. In 2018 it
had revenues of $22.4 billion and an
operating profit of $2.96 billion. Unit
CASM increased by 0.62 cents in 2019.
Southwest nevertheless has a strong
financial position, with cash reserves and
short-term investments of $4.07 billion at
the end of 2019 (see table, page 14). It also
had $4.0 billion in short- and long-term
lease liabilities, taking its net cash position
to close to zero.
Spirit Airlines
Spirit is an LCC that offers some of the
lowest fares in the US, and generates 50%
of its passenger revenue from non-ticket
sources. It has experienced a high rate of
growth, and has been consistently
profitable since 2010.
In 2016 it recorded an operating
margin of 19.1%, with an operating profit
of $443.7 million from annual revenues of
$2.32 billion.
Spirit operates a true low-cost model,
with an average passenger fare per segment
of $55 in 2019. Non-ticket revenues per
segment were $56, showing how adept it is
at generating ancillary revenues. In 2019, it
generated revenues of $3.83 billion, and an
operating profit of $501 million; an
operating margin of 13.1% (see table, page
ISSUE NO. 128 • FEBRUARY/MARCH 2020
15 I AIRCRAFT ANALYSIS & FLEET PLANNING
14). Spirit has the lowest unit CASM of all
US LCCs.
At the end of 2019 it had cash and
cash equivalents plus short-term
investments of $1.08 billion, equal to 28%
of annual revenue and 32.5% of annual
operating costs. Its net debt position was
$2.48 billion, 65% of annual revenue.
Air Canada
Air Canada has faced many financial
challenges over a sustained period, many of
which it overcame when it absorbed
Canada’s second full-service airline
Canadian.
Air Canada has nevertheless been
consistently profitable since 2010, and like
most other airlines has seen its operating
margins improve over the past four to five
years as it has unbundled passenger fares.
While 2016 saw Air Canada’s strongest
performance with a margin of 9.2%, it has
maintained this with an operating margin
of 8.3% in 2018 and 8.6% in 2019. Actual
cash operating profit was $1.65 billion in
2019 (about US$ 1.27 billion).
Air Canada’s balance sheet improved
strongly in 2019, with cash and cash
equivalents increasing by C$ 630 million to
C$ 2.09 billion ($1.6 billion), an increase
of C$ 1.46 billion (about US$ 1.12 billion).
This is equal to 10.9% of annual revenues
and 11.9% of annual operating costs (see
table, page 14).
WestJet
WestJet is Canada’s prime LCC, and
has been successful, maintaining steady
growth. Air Canada still dominates, with
almost four times its annual ASM capacity.
Westjet operates more than 150
aircraft, 140 of which are 737s. This
compares to Air Canada’s fleet of more
than 180, about 80 of which are medium
and large widebodies.
WestJet’s financial performance has
generally been strong since 2010, with an
operating margin of 7.3-14.2% in most
years. It had reduced profitability in 2018
following a strong rise in unit CASM in
2017 and 2018. Unit cost in 2018 was
10.69 cents, 1.15 cents and 12% higher
than in 2016. Its operating margin in 2018
was $119 million on annual revenues of
$3.64 billion.
WestJet improved its performance
during 2019, even though its unit CASM
rose by about 3%. Non-fuel costs rose by
more than 5% during the year.
WestJet had C$1.33 billion in cash and
cash equivalents at the end of September
2019, equal to 34.4% of revenues and
37% of operating costs (see table, page
14).
Europe
Europe has more flag-carrier and full-
service airlines than North America. The
three largest groups are the International
Airlines Group (IAG), the Air France-KLM
Group and the Lufthansa Group.
IAG’s airlines comprise British Airways
(BA), Aer Lingus, Iberia and the Spanish
LCC Vueling.
The Air France-KLM Group includes
the French and Dutch flag carriers, and
several other subsidiary carriers, including
HOP!, Transavia, KLM Cityhopper and
Martinair.
Like US airlines, European carriers
have been consistently profitable since
2010. Operating margins have particularly
improved since they started unbundling
from 2015. Unit TRASM has declined
more slowly than passenger yields, while
AIRCRAFT COMMERCE
16 I AIRCRAFT ANALYSIS & FLEET PLANNING
EUROPEAN AIRLINES FINANCIAL PERFORMANCE 2019 2015 after it started to offer unbundled
fares. Its unit cost dropped by about 4.40
Airline IAG Air France Lufthansa cents per ASM from 20.96 cents, a decline
Group KLM Group of 21%. Passenger yields naturally fell with
the adoption of this strategy, but unit
Annual revenue - $m 28,057 29,900 42,898 revenues did not reduce to the same level.
Annual op. costs - $m 24,443 28,650 41,039

Operating profit - $m 3,614 1,250 1,859 KLM

Operating margin - % 12.8%
Year-end cash - $m 4,466
Cash as % annual 18.2%
operating cost
Airline
Annual revenue - $m
Annual op. costs - $m
Operating profit - $m
Operating margin - %
Year-end cash - $m
Cash as % annual
revenues
unit CASM has fallen by a greater degree,
resulting in a wider gap between TRASM
and CASM, and better profit margins.
IAG
BA is the dominant player in IAG, and
holds many operating and economic
advantages, such as the expanse of its
intercontinental network.
Its operating margin in 2010 was just
2.3%; this has risen to a consistent figure
of more than 10% every year since 2015.
Like all other carriers, BA benefited from
low fuel prices to have a strong year in
2016, with an operating margin of 12.9%
in 2018. BA performed even better in
2018, with a margin of 15%, mainly due
to better passenger yields. In 2019 it
reported an operating margin of 14.5%.
Iberia
Iberia is IAG’s second largest airline.
While it had financial difficulties up to
2014, and generated losses for five years in
a row, it has been profitable every year
since 2015. Iberia had high unit CASM up
to 2014, with 20.51 cents per ASM in
2014. This fell to 14.06 cents in 2015, a
32% drop that returned it to profitability.
Operating margins have varied since, but
were 8.4% and 8.8% in the last two years.
Aer Lingus
Aer Lingus has regularly generated
operating profits since 2010, and improved
its margins from 3.8-7.2% in 2010-2015,
4.2% 4.3%
4,090 990
15.7% 2.4%
easyJet Ryanair
8,492 8,467
7,924 7,349
568 1,118
6.7% 13.2%
2,100 1,870
27% 25%
up to 13.0-15.1% in 2016-2020.
The main change with Aer Lingus has
been a drop in unit CASM of more than
4.4 cents from 2014 to 2016.
IAG Group performance
Vueling is the fourth carrier in IAG,
and achieved operating margins of 11.3%
and 9.8% in 2018 and 2019.
Overall, the four airlines in IAG had
annual revenues of €25.5 billion in 2019,
and generated an operating profit of 3.28
billion, equal to a margin of 12.8% (see
table, this page).
Cash and cash equivalents for the four
airlines in IAG at the end of 2019 were
€4.06 billion ($4.46 billion); equal to
15.9% of annual revenues and 18.2% of
annual costs (see table, this page). IAG’s
net position at the end of 2019 was €7.6
billion; 30% of its annual operating
revenues.
Air France
The Air France group includes its
regional subsidiary HOP! and Transavia
France.
The Air France group has had long-
term profitability problems, generating
losses every year from 2010 to 2014.
It became profitable for the first time in
2015 with an operating margin of 2.6%.
Its performance has not improved since
then, and in 2019 it reported an operating
margin of just 1.7% on annual revenues of
€16.59 billion.
Air France’s performance changed in
The KLM Group includes KLM, KLM
Cityhopper and Transavia. It is the smaller
of the two groups that form the Air France
KLM Group.
KLM made a small loss of under $20
million in 2012, but has been consistently
profitable since 2013. It has achieved
significant cost reductions since 2015, with
its unit CASM declining by 18% from
2014 and 2015, and by a similar degree
from 2004 to 2018.
Operating margins were 1.8-3.1% in
2013 and 2014, and have since improved.
KLM recorded operating profits of $751
million in 2016, following the drop in jet
fuel prices, while they exceeded $1 billion
in 2017 and 2018, equal to operating
margins of 8.8% and 9.8%.
The airlines generated an operating
profit of €853 million ($940 million) in
2019, equal to an operating margin of
7.7%.
The Air France KLM Group had total
revenues of €27.19 billion ($29.9 billion),
and an operating profit of €1.14 billion
($1.25 billion) in 2019; an overall group
operating margin of 4.2%.
The group includes maintenance and
engineering (M&E) activities, with almost
50% of its revenues coming from third-
party activities. These had an operating
margin of 5.6% in 2019.
Despite Air France’s poor financial
performance over an extended period, the
Air France KLM Group had cash and cash
equivalents of €3.71 billion ($4.09 billion),
equal to 15.7% of its total annual
operating expense in 2019 (see table, page
16). It has another €1.0 billion ($1.1
billion) in securities and bonds.
Moreover, the group had net debt of
€6.15 billion ($6.76 billion). This is the net
difference of €10.86 billion ($11.95
billion) of debt, and €4.71 billion ($5.18
billion) in net cash. The debt includes
€4.03 billion ($4.4 billion) of lease
commitments, and €6.89 billion ($7.6
billion) of financial debt.
Lufthansa
The Lufthansa Group includes the
network airlines Lufthansa, Lufthansa
Cityline, Swiss, Austrian, Brussels Airlines
and Eurowings, all of which have been
consistently profitable. The Lufthansa
Group also includes logistics, M&E,
catering, and airline services activities.
Lufthansa and the network airlines’
operating performance improved from
2015. In 2010-2014, Lufthansa’s operating

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18 I AIRCRAFT ANALYSIS & FLEET PLANNING
margins ranged from 1.6% to 3.1%,
typical of the industry at that time. Since
2015 its margins have ranged from 6.0%
in 2015 to 11.8% in 2018.
As with all other carriers, Lufthansa
adopted new strategies from 2015, after
which its unit CASM declined to 4.0-4.5
cents per ASM.
Operating profits in the past five years
have been high: $1.61 billion in 2015; and
$3.12 billion in 2017 from revenues of
$26.74 billion.
The airline group had similar revenues
in 2019, but higher fuel prices eroded the
operating margin to 4.3%.
Despite consistent strong performance
in recent years, the network airlines had
limited cash and cash equivalents at the
end of 2019. These totalled €897 million
($990 million).
easyJet
easyJet was one of the first European
LCCs. It has grown to be one of Europe’s
largest and most profitable carriers. Unlike
full-service and first-tier carriers, easyJet
has achieved strong operating margins
consistently since 2010.
In 2010 easyJet generated revenues
equivalent to $4.63 billion and an
operating profit of $270 million, a margin
of 5.8%. Profits grew each year to 2015,
when it had an operating profit of $1.06
billion; an operating margin of 14.7%.
Annual operating profit margins
continued at 7.3-10.7% in 2016-2019.
These lower operating margins
followed the decline in passenger yields as
the industry generally followed the
unbundling strategy, led by LCCs, of which
AIRCRAFT COMMERCE
easyJet was a pioneer. This is illustrated by
its average passenger revenue per seat
being £49.23 ($67.00) in 2018, falling to
£47.71 ($63.60) in 2019.
easyJet’s revenues generated from
ancillary products have grown as a portion
of total revenue. Revenues from ancillary
products equalled 20.5% in 2018, £12.71
($17.28) per seat; and a similar level of
21.5% in 2019, £13.10 ($17.40) per seat.
EasyJet had accumulated £1.58 billion
($2.1 billion) in cash by the end of 2019
(see table, page 16), an increase of £203
million ($270 million) during the year. This
is equal to 27% of full annual operating
costs; a high ratio compared to many other
airlines.
Despite this, easyJet’s debt increased
during the year by £350 million to $1.32
billion. It also has £576 million of lease
liabilities, resulting in a net debt position of
£326 million. This, however, is appreciably
low compared to both to annual revenues
and annual operating costs.
Easyjet operated a fleet of more than
235 aircraft at the end of 2019.
Ryanair
Ryanair is arguably not only the most
successful LCC in the world, but also the
most profitable airline worldwide when
judged by operating margin performance.
From 2010 to 2014, Ryanair achieved
annual operating margins of 13.5-15.6%.
Its highest operating profit during this
period was $944 million on revenues of
$6.06 billion in 2012.
Operating margins improved from
2015 as the industry followed the
unbundling strategy. Ryanair’s CASM fell
Ryanair has recorded the highest level of airline
profitability, when taken as operating margin. In
2015 it generated a margin of 22.8%, and this
was followed in 2016 by a margin of 23.3%.
by 11% in 2015, and it generated an
operating profit of $1.61 billion on annual
revenues of $7.05 billion; an operating
margin of 22.8%.
Ryanair’s low fare and passenger yield
strategy has continually stimulated traffic
growth, and the size of its operations and
fleet doubled from 2010 to 2019.
Revenues and operating margins have
continued to grow since 2015, and Ryanair
recorded its highest operating profit and
margin of $1.96 billion and 23.3% in
2018.
Financial performance was weakened
in 2019 as a 7.6% growth in revenues was
outstripped by a 21.8% increase in annual
operating costs. Ryanair’s unbundling has
seen ancillary revenue per passenger
gradually climb since 2015 by €2.00
($2.20) per passenger to €17.15 ($18.90).
In the meantime, the average passenger
net fare has steadily fallen by 21% over the
same period from €47.00 ($53.00) per
passenger in 2015 to €37.00 ($41.00) in
2019. Ancillary revenues accounted for
32% of total revenues in 2019, less than in
2017, when ancillaries accounted for 37%
of total revenues.
Overall therefore, total revenue per
passenger has declined over the period
from €62.44 ($71.80) in 2015 to €54.17
($60.00) in 2019, a drop of 13%.
These total revenues per passenger are
interesting when compared to US LCC
Spirit Airlines, which has the reputation of
being the lowest-fare airline in North
America. Spirit Airlines’ total revenue per
passenger of $110.91 in 2019 comprised
$54.63 from net fares and $56.28 from
ancillaries. Despite Ryanair having both a
lower ancillary revenue per passenger and
$50.00 lower total revenue per passenger,
both airlines achieved similar operating
margins of 13% in 2019.
While this clearly has an impact on the
airline’s financial performance, its costs per
passenger declined by 17% from 2015 to
2018. They then rose again by 13% to
€47.00 ($51.70) per passenger in 2019.
Besides a 17% increase in fuel cost per
passenger, Ryanair also had a rise of 22%
in both staff and marketing and
distribution costs, and an 18% rise in
aircraft maintenance costs in 2019 over
2018. Ryanair clearly needs to bring these
all under control to regain its previous
operating margin performance.
ISSUE NO. 128 • FEBRUARY/MARCH 2020
 19 I AIRCRAFT ANALYSIS & FLEET PLANNING
Despite a disappointing performance in
ASIA PACIFIC AIRLINES FINANCIAL PERFORMANCE 2019
2019, Ryanair held cash of €1.7 billion
($1.87 billion) at the end of the year, equal
Airline All Nippon Japan Cathay
to 25% of a full year’s operating costs (see
Airways Airlines Pacific
table, page 16). Ryanair’s net debt position
at the end of 2019 was $2.21 billion, equal
to 25% of its annual operating revenues. Annual revenue - $m 16,343 13,396 13,906
Annual op. copses - $m 14,897 11,809 13,474

Asia Pacific Operating profit - $m 1,446 1,587 432

The Asia Pacific has many major
international airlines with large
intercontinental networks, including China
Southern, Singapore Airlines (SIA), Japan
Airlines (JAL), All Nippon Airways (ANA)
and Qantas. It also has one of the largest
LCCs, Air Asia, whose operation is now
similar in size to, or larger than, some
national carriers such as Air India or JAL.
China
China’s three main carriers are the Air
China, China Eastern and China Southern
groups, all of which have performed
strongly in recent years, with operating
margins of 6.0% to 11.5%. China Eastern
is marginally more profitable than China
Southern.
Annual revenues have steadily grown
for all three carriers over the past four
years. As with other airlines, passenger
yields and CASM have both dropped since
the change in airline strategy in 2015.
All three major carriers enjoyed high
operating margins of 11.0-12.4% in 2016,
due to the fall in fuel prices. These have
fallen to 6.1-8.7% over the past three
years, similar to the operating margins
these airlines generated in 2010-2014.
All Nippon Airways
All Nippon Airways (ANA) has
steadily grown since 2010, with its RPMs
increasing by almost 56% and revenues by
39% to 2019.
ANA has consistently generated
operating margins of 4.8% to 9.1% from
2011 to 2019. It last recorded a loss of
$623 million on revenues of $11.76 billion
in 2010, primarily due to low passenger
yields, which then made a strong recovery
in 2011 by 12%.
ANA made large reductions in unit
CASM, dropping from 25.22 cents in 2013
to 19.77 cents in 2015. While CASM fell
further in 2016 due to low fuel prices, it
had risen again to 20.24 cents in 2019.
Even so, 2019 was ANA’s strongest year in
absolute terms, with an operating profit of
$1.44 billion on revenues of $16.34 billion;
an operating margin of 8.8%.
Despite consistent and respectable
profit performance, ANA only had $615
million in cash and deposits at the end of
2019. It also, however, held $2.03 billion
in marketable securities. Combined, these
are equal to 18% of a full year’s operating
cost (see table, this page).
Operating margin - % 8.8%
Year-end cash - $m 2645
Cash as % annual 18%
operating cost
Airline Singapore
Airlines Gp
Annual revenue - $m 16,323
Annual op. costs - $m 15,256
Operating profit - $m 1,067
Operating margin - % 6.5%
Year-end cash - $m 2,940
Cash as % annual 19%
revenues
Japan Airlines
Japan Airlines (JAL) once had the
largest intercontinental network in the Asia
Pacific, but has since restructured itself. It
has consistently recorded high operating
margins since 2010. It recorded the lowest
margin of 11.8% in 2019, and its highest
of 17.0% in 2011 and 15.7% in 2016.
JAL’s highest absolute operating profit
was $2.6 billion in 2011 on revenues of
$15.28 billion.
Despite long-haul and large aircraft
operations accounting for much of its
operations, JAL has one of the highest unit
CASMs. This was more than 30.0 cents in
2013 and 2014, but had fallen by 8-10
cents by 2017-2019.
With a consistent and high operating
margin performance, JAL held cash and
deposits equal to 29% of a full year of
operating costs (see table, this page),
putting it in a strong position.
Cathay Pacific
Cathay Pacific’s financial performance
has come under pressure in recent years. In
2010 it recorded an operating profit of
$1.83 billion on revenues of $11.52 billion,
an operating margin of 15.9%.
Since then, its financial performance
has weakened, largely due to a rise in unit
CASM up to 2014; from 2011 to 2014 its
11.8% 3.2%
3,425 1,932
29% 14%
Air Asia
Qantas Group
17,966 3,478
16,479 3,362
1,487 116
8.3% 3.3%
2,160 831
13% 25%
operating margins fell to a poor 1.8-5.6%.
Cathay’s performance was weakened
further following the general industry trend
to lower passenger yields and lower unit
CASM. While unit costs have declined,
passenger yields are 2.6-3.1 cents per RPM
lower, resulting in losses in 2016 and 2017,
despite lower fuel prices in 2016.
Cathay returned to profitability in
2018 and 2019, with an operating margin
of 3.2% in both years.
Despite having a lower unit cost in
2019 than in 2018, Cathay suffered from
an extended period of public
demonstrations in Hong Kong in 2019.
This undermined passenger growth and
passenger numbers, with the effect of
weakening passenger yields and revenues.
At the end of 2019, Cathay’s liquid
funds were equal to 14.3% of a full year’s
operating expenses (see table, this page).
Singapore Airlines
Singapore Airlines (SIA) was one of the
most profitable airlines in the 1990s. Now
an enlarged group, the SIA Group has
recorded consistent operating profits since
2011, although operating margins are not
as strong as other international carriers in
the region.
Up to 2015, SIA’s best performance
was 2011, when it recorded an operating
profit of $642 million from revenues of

ISSUE NO. 128 • FEBRUARY/MARCH 2020 AIRCRAFT COMMERCE

20 I AIRCRAFT ANALYSIS & FLEET PLANNING
$8.85 billion, an operating margin of
7.3%.
SIA’s unit CASM declined from 2016,
and was followed by lower passenger
yields. Like most airlines, SIA has benefited
overall, and operating margins were 4.2-
7.5% from 2016 to 2019. Its best year
recently was 2019, with revenues up to
$9.67 billion, and an operating profit of
$729 million; a margin of 7.5%. At the
end of its last financial year, the SIA Group
had $2.94 billion in cash, equal to 19% of
a full year of operating costs (see table page
19).
Qantas
The Qantas group, which includes
Qantas and Australian carrier Jetstar, has
improved its financial performance from
2016 to 2019. Its best year was 2017, with
an absolute operating profit of $1.6 billion,
generated from revenues of $14.42 billion.
This was an operating margin of 9.1%. Its
highest operating margin was in 2018, at
10.2%.
Qantas’ previous performance in 2010-
2015 saw lower operating margins. It
adjusted in 2015 to lower passenger yields,
but failed to reduce its unit CASM, which
rose by 11.6%, as Qantas experienced a
7.5% drop in yield per RPM.
Qantas regained control of costs, and
its unit CASM was 16.15 cents in 2016,
and fell further in 2017 to 14.44 cents.
Qantas had cash of $2.16 billion at the
end of 2019, equal to 13.0% of full annual
operating costs (see table, page 19). Its net
debt on its balance sheet was $3.07 billion,
equal to 17% of annual revenues.
AIRCRAFT COMMERCE
Air Asia
The Air Asia Group comprises low-
cost Air Asia airlines operating in several
Asia Pacific countries, including Malaysia,
Thailand, The Philippines, Indonesia,
Japan, India, Vietnam and China. The
group operates A320 family and A330
aircraft.
The Air Asia Group has consistently
achieved high operating margins, peaking
at 20.8% in 2009, and again at 22.8% in
2016. These were operating profits of $230
million from revenues of $1.1 billion in
2009, and $597 million from revenues of
$2.62 billion in 2016.
The group has been able to maintain a
low unit cost performance, with unit
CASM at 4.85-7.33 cents from 2009 to
2014. This then dropped from 2015, and
ranged from 4.7 to 5.3 cents in 2016-2019.
Operating margins strengthened from
2016 to 2019, ranging from 16.0% to
22.8%. Margins have, however, dropped
in 2018 and 2019 to 10.5% and 11.4%.
Its consistent positive financial
performance has seen the Air Asia Group
steadily strengthen its balance sheet. At the
end of 2019 it had cash deposits of 3.3
billion Malaysian Ringgits ($831 million)
(see table, page 19). Moreover, the group
improved its balance sheet strength each
year, with net debt reducing from $2.85
billion at the end of 2014 to $1.86 billion
at the end of 2017. By the end of 2018 it
had zero net debt, having generated net
profits in the region of $400 million every
year for three years.
One of Air Asia’s main achievements
has been its high growth in ancillary
The Air Asia Group has achieved some of the
highest operating margins of all global airlines
over the past 10-11 years. Air Asia is a leading
airline in terms of portion of total revenues
generated from ancillary products and on-board
sales.
revenues. Revenues generated by ancillary
products in 2019 accounted for 23% of
total revenue, equal to about 2.75 billion
Malaysian Ringgits ($688 million).
Air Asia’s main ancillary products
include seat selection, checked baggage,
and its Teleport and Bigpay products.
Future considerations
A large number of major and low-cost
airlines have improved their financial
performance in recent years. This has had
the benefits of increasing cash reserves and
reducing net debt.
This financial strength will stand
airlines in good stead as the Coronavirus
pandemic grows around the world. The
rate at which this has had an impact on the
global economic situation and people’s
ability to travel has seen airline traffic and
airline fleet activity decrease at an
unprecedented rate.
This clearly raises several issues, one of
which is the extent to which airlines’
financial strength will enable them to
withstand such a rapid downturn,
especially since no one knows for how long
airline travel will be disrupted.
While airlines will not be incurring
many aircraft operating costs, they will still
have to pay aircraft financing costs, staff
salaries, and general overheads. No doubt
many airlines will seek financial support
from their local governments in the event
of a prolonged downturn.
In the meantime, developments in
recent years illustrate the effectiveness that
unbundling the traditional passenger fare
product has had on lowering airlines’ unit
costs, and improving profit margins,
despite also reducing passenger yields.
The financial performance of some
leading LCCs, in particular Spirit Airlines
and Air Asia, demonstrates the
effectiveness and therefore importance of
improving revenues generated by
ancillaries. With the constant development
in IFE systems and business models for
selling ancillary products, it should be
possible for airlines to generate larger
volumes of revenue, and improve their
financial performance further when normal
service is resumed.
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ISSUE NO. 128 • FEBRUARY/MARCH 2020

Latest in-flight entertainment (IFE) systems utilise the wireless network to
stream content to the passenger mobile devices and seatback screens.
Importantly, modern IFE systems use software and analytics to leverage
ancillary revenue sales and improve the passenger experience.
IFE 2020: All modern
conveniences
C
onsiderations for airlines to
think about when choosing an
in-flight entertainment (IFE)
platform, are its limits and
whether it will meet its needs.
IFE solutions can serve different
purposes. Some operators want to use an
IFE system to improve the passenger
experience; others to exploit the IFE’s
capability to leverage ancillary revenue
and to boost airline yields. An experience
of the latter is Air Asia, which has
increased the portion of total revenues
generated by ancillary products to 23%.
According to Bluebox chief executive
officer, Kevin Clark: “Service
enhancement in its simplest form is when
an airline without an IFE system wants to
improve its overall passenger experience.
As the solution develops, the ability to
satisfy a particular requirement becomes
much broader.”
A wireless bring-your-own-device
(BYOD) system is also known as a
containerised or cache solution, because
it stores a mix of media-content in a hard
drive like a computer. Passengers can
access the stored media content via their
personal electronic devices (PEDs)
through a wireless network.
This BYOD culture is becoming
increasingly popular with airlines because
it removes the need for them to embed an
IFE system with seatback monitors and
complex equipment.
The Bluebox system creates a wireless
network that can provide coverage for
the whole cabin. Typically, two portable
Bluebox units can facilitate about 150
passengers, and three can support 220.
When passengers access the wireless
network on their PEDs, they are
presented with an IFE portal, from which
they can select the media content. Airlines
can customise the look and feel of the
portal with their branding. The portal
could display an advert, a link to its in-
flight shop or a ‘pay-as-you-use’ screen.
ISSUE NO. 128 • FEBRUARY/MARCH 2020
This browser-based system means that
passengers do not need to download the
airline’s IFE app before the flight. They
are often unaware of the importance of
downloading the airline’s IFE app before
the flight; once they are airborne, it
cannot be downloaded.
This means the browser-based system
is more convenient and accessible to
passengers, which translates into an
increase in service uptake rates. Unlike
aircraft with internet connectivity, uptake
rates with a containerised app-free
solution can be as high as 100%.
More important to the IFE solution is
the software that is behind it, which is
why many IFE providers focus on
software. Platforms that use easily
upgradable software can stay up to date
with changes in technology.
Typically, many legacy IFE seatback
systems are driven by bespoke software
solutions. These hardwired IFE systems
have a limited potential to be upgraded,
meaning the front-end can look dated in
appearance and lack functionality.
Airline virtual shops and magazines
are becoming increasingly sophisticated
and larger in scale. IFE software needs
the capacity to grow with these services.
APP-FREE
Sometimes ideas that come from the
market are beyond what is realistically
achievable, although they can influence
the developers of IFE platforms to create
more innovative IFE systems. One area of
IFE that is important is the influence of
software and content on its development.
Until recently, digital rights
management (DRM) related to wireless
streaming was controlled by passengers
downloading an airline app to their
PEDs. The app unlocks the content
securely so that it cannot be copied or
recorded illegally by the passenger.
Recently it has become possible for
21 I AIRLINE REVENUES
passengers to watch browser-based DRM
content without an app directly on their
PEDs via an internet browser.
This means that the software that
decodes the content is part of the internet
browser. “The clever bit is serving the
content so it can be decoded by the
passenger’s chosen browser, such as Safari
or Chrome, on their device without them
downloading an airline app,” says Clark.
Service uptake increases by 40%
using a browser-based system rather than
an app-based IFE system.
Destination services
Apps such as moving maps are
becoming progressively more immersive
and increasing in interactive functionality.
Maps educate the customer and can be
used by the airline as a tool to generate
ancillary revenue. Maps provide a
context that is relevant to the viewer and
make it possible to leverage services such
as destination shopping.
The map’s primary function is to
make passengers aware of the services
available at any given destination.
Embedded within the map’s software is
the ability for passengers to buy any
chosen destination event, such as city
tours or holiday activities. With a degree
of connectivity included, it is possible to
extend the capability of the map further.
It is still possible to support an off-line
transactional environment.
“They system includes an off-line
mode that allows a passenger to book an
event,” says Clark. “For example, when a
passenger buys a ticket for an event, it is
provided at an allocation level. This
means that it is only released when the
aircraft synchronises with a ground-based
server at its destination.”
Unsold tickets are then made
available to passengers on board another
flight. This sequence will continue until
all the tickets allocated to the airline have
AIRCRAFT COMMERCE
22 I AIRLINE REVENUES
been sold. Typically, off-line sales are for
low-risk items, such as a restaurant
reservation. Such ticketed events have
little chance of selling out quickly and are
relatively safe from double bookings.
To decide on the level of connectivity
needed for payment solutions, operators
must understand the goods and services
they intend to transact. Will passengers
be consuming goods and services in the
air, or buying a watch that will be
delivered to their hotel or home?
Selling tickets for concerts and
sporting events in-flight represents a
higher risk, because of the fluidity of
seating allocation. Connectivity is needed
to reserve booked seats with the vendor
and to ensure that payment is authorised.
Payments
On board a disconnected aircraft,
payments are usually limited to $20-30 to
mitigate against fraud or declined
transactions. In a connected aircraft
environment, this limit can be increased,
because passenger credit or debit card
payments are authorised in real time.
Aircraft connectivity makes payment
transactions as secure as online banking
and comparable to many e-retailers.
Furthermore, it is possible to achieve high
levels of security with low bandwidth
solutions.
“Airlines offering an onboard duty-
free catalogue do not require any in-flight
connectivity, because many of the
transactions will be fulfilled after the
journey. This means all payment security
checks as part of the transaction can be
completed after the journey, before the
goods are despatched,” says Clark. “It is
possible to achieve a lot with a
disconnected aircraft.”
AIRCRAFT COMMERCE
The Bluebox solution recognises
when an aircraft has landed and is at the
gate. At this point, the system connects to
the local long-term evolution (LTE)
network and all payment transactions
that have been completed on the flight
will be authorised at this point. This LTE
data path is also used to refresh content
and load IFE data onboard the aircraft.
Portability
A big difference between Bluebox and
other IFE systems is that it does not need
a supplemental type certificate (STC), as
it is not hardwired into the aircraft.
Airline operators normally do not
take the unit off the aircraft. “We have
designed the units so they will operate on
battery power. Many operators leave the
units on the aircraft, and just recharge
and exchange the batteries,” says Clark.
“The size of the unit is 20 x 10 x 15 cm
and it weighs about two kilograms, so it
is small and compact. It is possible to
slide a battery in and out of the system,
and it also has a power input socket.”
Once connected it runs off the aircraft
power, so an STC is not needed for that.
Batteries are recharged in a docking
station and can power the system for up
to 15 hours of operation. The
replacement battery is built from AA cells
contained in a robust structure. It is
possible to track how many times
batteries have been charged and fully
depleted. The rechargeable batteries
retain a high capacity throughout their
life, and will remain fully serviceable for a
typical three-year contract.
If an airline wants to provide a WiFi
IFE service, the simplest business model is
to allow passengers to view the content
available, and make them pay to access it.
Over the top (OTT) television is called online,
streaming or internet television. Popular media
content such as movies and shows can be
consumed by the passenger through the cabins
wireless network. Analytics can be performed on
passenger viewing behaviour to increase Ad
revenue.
Business model
Typical business models incorporate
advertising and sponsorship along the
lines of digital adverts on a website.
Commonly the adverts are generated by a
sophisticated application called an Ad-
server.
“The Ad-server presents the advert at
the bottom of a webpage. It is possible to
have multiple adverts appearing there on
a rotational basis, and for the passenger
to see a new advert whenever they access
a page,” says Clark. “The customer can
configure the Ad-server, and included it
as part of a Bluebox software suite, so
that the airline or advertising agency can
control that part of the screen.”
If an airline wants to change an
advert, they can do it via the Ad-server
through an online portal. When the
BlueBox unit connects to the base system
via an LTE network, the advert will be
updated. The system will automatically
connect to an LTE network once the
aircraft is on the ground, meaning it can
autonomously refresh its content, as well
as all advertising and payment
information.
Units with an integrated built-in
modem must be certified globally.
Bluebox has designed a plug-in LTE
cellular dongle to give them connectivity.
“When the dongle is plugged in, the
ISSUE NO. 128 • FEBRUARY/MARCH 2020

Segmentation of passenger service software
makes it possible to integrate IoT technology
such as a smart trolley into the IFE solution. The
smart trolly will interface with the seatback
screen and introduce special offers to the
passenger that are influenced by food and
beverage stock-levels.
system recognises if the aircraft is in-flight
or on the ground, and knows when to
activate the LTE system,” explains Clark.
Aircraft transmit their position
through the automatic dependant
surveillance broadcast (ADS-B) system.
The Bluebox system extracts information
contained in these transmissions, such as
aircraft location and speed. This
information is used to render the
aircraft’s position on a moving map.
Moving maps are typically the most
viewed content of any IFE system, so it is
good practice to embed adverts within
the map for the best passenger reach.
Bluebox has its own moving map
software and platform. Bluebox procures
the topographical map layers to facilitate
the zooming in and out, making it
possible to accurately place embedded
points of interest into the map.
The system will also support third-
party map applications because there can
be reasons way an airline would prefer to
use another product.
“This differentiates us in the market
from the more traditional IFE model. We
are open within the system’s architecture.
This makes it possible to support and
allow integration with other vendor
applications,” says Clark.
Wireless seatback hardware
Axinom specialises in a wireless IFE
solution that facilitates wireless streaming
directly to a seatback screen. Axinom
recommends that airlines use a wireless
infrastructure, because it is more efficient
to build and easier to set up.
Embedded IFE systems with seatback
screens rely on lots of wiring, making
them expensive to install. These systems
are typically hard to maintain because the
wiring is located behind cabin interior
panels and under passenger seats.
Digitally connecting the aircraft’s IFE
server wirelessly to embedded seatback
screens avoids the need to remove whole
rows of seats to access a component if a
seatback screen develops a fault.
According to Axinom chief executive
officer, Ralph Wagner: “We can support a
wired system, but I do not believe that
this is the future. We see everything
becoming wireless, not only for passenger
entertainment, but also to support smart
trollies, smart seats, smart cushions and
smart galleys.”
Wireless technology includes all
ISSUE NO. 128 • FEBRUARY/MARCH 2020
wireless I.P.-based communication such as
Bluetooth and nearfield communications.
Implementing Internet of Things (IoT)
technology offers many ancillary revenue
advantages, although it does depend on
which entities these systems are talking
to. A smart trolley onboard the aircraft
registers its inventory, but what does it do
with this information? Where is inventory
data transferred?
Networking data from many different
entities and services means that some of it
will be more useful transferred to the
ground. Other data will be more useful
being transmitted wirelessly through the
aircraft’s WiFi.
“Installing a modem into a trolley so
it can communicate with the outside
world is not a solution! It is better to use
the data inside the aircraft,” says Wagner.
“With our in-flight services product we
are building a platform inside an aircraft
where you add passenger services that
can consume data from a smart trolley, a
passenger’s IFE, a toilet, or seat cushion.”
By digitally itemising the trolley’s
contents it is possible to present this
information to passengers through their
seatback screens more creatively.
Furthermore, the solution can initiate its
own special offers. For instance, at a
particular stock-threshold a discount
could be applied to certain foods to
prompt customers to buy them. Tracking
stock levels digitally reduces food
wastage by leveraging food sales.
Axinom specialises in separating data
from all the different entities, and
ensuring that it is transmitted to the most
relevant system or department. Smart
trolley data that is transmitted to ground
services will allow each aircraft food and
drinks inventory to be standardised. This
will prevent aircraft from overloading
23 I AIRLINE REVENUES
passenger consumables and duty-free
items.
IoT is not about just having sensors
located throughout the aircraft; its real
value is what the sensors talk to. IoT can
be used to identify seat occupation to
market any remaining business-class seats
to economy passengers through the IFE
system.
Dockers
Each of the services that use the cabin
wireless infrastructure will have a unique
way to update the data and the services
they use. For an IFE system this means
updating content such as movies and TV
shows. It is possible to create several
specific content packages, and upload
them on to the onboard server.
The IT software ‘Docker’ is
containerisation technology that enables
the creation and use of Linux containers.
Docker containers can be treated like
modular virtual machines.
Containerisation makes it possible to
create, deploy, copy and move them from
one environment to another to optimise
apps for the cloud.
“We build a product that has the
capability to update. We ‘dockerise’ it
and define what kind of access rights
each docker container has. We control the
docker, so we can uninstall it, operate it
and change the containers. This means
that we can take a complete service out
and put it on without having a
certification issue,” says Wagner.
Digital services can be segmented so
individual services can be updated and
amended without unsettling other
services. Cloud infrastructure can have a
lot of services running in parallel; some of
which are connected and some are not.
AIRCRAFT COMMERCE
24 I AIRLINE REVENUES
It is possible to build a service that is
dedicated to advertising. It has images
and videos and many other advertising
capabilities. This service will not be
connected to the IFE system or a virtual
shop, so it can operate and be updated
independently.
Advertising
Advertising can be stitched into the
video on demand (VoD) platform, which
enables it to be targeted. To increase the
reach and relevancy of its pre-loaded
adverts, the system can identify which
class the passengers are seated in. This
means the service is better able to choose
an advert that will interest the viewer.
Aircraft can barcode each seat, so that
when the browser is opened it will ask
passengers to scan the barcode to allow
the system to know who is sitting where.
Passengers that authenticate
themselves through a loyalty application
can be targeted more precisely, because
the system will know their details, such as
age and sex. If passenger information is
forwarded to the advertising services, this
will help the system decide what type of
advert is shown.
It is not necessary to have individual
passenger data. Assumptions can be made
by the type of content the passenger is
consuming.
AI components inside the solution
may predict that if a passenger watches
The Crown, then that passenger is
female. Alternatively, if they are watching
Breaking Bad, then the passenger is more
likely to be male.
“When you separate services, you can
concentrate on things like advertising and
how it should be highlighted to the
passenger,” Wagner says. “Then it is
AIRCRAFT COMMERCE
possible to stitch advertising in different
applications, such as the IFE. So, if the
IFE service communicates to the
advertising service that a passenger is
watching Breaking Bad, the advertising
service will send a suitable advert.”
AI systems can track passenger
behaviour and determine if the passenger
is rich or poor. Knowing which device the
passenger is using to view content can
place the passenger in an income bracket.
For example an Android user could be
placed into a different income category to
an Apple user.
The targeted advert can be a video,
image or any type of content the airline
requires. Targeted advertising generates
more revenue for the airline. Advertising
content that is assigned for individual
services can be updated at every
turnaround.
When the aircraft connects to the LTE
network at the gate the advertising service
will update its content so it can more
accurately target the passengers with
regional-specific adverts.
“When talking about advertising you
do not talk about the front end.
Advertising can be consumed by a
monitor that is built into a seatback, on
top of the window, or in an internet
browser or app,” says Wagner.
The future of IFE is about in-flight
services. Entertainment is just one of the
services, but these different services will
be interconnected with each other.
Content
Flight duration influences the content
to be loaded onto the IFE system. Ideally
different viewing content should be made
available for passengers on flights of
different lengths.
Modern IFE systems are implementing wireless
technology to stream IFE content to seatback
screens or passengers’ mobile devices. The
software that delivers this content is important
because it has the ability to match airline
products and services to individual passengers.
For regional and shorter flights,
content should be news-based and
include destination guides typically of 10-
minute duration. For long flights,
passengers prefer movie blockbusters.
“Blockbuster material is expensive. I
see a lot of attempts to collate the content
better. Some airlines have their own
teams that will tell them the type of
content to show the passenger. They will
also keep the content fresh,” says Wagner.
Operators need to think about what
sort of content they would like their
passengers to consume. It is possible to
increase system uptake rates by being
more selective and personalised by
diversifying the onboard content.
Changing the content sets works well
if an airline has access to a lot of content.
Nevertheless, the content sets do not need
to be a totally different, because it is
possible to bring forward another set of
content to the front of the IFE system.
Therefore, the landing page will be
different depending on which content set
the airline chooses to use. Yet the
database behind the landing page will
include the same content.
If the airline IFE system can interface
with the ecosystem of its passenger app, it
can better target passengers with relevant
content and advertising.
BYOD
Many airlines are moving towards a
BYOD philosophy. This is attractive
because it removes the need for seatback
screens from existing fleet aircraft and on
newly ordered aircraft. Passengers also
like airlines that facilitate a BYOD
culture, because on a connected aircraft
they can consume personalised content.
Removing embedded IFE systems
moves the centricity from the airline to
the passenger. Empowering passengers
means that they can choose both their
preferred media content, and the software
and applications used to access it.
USB power
Potential markets for IFE systems are
evolving from the traditional long-haul
airlines to include low-cost carriers
(LCCs). In the past LCCs typically did
not offer IFE because there were few cost-
effective solutions available.
Passengers are increasingly using their
PEDs in the terminal building as a source
of entertainment and as their primary
ISSUE NO. 128 • FEBRUARY/MARCH 2020

Passengers are increasingly bringing their own
devices onboard the aircraft. They now have the
ability to download their own moving map
solutions from independent providers and
bypass the airlines IFE solution.
source of travel information before the
flight. Passengers tend to download
electronic boarding passes to their PEDs
from the airline’s app, so it is imperative
that their devices are well charged.
Research has shown that passengers
are prone to suffer from battery anxiety
in the event of their PED running low on
charge. Typically, passengers have become
reliant on PEDs for airport transfers,
maps and communication, so they
become anxious when they cannot use
their devices.
When passengers select the aircraft
mode function on their devices, they are
still using their devices for entertainment
or work purposes.
An aircraft without an IFE system
installed means many passengers will
download media content from services,
such as Netflix, to their PEDs to consume
in-flight. BYOD culture also strains a
PED’s battery charge, because the
passenger is using the device to stream
entertainment from the aircraft’s server.
As travellers are increasingly using
their PEDs before and during flight, they
need a way to keep them charged.
IFPL
“For an airline to meet its passenger
expectations, it is becoming increasingly
important for operators to make USB
power available,” says Dave Phillips,
IFPL head of business development.
“Demand for passenger power outlets
becomes even more vital for airlines that
implement a BYOD culture.”
Containerised IFE systems mean that
passengers consuming onboard wireless
content will consume battery charge
faster than they normally would.
“We are having discussions with
airlines that have implemented BYOD
systems about what they should do,” says
Phillips. “Simply put, they need to install
onboard USB power outlets on the
aircraft. The bigger question is what sort
of USB power outlet do they install?”
USB-A is the traditional power source
used by many PEDs. It is expected that
many PEDs will soon be installed with
USB-C connectors.
USB-C cables can carry significantly
more power, so they can be used to
charge larger devices such as laptops.
USB-C ports vary in design to USB-A
ports, and look like a micro USB
connecter. USB-A will typically give out
10 watts of power and USB-C has a
ISSUE NO. 128 • FEBRUARY/MARCH 2020
potential to deliver 100 watts of power.
USB-C therefore has the capacity to
charge devices at a much higher rate.
Already manufacturers are installing
their latest generation of phones with
USB-C connectors. The difficulty for
airlines choosing to install their aircraft
with USB power is how long USB-A
devices will remain in widespread use
before passengers fully migrate to USB-C
devices. As this is difficult to predict,
IFPL has developed a USB adaptor that
accommodates both USB-A and USB-C
sockets.
“Fitment for USB-C ports can vary. In
terms of USB-C it is possible to choose
how much power is delivered by the port
to the device. USB-C has the capability to
deliver 100 watts of power, but delivering
power at this maximum rate makes the
USB socket hot. This introduces the
problem of how to dissipate this heat in
the cabin,” explains Phillips. “Most of
the airline industry is aiming for 60 watts
of power delivery, which is believed to be
the maximum output without emitting
too much unwanted heat.”
Higher output settings also translate
to an increased number of power packs
needed to distribute the power to all the
sockets in the aircraft. Increasing the
number of power packs is detrimental,
because they produce heat and add
weight and complexity to the system.
“We are trying to listen as much as
possible to what the market is telling us.
What we are saying is that if airlines do
not want to deliver 60 watts of power,
because of the number of powerpacks
needed, then it is possible to reduce this
number,” says Phillips.
Many passengers use their mobile
phones as their preferred data source
when travelling, so there is not a general
25 I AIRLINE REVENUES
need for 60 or 100 watts. Mobile phones
do not need as much power to charge or
sustain as a larger device, like a laptop.
To charge tablets and mobile phones 27-
35 watts will be enough.
Airlines will want to future-proof
their investment, yet they will also want
to provide passengers with the power that
they need.
“Airlines say that they must have 60
watts, because they have heard that
passengers can have 60 watts. When the
conversation develops and the airline
understands that it will need more power
packs to attain 60 watts, it will often
revaluate its requirement,” says Phillips.
“What we know is that a laptop will need
much more power than a phone. We
believe that 60 watts is nice to have, but
it is not critical.”
Passengers perceive broken USB ports
to be detrimental to their experience. All
USB ports need to be fully functional or it
is not worth offering them.
There is more vulnerability to the
USB-C socket than the USB-A type. It is
believed that the USB-A socket is more
robust and the USB-C socket has a
weaker set of contact points. It is
common for passengers to heavily handle
onboard USB outlets, which results in
broken sockets. IFPL has developed a
rapid-fit cassette that minimises the time
a USB port is out of service.
All IFPL USB ports are easily replaced
if they are damaged by a passenger, partly
because all the expensive componentry is
kept away from the socket area.
Most IFPL products have a light guide
to identify if a port is working. Working
with seat manufacturers and partners, it
is possible to place the USB port in
several locations around the seating area.
With passengers increasingly using
AIRCRAFT COMMERCE
26 I AIRLINE REVENUES
their PEDs for information and
entertainment, the IFE software
philosophy can change. Empowering
passengers to BYOD means they are also
enabled to choose not only the type of
content they watch, but also solutions
that can compete against IFE services
traditionally supplied by the airline.
The Inflighto moving map
Inflighto is a standalone moving map
experience that is app-based, and can be
downloaded by travellers directly to their
PEDs. Once downloaded, Inflighto will
provide passengers with an immersive
and comprehensive moving map solution.
Because the solution is downloaded
independently to a passenger’s PEDs, they
have the potential to circumnavigate the
airline’s map solution.
According to Inflighto, director, Chris
Smyth: “Passengers on a flight will
normally have the moving map open,
displayed on a seatback screen which can
advertise affiliate programmes. By
downloading the Inflighto app onto a
PED, the passenger does not need to
access the seatback system which will
reduce the airline’s advertising reach.”
It is also possible for Inflighto to be
embedded into the airline’s IFE or
booking app. This makes it possible for
airlines that operate a BYOD culture to
implement moving map technology to
passengers that have downloaded its app
to their PED.
Inflighto can make it possible for
these airlines to generate targeted
advertising revenue and sales in
destination services.
“We have been in discussions with
several airlines, to partner with them to
install Inflighto into the airlines’ existing
AIRCRAFT COMMERCE
IFE products. We have a software
developers kit (SDK) that will allow us to
embed the map inside an airline’s app. It
will be a white label solution, meaning
the map will be unbranded. Therefore,
passengers will be unaware that they are
using a third-party product,” says Smyth.
It is possible to keep the solution
advertisement-free, or to embed adverts
of the airline’s choice. Additionally,
Inflighto can leverage destination services
such as hotel and restaurant bookings.
“If you are flying over an island,
beach or a mountain range that you like
the look of, then it will be possible to
look up the tourism options that are
available at this destination, and book
them through the map,” explains Smyth.
Inflighto can recommend transport
providers, duty-free providers and
accommodation partners. In addition, the
solution can message passengers at a
chosen phase of the flight with timely
advertisements and offers.
“We can target passengers to use the
likes of Uber or to ‘book-now or get the
Uber app to get a discount’,” says Smyth.
“Because we know a user’s location, we
can target them with specific offers and
promotional discount codes for services
at their destination.”
Inflighto includes a weather radar so
that passengers can view live weather en
route. The solution can also identify
marine traffic and its origin and
destination.
Additionally, the solution includes
natural event tracking so the user can
identify the position of any tornadoes,
mudslides, bushfires and icebergs or
natural events that are happening in the
world at any time.
Typical flight data such as the
aircraft’s speed, altitude and descent rate
Moving maps is among the most popular
content consumed by passengers. This means
the moving map is an ideal platform to leverage
destination-shopping and events and generate
revenue by marketing airline partners products
and services.
are also viewable. It is also conceivable to
send information on the flight to social
media channels such as Facebook,
Instagram and Twitter. Sharing flight
information by social media increases the
airline’s organic reach and allows
relatives to keep track of the flight.
“Older moving maps are not very
interactive and do not engage the
passenger. This typically translates to a
limited analytic capability. The Inflighto
product allows for a much higher degree
of interactivity and analytics can be
performed on scroll length and
destination shopping. If a passenger clicks
onto a point of interest then this can be
tracked,” says Smyth.
The map can also be translated into
Mandarin and Cantonese. The Chinese
market is expected to be the biggest in the
world within the next few years.
Findings
IFE solutions can vary from a simple
USB port to enable passengers to keep
their PEDs charged to capacity, to a
wireless seatback system that includes
software with the functionality to
containerise its passenger-services and
create dynamic, sales, advertising and
content opportunities.
Linking IFE to the IoT technology
and a smart trolley has the potential to
cut down on food and beverage wastage
by leveraging special offers.
Containerised systems and BYOD
culture have the functionality to stream
watchable and popular content to
passengers’ PEDs. Potentially
containerised systems can offer many
features that passengers expect. The
system can also leverage important
ancillary revenue services, such as the
moving map.
Map solutions such as Inflighto are
moving the IFE functionality from the
airline to the passenger. It is now possible
to embed part of the IFE solution directly
into the passenger’s PED through the
airline application.
Software development is becoming
increasingly important in the evolution of
IFE solutions. Software platforms and
data analytics are driving onboard
ancillary revenue.
To download more than 1,200
articles like this, visit:
www.aircraft-commerce.com
ISSUE NO. 128 • FEBRUARY/MARCH 2020
 27 I AIRLINE & AIRCRAFT OPERATIONS

The variation in fuel burn and cost incurred by carrying incremental

passenger loads, on-board supplies and belly freight are analysed for a
selection of current generation narrowbody and widebody types. These are
on typical short- and long-haul missions.

The effect of varying

payloads & AUW on
aircraft fuel burn
A
simple analysis of aircraft fuel high level of on-board service, including
burn and operating performance multiple meals, drinks and blankets, and Short-haul analysis
often assumes an aircraft or has three classes, would have a higher The incremental fuel burn with
several aircraft types operating OEW on the same aircraft type than a low- different load factors is now being
with a full passenger payload, equal to a cost carrier (LCC), such as Norwegian. compared with the A320neo/A321neo
100% passenger load factor. The same variations with weights occur on fitted with the PW1100 powerplant, and
In reality, passenger numbers and short-haul flights and operations with the the standard 737-800NG fitted with
aircraft loads vary from flight to flight. same aircraft type. CFM56-7B26 engines.
Average passenger cabin load factor was Overall, how fuel burn varies with a Different load cabin factors will be
81.9% in 2019, so an average of 18% of range of different payloads and different used for the analysis. The lowest will be
seats across the global network were flown planned take-off weights (PLTOW) is 65%, and then each aircraft will be
empty. Clearly, load factors on some flights analysed here for the 737-800, A320neo analysed with load factors of 70%, 80%
are as low as 60-65%, and in other cases and A321neo on the short-haul route of and 90%.
as high as 95% or more, with belly freight Amsterdam (AMS) to Rome Fiumicino The lowest of 65% is also analysed
carried in addition. These variations in (FCO). The 787-9 and the A350-1000 are with an increased OEW for the three
carried payload affect the aircraft’s all-up analysed on the long-haul route London aircraft with an extra 5lbs per installed seat
weight (AUW) throughout a flight, and so Heathrow (LHR) to O’Hare International to show the effect of a higher level of cabin
its rate of fuel burn. Airport (ORD). service. The additional 5lbs represent the
This raises the issue of how an
aircraft’s fuel burn on a route varies with
different levels of passenger load, what the
incremental fuel burn is for the increased
passenger load, and how the cost of fuel
burn per available seat mile (ASM) varies
with a range of passenger load factors.
These issues are analysed here.
Another consideration is how the level
of cabin service directly impacts the
aircraft’s operating empty weight (OEW),
and so its fuel burn per ASM. Long-haul
aircraft operated by a legacy carrier, such
as British Airways (BA), which offers a

For the A320neo, incremental fuel burn is just

2-3USG per additional passenger as cabin load
factor increases on typical short-haul missions.

ISSUE NO. 128 • FEBRUARY/MARCH 2020 AIRCRAFT COMMERCE

28 I AIRLINE & AIRCRAFT OPERATIONS
weight of the extra items carried on board
by a full-service carrier. This compares to a
simpler service level, but with the same
two-class cabin configuration.
The 65% load factor is also assessed by
varying the OEW, in the form of adding
extra holding and diversion fuel to show
the effect of varying the AUW, also known
as aircraft gross weight.
Aircraft specifications
The 737-800 is assessed with standard
blended winglets, and the A320neo and the
A321neo have sharklets built-in as
standard.
The aircraft under consideration are
assumed to be configured with the highest
certified maximum take-off weight
(MTOW). The maximum certified MTOW
for the 737-800 with winglets is
174,200lbs (see table, page 30). The
maximum landing weight (MLW) for this
configuration is 146,300lbs, and the fuel
capacity is 6,875 US gallons (USG),
equivalent to 45,897lbs of weight (see
table, page 30). The aircraft is powered by
two CFM56-7B26 powerplants, with a
certified take-off thrust of 26,300lbs, a 5.1
bypass ratio and a 61-inch diameter intake
fan.
The maximum certified MTOW for the
A320neo is 174,165lbs (see table, page
30). The MLW is 148,592lbs, the fuel
capacity is 6,303 USG, equivalent to
41,287lbs of weight. The engine selected
for the analysis is the Pratt & Whitney
PW1127G geared turbofan variant with a
certified maximum take-off thrust of
27,075lbs, a 81-inch diameter fan and a
bypass ratio of 12.5:1.
AIRCRAFT COMMERCE
There are several certified MTOW
weights for the A321neo. These mainly
reflect structural changes when the aircraft
is fitted with the Air Cabin Flex
configuration, the extra weight of the
Additional Centre Tanks (ACT) on the
A321LR, and the structural reinforcements
for the A321XLR.
In this analysis the highest MTOW of
207,014lbs for the standard medium-haul
A321neo has been selected (see table, page
30). The maximum landing weight for the
aircraft is 174,606lbs, the fuel capacity is a
standard 6,205 USG equivalent to
41,424lbs weight. The engine selected for
the analysis is the PW1133G geared
turbofan variant with a certified maximum
take-off thrust of 33,000lbs, a 12.5:1
bypass ratio and an 81-inch diameter fan.
Long-haul analysis
The incremental fuel-burn of long-haul
aircraft with different passenger load
factors and weight of belly freight is
compared between two long-haul aircraft,
the 787-9 and the A350-1000.
As with the short-haul analysis,
different load cabin factors will be used for
the analysis. The lowest will be 65%, and
then each aircraft will be analysed with
load factors of 70%, 80% and 90%.
The analysis also incorporates higher
aircraft weights originating from an
increased level of service, and from
carrying extra cargo of 20,000lbs at a load
factor of 90%.
The 787-9’s seat configuration for this
study is 295 (see table, page 32).
The A350-1000 is a stretch of the
A350-900 baseline variant. The A350-
For A350-1000 operating an eight hour mission,
fuel burn increases by about 12-18USG per
additional passenger. Fuel cost per lb of belly
freight carried in addition is in the order of
6.5-8.0 cents on the same mission.
1000 is assessed in a three-class 325-seat
configuration.
Aircraft specifications
Two widebody aircraft were selected
for this analysis, the A350-1000 and the
787-9. These are probably the most
technologically advanced aircraft in the
market, along with the A220 narrowbody.
The 787-9 and A350-1000 have much
in common. Both are made of cutting-edge
composite materials; are powered by
higher-ratio bypass turbofan engines;
incorporate start-of-the-art systems and
advanced aerodynamics; and deliver better
economics than previous generations of
widebodies.
Although it was launched as a response
to the 787 programme, the capacity of the
A350 family of aircraft is more akin to the
777 family of aircraft, whereas the 787
family has a similar capacity to the A330
family. The A350-1000 is actually similar
in capabilities and scope of missions to the
777-300ER. On the other hand, the 787-9
is similar in size to the A330-300, but is
capable of much longer missions. The
aircraft standard specifications are shown
(see table, page 32).
For this study, the A350-1000 is
considered in a three-class configuration
and the 787-9 in a two-class configuration.
The MTOW considered for this analysis is
696,660lbs for the A350-1000 and
560,000lbs for the 787-9 (see table, page
32). The MLW for the two models is
520,290lbs and 425,000lbs respectively.
The fuel capacity for the aircraft is
271,999lbs and 220,433lbs, equal to
41,212 USG and 33,399 USG for each
aircraft.
The A350-1000 is powered by the
Trent XWB-97 engine, and the 787-9 by
the GEnx-1B74/75 engine. Both
powerplants are high-bypass ratio engines
(see chart, page 32).
The A350-1000’s launch operator was
Qatar Airways in early 2018, and which
now has a fleet of 15 aircraft. Cathay
Pacific is the second largest operator with
11 aircraft. Other operators include Virgin
Atlantic, BA and Air Caraibes.
Basis for comparison
As described, the objective of the
analysis is to determine how each aircraft’s
fuel burn increases or decreases with
ISSUE NO. 128 • FEBRUARY/MARCH 2020

changes in payload and AUW. There are
several ways to approach this analysis. One
is to vary the passenger payload by
assessing the aircraft on the same route
with different load factors. Another is to
analyse fuel burn changes by changing the
OEW and varying the levels of equipment
and on-board service.
These variations can also include
having a larger amount of fuel for holding
or diversion, for example if adverse
weather conditions are expected at the
destination airfield.
Short-haul analysis
The basis of comparing the fuel burn
and operating performance of the three
narrowbodies selected is to analyse the
aircraft on AMS-FCO (see table, page 31).
The route has a tracked airway
distance of 783 nautical miles (nm), there is
a headwind component of 14-16 knots,
and equivalent still air distance (ESAD)
that takes into account the actual ground
distance considering the wind component,
equivalent to 809-813 nautical miles (see
table, page 30).
The aircraft’s performance has been
examined on the basis of operating a
typical two-class configuration. The short-
haul narrowbody selected will operate the
same route with different load factors,
OEWs and fuel carried on-board.
ISSUE NO. 128 • FEBRUARY/MARCH 2020
As mentioned above, a two-class
configuration is assumed for the
narrowbody analysis. This assumes a full-
service operation and a basic level of
service operation as explained in the first
section. The level of service assumes 5lbs
extra weight per installed seat on a full-
service operation to reflect enhanced on-
board amenities for the full-service carrier.
The analysis also takes into consideration a
basic level of service which entails no extra
weight for a basic service. The route
characteristics for the three aircraft
variants are shown (see table page 30).
The seat count used for the A320 is
161 seats, 158 for the 737-800NG and
192 for the A321neo.
The load factors considered are 65%,
70%, 80% and 90%. In the case of the
737-800, a 65% load factor is equal to
103 passengers. A 70% load factor 111
passengers, an 80% load factor 126
passengers, and a 90% load factor 142
passengers (see table, page 31).
The number of passengers for the
A320neo and A321neo are also listed (see
table, page 31).
The passenger payload has been
calculated using an allowance of 231lbs
per passenger, including baggage. The
stated additional payload in lbs over the
65% load factor is also listed (see table,
page 31).
The flight plans and performance of the
29 I AIRLINE & AIRCRAFT OPERATIONS
aircraft are simulations generated using the
Lufthansa Systems’ LIDO/Flight Solution,
for both the short- and long-haul analyses.
The inputs for the simulation include
taxi times, taxi fuel, reserve fuel, total fuel,
flight profile, cruise speed, speed and length
of flight at cruise level, prevailing winds,
and the different weights assumed for each
mission.
The standard flight rules have been
used in this analysis, and these relate to the
route parameters, including cruising
altitude and flight levels (FL). These
parameters depend on trajectory, and
typically require a vertical separation of
4,000 feet for the same direction of travel,
and a separation of 2,000 feet for travel or
flightpaths in opposite directions. These
parameters have been optimised using the
Lufthansa Systems Lido/Flight tool to
optimise and reduce total costs for fuel
burn, time-related costs, and all navigation
and air traffic control (ATC) charges.
AMS-FCO has been optimised, since
the mission length lets the aircraft analysed
reach a cruising altitude that allows the
cruising speed to be adjusted to improve
operational and performance levels.
Climb, descent and cruise profiles are
different for the three aircraft analysed.
Cruise speeds for the three aircraft were set
at a representative fixed Mach number in
the range of Mach 0.74-0.78, depending
on aircraft type.
AIRCRAFT COMMERCE
30 I AIRLINE & AIRCRAFT OPERATIONS
NARROWBODY AIRCRAFT SPECIFICATIONS FOR SHORT-HAUL ROUTE times were obtained from the LIDO
database, and are the standard times at
Aircraft 737-800 A320neo A321neo each destination. The alternate airport in
type this scenario is Rome Ciampino (CIA).
For the missions where extra reserve
Engine CFM56 PW1100 PW1100 fuel is incorporated in the analysis, it is
Variant CFM56-7B26 PW1127G PW1133G assumed a worst-case scenario where the
Engine bypass ratio 5.9:1 12.5:1 12.5:1 alternate is 200nm away from the original
destination. The alternate airport in this
MTXW - lbs 174,900 175,047 207,014 scenario is Milan Bergamo (BGY).
MTOW - lbs 174,200 174,165 206,132
MLW - lbs 146,300 148,592 174,606
MZFW - lbs 138,300 141,757 166,669 Short-haul performance
Max Payload - lbs 40,637 45,856 46,958 The performance of the 737-800,
A320neo, and the A321neo have been
Fuel Capacity - USG 6,875 6,303 6,205 assessed on AMS-FCO, as described (see
Duel-class seat count 158 161 192 table, page 31). Overall, the cash cost of
burning extra fuel for each increment in
OEW / DOW - lbs (STANDARD) 97,663 95,901 119,711 passenger load factor in three steps from
OEW / DOW - (+5lbs per seat) 65%LF 98,453 96,706 120,671 65%, the associated cash cost per
DOW/Seat - lbs (STANDARD) 618 596 623 additional passenger, and the overall cost
DOW/Seat - lbs (+5lbs per seat) 623 601 628 per ASM have been calculated. The four
different load factors analysed are
intrinsically correlated to the aircraft’s
break-even point on each route in a
SHORT-HAUL ROUTE CHARACTERISTICS: AMS-FCO network. These issues are considered here.

Aircraft 737-800 A320neo A321neo

type
Flight time - mins
Taxi out time - mins
Taxi in time - mins
Block time - mins
Tacked distance - nm
Wind component - kts
ESAD - nm
Alternate airport 1 - CIA - nm
Alternate airport 2 - BGY - nm
The current prevailing trend is for
operators to generate flight plans other
than assuming a fixed Mach cruise speed
or long-range cruise (LRC) plans.
There is a trend to generate flight plans
using the cost index (CI) flying method,
which is more efficient in managing
operational costs. Nonetheless, each airline
has a different approach to managing its
flight operations, so fixed Mach number
and LRCs have been used to run this
simulation.
The calculations have assumed
standard seasonal ISA conditions at sea
level, and average prevailing winds and
temperatures. The departure runway from
AMS is 36L and the landing runway at
FCO is 16L. The cost of fuel at AMS at the
time of calculation was estimated to be
$1.39 per USG .
For the scenarios where the load factor
is the only variable, European Union
Aviation Safety Agency (EASA) standards
and rules have been applied conservatively,
with an alternate destination airport.
Under certain conditions, EASA allows
737-800
The 737-800NG has a fuel burn of
117 115 116 1,713USG and associated fuel cost of
15 15 15 $2,381 on AMS-FCO when carrying a
20 20 20 passenger load factor of 65%, equal to 103
152 150 151 passengers (see table, page 31). Fuel cost
per passenger is $23.22, and $1.86 per
783 783 783 ASM.
-14 -14 -16 The 65% load factor may be at or a
809 809 813 few percentage points below the break-
even point. As will be seen, the incremental
15 15 15 cost of fuel for increases in passenger load
257 257 257 factor is small.
A 65% passenger load factor makes a
good reference point. Analysing the
additional fuel burn incurred by increasing
flight plans to be generated without an on-board service and so adding 5lbs per
alternate airport. seat equals just 790lbs of extra weight
Contingency fuel was set at 5% of trip added to the OEW. This increases fuel burn
fuel (with a minimum amount to be able to by just 7USG, and the fuel cost for the trip
hold for five minutes over the destination by $9.0 (see table, page 31).
airport). This is a conservative approach A total of 2,924lbs more fuel has to be
when compared with the more cost- loaded to account for a longer diversion, at
effective 3%+ en-route alternate (ERA) the same as a 65% passenger load factor,
option where an ERA is used for flight- examines the effects of a higher AUW for
planning purposes. various operational reasons. This increases
The reserve fuel incorporated for the fuel burn by 103USG, and raises fuel cost
route was the normal amount required to by $143.45 (see table, page 31). This
hold for 30 minutes at 1,500 feet above shows the savings that can be realised
ground level (AGL) over the alternate through careful weight management.
airport at planned gross weight. When the passenger load factor is
For the taxi fuel it was assumed that increased to 70%, passenger numbers rise
the engine would operate from the gate to by nine to 103. The additional fuel burn is
the runway with both engines active. 25USG, and the related extra fuel cost is
Taxi fuel burns for the total of 35 $25.25, equal to $3.16 per extra passenger.
minutes (see table, page 30) are 158 USG This will clearly be covered by the net fare
for the 737-800, 157 USG for the received, even when heavy discounts are
A320neo, and 164 USG for the A321neo. considered. The higher fuel burn increases
The same consideration has been made fuel cost per ASM from 1.86 to 1.88 cents.
for the taxi-in, where it is assumed the Increasing the load factor rate to 80%
aircraft would have both engines in adds 23 passengers over the 65% reference
operation until it reaches the gate. The taxi point. An extra 60USG in fuel is needed to

AIRCRAFT COMMERCE ISSUE NO. 128 • FEBRUARY/MARCH 2020

 31 I AIRLINE & AIRCRAFT OPERATIONS
INCREMENTAL FUEL BURN ANALYSIS: SHORT-HAUL SCENARIO 737NG, A320NEO & A321NEO ON AMS-FCO

Pax Number Add’l Add’l ASMs Block Block Total Add’l Add’l fuel Fuel cost
load of payload pax time fuel fuel cost$ fuel cost cost $ per Cents
factor pax lbs min USG US$ add’l pax per ASM
$1.39/USG
737-800
65% 103 BASE BASE 127,822 152 1,713 2,381 BASE 0.00 1.86
65% 103 BASE *5lbs per seat 127,822 152 1,720 2,390 9.34 0.09 1.87
65% 103 BASE **Extra fuel 127,822 152 1,816 2,524 143.45 1.39 1.97
2,924lbs
70% 111 1,825 8 127,822 152 1,731 2,406 25,25 3.16 1.88
80% 126 5,474 23 127,822 152 1,773 2,464 83.39 3.63 1.93
90% 142 9,124 39 127,822 152 1,802 2,505 124.35 3.19 1.96

A320neo
65% 105 BASE BASE 130,249 150 1,414 1,966 BASE 0.00 1.51
65% 105 BASE *5lbs per seat 130,249 150 1,420 1,973 7.43 0.07 1.51
65% 105 BASE **Extra fuel 130,249 150 1,474 2,049 83.39 0.79 1.57
3,443lbs
70% 113 1,860 8 130,249 150 1,427 1,983 17.40 2.18 1.52
80% 129 5,579 24 130,249 150 1,452 2,018 52.63 2.19 1.55
90% 145 9,298 40 130,249 150 1,479 2,055 89.55 2.24 1.58

A321neo
65% 125 BASE BASE 155,328 151 1,683 2,340 BASE 0.00 1.51
65% 125 BASE *5lbs per seat 155,328 151 1,691 2,351 11.03 0.09 1.51
65% 125 BASE **Extra fuel 156,096 151 1,762 2,449 108.86 0.87 1.57
3,679lbs
70% 134 2,217 9 155,328 151 1,702 2,366 25.89 2.88 1.52
80% 154 6,653 29 156,096 151 1,737 2,414 74.69 2.58 1.55
90% 173 11,088 48 156,096 151 1,770 2,461 121.17 2.52 1.58

*Considering enhanced levels of service

**Diversion to alternate 200nm

carry them, at a cost of $83.39. This is
equal to $3.63 per extra passenger carried,
while fuel cost per ASM increases to 1.93
cents per ASM.
When the passenger load factor is
increased to 90%, the passenger load goes
up by 39. An extra 89USG are consumed
carrying this extra load, with an associated
cost increase of $124.35, equal to $3.19
per additional passenger carried over the
65% load. The fuel cost per ASM rises to
1.96 cents.
By raising the load factor from 65% to
90% (an increase from 103 to 142
passengers), the cost of higher fuel burn is
only $124.35 and the fuel cost per ASM is
raised by just 0.10 cents.
A320neo
At 65% the A320neo will carry 105
passengers of 161 seats. The aircraft will
have a fuel burn of 1,414USG, equal to a
cost of $1,966 (see table, this page). The
associated fuel cost per ASM is 1.51 cents.
At the same 65% load factor,
increasing on-board service by 5lbs per seat
increases the aircraft’s OEW by 805lbs and
the fuel burn by just 6USG and the fuel
burn cost by $8.00 (see table, this page).
A total of 3,443lbs more fuel is added
for a longer diversion. This increases the
trip burn by 60USG, and raises the fuel
cost by $83.00. Fuel cost per ASM is 1.57
cents.
When the load-factor is increased to
70%, passenger numbers go up by eight to
113. The additional fuel burn is just
13USG, and the related extra fuel cost is
$17.00, equal to $2.18 per extra passenger
(see table, this page). The fuel cost per
ASM increases to 1.52 cents.
When the load-factor is raised from
65% to 80%, 24 more passengers are
carried. This increases fuel burn by 38USG
and the fuel burn cost by $52.63, equal to
$2.19 per extra passenger. The fuel cost per
ASM is increased to 1.55 cents.
Finally, when load factor is increased to
90%, 40 passengers are added. This
increases fuel burn by 65USG and trip fuel
cost by $89 (see table, this page), equal to
$2.24 per additional passenger. The fuel
cost per ASM increases to 1.58 cents.
A321neo
The same base scenario of 65% load
factor has been used for the A321neo
analysis, equal to a passenger load of 125
(see table, this page).
At this load factor the aircraft’s fuel
burn is 1,683USG, at a cost of $2,340. The
fuel cost per ASM is $1.51 cents.
Adding 5lbs of extra weight per seat
increases aircraft’s OEW by 960lbs, and
fuel burn is increased by just 8USG. This
increases fuel burn cost by $11 (see table,
this page).
An additional 3,679lbs of fuel has to
be loaded for a longer diversion, and this
increases the trip burn by 79USG. It raises
the fuel cost by $109.00. Fuel cost per
ASM is 1.57 cents.
Increasing the load factor to 70%
raises passenger numbers by nine to 134.
Fuel burn increases by 19USG and fuel
cost by $26. The cost of fuel per additional
passenger is $2.88. Fuel cost per ASM
changes slightly to 1.52 cents.
Increasing the load factor rate to 80%
adds 29 passengers. Fuel burn increases by

ISSUE NO. 128 • FEBRUARY/MARCH 2020 AIRCRAFT COMMERCE

32 I AIRLINE & AIRCRAFT OPERATIONS
LONG-HAUL ROUTE CHARACTERISTICS: LHR-ORD
Aircraft A350-1000
type
Engine Trent XWB-97
Engine bypass ratio
MTXW - lbs
MTOW - lbs
MLW - lbs
MZFW - lbs
Max Payload - lbs
Fuel Capacity - USG
Seat count
Configuration
OEW / DOW - lbs (STANDARD)
OEW / DOW - lbs (+10lb per seat
LONG-HAUL ROUTE CHARACTERISTICS: LHR-ORD
Aircraft A350-1000
type
Flight time - mins
Taxi out time - mins
Taxi in time - mins
Block time - mins
Tacked distance - nm
Wind component - kts
ESAD - nm 3,932-3,950
Alternate airport - MKE -nm
54USG and fuel cost by $74.69 (see table,
this page). The cost of fuel per additional
passenger is $2.58.
When the load factor goes up to 90%,
an additional 87USG are consumed,
increasing the cost by $121.17. The
additional fuel cost per extra passenger is
$2.52.
Long-haul analysis
The calculations for the long-haul
analysis were also generated using the
Lufthansa Systems’ LIDO/Flight Solution.
The fuel burn and operating
performance of the A350-1000 and the
787-9 are compared by analysing their
incremental fuel burn on LHR-ORD (see
table, this page). The route has a tracked
airway distance of 3,572nm, wind
component is a headwind of 43-45
minutes, and resulting ESAD is 3,898-
3,950 nm (see table, this page), depending
on type and flight profile.
The aircraft’s performance has been
examined on the basis of the A350-1000
on a three-class configuration, with 325
seats; and the 787-9 on a typical two-class
configuration, with 295 seats.
The load factors considered are 65%,
70%, 80% and 90%. The 65% load factor
AIRCRAFT COMMERCE
Similarly, standard seasonal ISA
conditions at sea level, and average
787-9 prevailing winds and temperatures are
assumed. The departure runway from
LHR is 27R and the landing runway at
GEnx-1B74-75 ORD is 09L. The cost of fuel at the time of
9.6:1 8.8:1 calculation was estimated to be $1.47 per
USG.
698,660 561,500 As with the calculations for the short-
696,660 560,000 haul analysis, EASA standards are used,
520,290 425,000 with load factor the only variable.
491,630 400,000 Contingency fuel and reserve were
138,730 132,200 considered to be the same as in the short-
41,212 33,399 haul analysis. The baseline assumptions are
335 295 EASA IFR with alternate, 5% contingency
Three-class Two-class fuel, fixed Mach cruise, fixed routes, 0%
352,900 267,800 performance degradation, and 85%
1,063 918 average winds.
Taxi fuel was considered with both
engines operating on the widebodies.
529USG for the A350-1000 and 422USG
for the 787-9.
The reserve fuel incorporated for the
787-9 route was the normal amount required to
hold for 30 minutes at 1,500 feet AGL
over the alternate airport at planned gross
482-488 479-487 weight. The alternate airport for this
20 20
analysis is Milwaukee (MKE).
27 27
529-535 526-534
Long-haul performance
The performance of the A350-1000
3,572 3,572 and the 787-9 have been analysed on
-45.8 -43 LHR-ORD in their respective seat
3,898-3,934 configurations (see table, page 33).
As with the short-haul analysis, the
58 58 main factors involved are the additional
fuel consumed, the additional cost of the
higher fuel burn, and the extra fuel cost per
for the A350-1000 is 218 passengers, while passenger added for three load factors
it is 192 passengers for the 787-9 (see higher than 65%.
table, this page). The number of passengers The cost of carrying additional belly
carried for the 70%, 80% and 90% cargo at a 90% load factor has also been
payloads for each type is listed (see table, incorporated in this analysis, with both
this page). The passenger payload has been aircraft carrying a gross weight of
calculated using an allowance of 231lbs 20,000lbs.
per passenger including baggage. The The A350-1000 and 787-9 have space
stated additional payload in lbs over the for 44 and 36 LD-3 containers in their
65% load factor is also listed. lower hold. The A350-1000 will require
The analysis also considers a basic level about 12 LD-3s and the 787-9 will require
of service and an enhanced level of service about nine or 10 LD-3s to carry the bags
which adds 10lbs of weight per passenger. for passengers at a 90% load factor.
The long-haul analysis further This leaves a sufficient number of LD-
considers carrying 20,000lbs extra belly 3s to carry up to a gross weight of
cargo together with a passenger load factor 20,000lbs. Each container has a tare
of 90%, giving aircraft the highest AUW. weight of 200lbs, and has an internal
The increase in payload over the 65% load volume of 158 cubic feet. Packaged at
factor is 39,347lbs for the A350-1000, and 7.5lbs per cubic foot, each container can
is 37,037lbs for the 787-9 (see table, page carry a net weight of about 1,100lbs. Each
33). container will thus have a gross weight of
Cruise speeds for the aircraft were set about 1,300lbs. Thus 15 LD-3s will be
at a representative fixed Mach number of assumed to carry the 20,000lbs gross
Mach 0.84 for the A350 and Mach 0.85 payload. This will leave a net payload of
for the 787-9. The cruising altitude in the 17,000lbs for revenue-generating freight.
trans-oceanic sector of the mission was
FL380. As mentioned before, fixed Mach
numbers were used to generate the flight A350-1000 analysis
plans instead of the more optimised CI A 65% load-factor is again the base
methodology as already illustrated in the level of comparison for this analysis. This
long-haul analysis. is equal to a passenger load of 218. With
ISSUE NO. 128 • FEBRUARY/MARCH 2020
 33 I AIRLINE & AIRCRAFT OPERATIONS
INCREMENTAL FUEL BURN ANALYSIS: LONG-HAUL SCENARIO A350-1000 & 787-9 ON LHR-ORD

Pax Number Add’l Add’l ASMs Block Block Total Add’l fuel Add’l fuel Fuel cost
load of payload pax time fuel fuel cost cost US$ cost US$ per Cents
factor pax lbs & freight min US$ US$ add’l pax add’l pax per ASM
$1.47/USG

A350-1000
65% 218 BASE 0 1,318,225 529 17,181 25,290 BASE 0.00 1.92
65% 218 BASE *10lbs per seat 1,317,220 529 17,274 25,427 137 0.63 1.93
70% 235 3,870 17 1,317,220 529 17,289 25,449 159 9.49 1.93
80% 268 11,608 50 1,317,220 530 17,534 25,810 520 10.34 1.96
90% 302 19,347 84 1,317,555 531 17,805 26,209 919 10.97 1.99
90% 302 39,347 84 + 20,000lbs 1,323,250 533 18,696 27,521 1,312 0.07 2.08

787-9
65% 192 BASE 0 1,149,910 526 12,942 19,051 BASE 0.00 1.66
65% 192 *10lbs per seat 1,150,205 527 13,041 19,197 147 0.76 1.67
70% 207 3,408 15 1,150,205 527 13,017 19,240 189 12.84 1.67
80% 236 9,862 43 1,150,205 528 13,287 19,558 507 11.89 1.70
90% 265 17,037 74 1,155,220 531 13,566 19,969 919 12.46 1.73
90% 265 37,037 74 + 20,000lbs 1,160,530 530 14,395 21,190 1,220 0.06 1.83

*Considering enhanced levels of service

**Diversion to alternate 200nm

this load the aircraft burns 17,181USG of
fuel at a cost of $25,290 and 1.92 cents per
ASM (see table, page 33). Fuel cost per
passenger is $116.
Increasing the on-board service may
add 10lbs per seat. This increases the
aircraft’s OEW by 3,350lbs. At the same
load factor, fuel burn is increased by
93USG and the additional cost of fuel is
$137.00, equal to $0.63 per passenger.
Increasing load factor to 70% for the
baseline aircraft increases passenger
numbers by 17 to 235. This increases fuel
burn by 108USG, increasing fuel cost by
$159. Fuel cost per additional passenger
carried is $9.50, and fuel cost per ASM
increases from 1.92 to 1.93.
When the load-factor is increased from
65% to 80%, passenger numbers go up by
50 to 268. Fuel burn rises by 353USG,
increasing trip fuel cost by $520. Fuel cost
per additional passenger carried is $10.34
(see table, this page).
A similar trend is seen when passenger
load factor is increased to 90%, taking
passenger numbers up by 84 to 302. Fuel
burn is increased by 1,515USG.
The effects of carrying extra belly
freight are examined by increasing the
aircraft’s planned zero fuel weight at take-
off. An additional 20,000lbs of gross
weight have been added, on top of the
90% passenger load factor.
When carrying an extra 20,000lbs of
belly cargo, fuel burn is increased by
891USG. The cost of this extra fuel is
$1,310 (see table, this page). This is equal
to 7.70 cents per lb of net belly freight
carried.
787-9 analysis
The analysis starts with a 65% baseline
passenger load factor and standard
weights. This is a load of 192 passengers.
Fuel burn for this scenario is 12,942
USG, which incurs a cost of $19,051. This
is equal to a fuel cost of $99.22 and cost
per ASM of 1.66 cents.
Simulating the effect on fuel burn of
improved on-board service adds 10lbs per
seat, and so increases aircraft OEW by
2,950lbs. This increases fuel burn by
99USG and fuel cost by $146 (see table,
this page). This is equal to $0.76 per
passenger carried.
Increasing load factor to 70% on the
baseline aircraft adds 15 passengers, and
increases fuel burn by 129USG. This
increases trip fuel cost by $189, and is
equal to $12.84 per extra passenger
carried.
A higher load factor of 80% increases
passenger numbers by 43, and fuel burn by
345USG. The associated increase in trip
fuel cost is $507 (see table, this page). Fuel
cost per extra passenger is $11.79.
The highest load-factor for this analysis
is 90%, equal to 265 passengers and 74
more than a 65% load factor. Over a 65%
load factor, fuel burn is increased by
624USG and fuel trip cost is raised by
$919, equal to a fuel cost of $12.46 per
extra passenger carried.
As with the A350-1000, the economics
of carrying additional belly freight with a
90% passenger load factor are examined,
with an additional gross 20,000lbs and
40,000lbs.
Where the 787-9 carries an extra
20,000lbs of cargo at 90% passenger load
factor, the aircraft’s fuel burn increases by
829USG and $1,220. This is the equivalent
of 7.21 cents per lb of net freight carried.
In summary
Both narrowbodies and widebodies
benefit from higher load factors. The
widebodies achieve lower CASM and
CRSM miles because both the block times
and total seats allow for the total operating
costs to be spread among a higher number
of unit costs. With the levels of cost
assumed, the difference in CASM and
CRSM are not significant. In a higher-fuel
cost scenario, the differences should be
more noticeable. For the widebody analysis
carrying extra cargo on board on the two
scenarios evaluated, it is likely that the
revenue from cargo activities covers the
slightly higher CASM and CRSM. The
extra revenue generated from freight
activities is therefore vital for operators to
achieve higher levels of profitability.
Load factors are a relevant metric for
airline profitability. Decades ago they were
were relatively low, but load factors are
now vital to profitable operations. With
the average break-even load factor in 2019
reported as 65.9%, a profitable operation
is only achieveable by carrying the
maximum number of passengers on board
at strict revenue management pricing.
To download more than 1,200
articles like this, visit:
www.aircraft-commerce.com

ISSUE NO. 128 • FEBRUARY/MARCH 2020 AIRCRAFT COMMERCE

34 I MAINTENANCE & ENGINEERING
The CFM56-5B has powered almost 52% of all A320ceos ordered. The
engine has a high EGT margin, making management relatively simple in
the majority of cases. Removal intervals and shop visit management are
considered, together with probable maintenance costs.
CFM56-5B maintenance
management & SV inputs
T
he CFM56-5B powers the largest
share of the A320 current engine
option (ceo) family. The first
A320s equipped with CFM56-5B
engines entered service in 1993, making
them 27 years old. There are now fewer
than 50 ceo aircraft on firm order, and the
A320 new engine option (neo) will be the
only types in production by the end of
2020.
The CFM56-5B is well known for its
on-wing reliability and long removal
intervals. The exhaust gas temperature
(EGT) margin is high enough on most
variants and thrust ratings for it to remain
on-wing up to the life-limited part (LLP)
engine flight cycle (EFC) life limits. This,
together with typical rates of annual
utilisation, means that it is possible for
certain engines to only come due their third
planned removal and shop visit (SV) after
more than 25 years of operation.
Engine performance, reliability and
removal intervals have been improved by a
series of technical upgrade programmes.
Long removal intervals and the low
frequency of maintenance events have led
to a prolonged delay in CFM56-5B SV
activity across the fleet. The surge in SV
activity materialised in 2016-2018. This,
CFM56-5B SERIES VARIANTS & THRUST RATINGS
Engine -5B3 -5B2 -5B1
variant
Thrust lbs 32,000 31,000 30,000
Application A321 A321 A321
Corner 30 30 30
Point (deg C)
Initial EGT 66 95 105
margin (deg C)
AIRCRAFT COMMERCE
and a surge in the SV activity of other 26,500lbs for the -5A3. The -5A, however,
narrowbody engines, has led to a shortage lacked thrust growth capability to power
of engine shop capacity in recent years. the stretched and higher weight A321.
With engines having been in service for The -5B was developed from the -5A
more than 25 years, and large numbers by adding a stage to the low pressure
going through, or coming due, their third compressor (LPC). The -5B series has a
and fourth SVs, there is also scope to 68.3-inch diameter fan, a four-stage LPC, a
reduce maintenance costs, by using parts nine-stage HPC, a single-stage HPT, and a
manufactured approval (PMA) airfoils and five-stage LPT. This gave the engine
other components, and used serviceable capacity for thrust growth up to 32,000lbs.
material (USM). The -5B variants can be grouped into
The long-term maintenance costs per thrust ratings. The -5B3 is rated at
engine flight hour (EFH) and per EFC can 32,000lbs, the -5B2 and -5B1 are at lower
therefore be examined over a long-term ratings of 31,000lbs and 30,000lbs for the
period equating to three planned SVs and A321 (see table, this page). The -5B3 is the
most of an engine’s operational life. highest rated variant of the -5B series.
Options for maintenance management The -5B4 and -5B6 are rated at
during the later years of an engine’s 27,000lbs and 23,500lbs for the A320 (see
operation can also be analysed. table, this page). -The -5B5 is rated at
22,000lbs and the -5B7 rated at 27,000lbs,
and together with the -5B6, power the
CFM56-5B description A319 (see table, this page).
The -5B series of CFM56 engines The -5B9 and -5B8 are the lowest-rated
followed the initial -5A1 series that variants at 23,300lbs and 21,600lbs, which
powered the first A320s in 1987, and power the A318 (see table, this page).
continued production up to 2003. The Overall, there are nine variants rated
-5A1 and -5A3 powered 390 A320s. from 21,600lbs to 32,000lbs. These nine
Despite the -5A4 and -5A5 also being used variants are based on the same
to power the first A319s from 1995, the turbomachinery hardware and parts, with
highest thrust rating of the -5A series was thrust rating being changed through the
engine’s full authority digital engine control
(FADEC) unit. This facility has some use in
maintenance management, since high-rated
-5B7 -5B4 -5B6 -5B5 -5B8 -5B9 engines operated on the A321, for
example, can be de-rated to a lower thrust
rating when they have come close to
27,000 27,000 23,500 22,000 21,600 23,300 exhausting all of their EGT margin, but
still have LLP life remaining. The engines
A320 A320 A319 A319 A318 A318 can then gain additional on-wing time
when operated at a lower thrust rating on
45 45 45 45 45 45
the A320 or A319 if the airline operator
has a mixed fleet.
109 109 145 163 180 145 The addition of an LPC stage to the
-5B series allowed thrust growth, while the
improvement in core engine flow has also
ISSUE NO. 128 • FEBRUARY/MARCH 2020
 35 I MAINTENANCE & ENGINEERING
The CFM56-5B has been specified for almost
4,200 A320ceo family aircraft. There are more
than 3,840 aircraft with -5B engines in service.
This fleet is dominated by the -5B6/P, -5B5/P,
-5B4/P, -5B4/3 PIP, and -5B3/3 PIP variants.

given the engine a high EGT margin. The

higher airflow and degree of core engine
cooling was also required to compensate
for the higher combustion temperatures.
Initial EGT margins are about 66
degrees centigrade for the highest-rated
-5B3 and -5B2 variants powering the
A321. The mid-rated -5B4 variant at
27,000lbs has an initial EGT margin of up
to 110 degrees, while lower-rated engines
rated at 22,000-23,500lbs have up to 110-
165 degrees centigrade.

Upgrade programmes
The CFM56-5B series has had a series
of modification and upgrade programmes.
The original standard -5B series engine was
introduced in 1993. These are designated
with a -5BX suffix, the last digit indicating
the thrust rating (see table, page 34).
A total of 49 engines were fitted with a
dual annular combustor (DAC) to emit
lower nitrogen oxide (NOx) emissions, and
designated as -5BX/2P.
The first modification and upgrade was
the /P programme, and was launched in
1996. This was an improved standard or
airfoils, and was referred to as the 3-D
aerodynamic programme. An example is
the upgrade of the -5B4 to the -5B4/P.
The upgrade was based on using 3-D
airfoils for the HPC, HPT blades, and LPT
nozzle. It also used improved cooling in the
HPT blades. The overall intention was to
increase EGT margin by about 10 degrees
centigrade; reduce specific fuel
consumption (sfc) by about 3%; and
increase the lives of LLPs in the fan/LPC to
30,000EFC, in the HPC and HPT to
20,000EFC, and in the LPT to 25,000EFC.
The /P programme was incorporated on
the engine production line from 1996, but
could also be incorporated into the engine
during an SV.
“The HPT blades used in these
modification programmes were improved
compared to the original -5B engines,” says
Florian Weinz, senior engineer CFM
engines at Lufthansa Technik. “Since their
introduction, these new blades are capable
of a full removal interval of up to
20,000EFC. The 3-D aero blades are a bit
more sensitive and have slightly higher
deterioration rates. Despite this, the EGT
margins for brand new engines and post-
SV are both higher when these blades are
fitted. Average EGT margin erosion rates
are about 4.0 degrees per 1,000EFC for
low thrust engines, and 6-7 degrees per engines.
1,000EFC for higher thrust ratings.” The modules affected by the /3 upgrade
Most original standard engines have were the HPC, the combustor, the HPT,
been upgraded to /P standard since the and the LPT. The main features were the
modification was introduced. The same use of second generation 3-D blades and
applies to DAC or /2P engines. A mixed airfoils.
fleet that includes some /2P engines The effects of the programme have
provides complications for some operators. been an increase in removal intervals by
The second major modification was the about 10%, due mainly to improved EGT
Tech Insertion or Tech 56 programme. margin and parts durability. Fuel burn has
This was launched in 2004, provided as a also been reduced, and NOx emissions are
retrofit kit, and became the production line 20-25% lower.
build standard from 2007. The third main upgrade programme
Engines with this standard are can only be applied to /3 engines. This is
identified as having a /3 suffix. An example known as the performance improvement
is the -5B4 variant modified to the -5B4/3. programme (PIP). It became available in
The modification is intended to 2011, and only /3 standard engines could
increase EGT margin, reduce fuel burn and be retrofitted with the kit. Most engines
reduce maintenance costs through built since 2011 have been /3 PIP engines.
improved parts durability. The /3 An example is the -5B4 becoming the
modification is more expensive than the /P -5B4/3 PIP.
programme when applied to baseline Changes to engine hardware mainly
CFM56-5B LIFE LIMITED PARTS
Engine Number Life limits 2020 list
module of parts EFC price - US$
Fan/LPC 3 30,000 543,000
HPC 6 20,000 1,016,000
HPT 4 20,000 1,088,000
LPT 6 25,000 1,142,000
Complete shipset 19 4,170,000

ISSUE NO. 128 • FEBRUARY/MARCH 2020 AIRCRAFT COMMERCE

36 I MAINTENANCE & ENGINEERING
ACTIVE FLEET OF CFM56-5B-POWERED A320 FAMILY AIRCRAFT four groups have a 2020 list price of $4.2
million. This compares to a list price of
A318 -5B9 -5B8 Total Production $2.55 million for the same 19 parts in the
years four modules in 2014 (see CFM56-5B
maintenance management & reserves,
Thrust rating - lbs 23,300 21,600
Aircraft Commerce, February/March 2014,
-5BX
page 26). This is an annual increase in LLP
-5BX/2P
shipset list prices of 6.8%.
-5BX/P 4 20 24 2003-2010 There are now three LLPs in the fan
-5BX/3 13 2 15 and LPC with certified life limits of
-5BX/3PIP 4 4 2011-2013 30,000EFC, and a list price of $543,200.
The LPT has six parts, and certified
TOTAL 21 22 43 lives of 25,000EFC. Their 2020 list price is
$1.14 million (see table, page 35).
A319 -5B7 -5B6 -5B5 TOTAL The core engine has the two modules
Thrust 27,000 23,500 22,000 of the HPC and HPT. These have six and
rating - lbs four parts, and have a total list price of
$2.1 million (see table, page 35).
-5BX
-5BX/2P 17 17 1997-2004
-5BX/P 58 174 195 427
CFM56-5B in operation
-5BX/3 26 76 85 187 2005-2011 More than 8,060 A320ceo family
-5BX/3PIP 97 12 9 118 2011-2015 aircraft have been built since 1987. The
last orders for fewer than 70 aircraft are
TOTAL 181 279 289 749 due for completion before the end of 2020.
The initial CFM56-5A series engine
A320 -5B4 -5B6 TOTAL Production equipped 390 A320s and 144 A319s. The
years -CFM56-5B series has powered 4,151
Thrust rating - lbs 27,000 23,500 aircraft built to date since 1993, and there
-5BX 3 3 1996 are 47 aircraft on order with -5B engines.
-5BX/2P 24 24 1995-2004 The -5B series therefore accounts for
51.7% of all A320ceos ordered.
-5BX/P 447 30 477 195-2011
The second main engine type for the
-5BX/3 513 98 611 1995-2013
A320ceo was the V2500-A5, which was
-5BX/3PIP 1,175 99 1,274 2009-2019
selected for more than 3,220 aircraft and
39.7% of the fleet. The V2500-A1
Total 2,162 277 2,389 preceded the -A5 series, and powered 143
aircraft built in the late 1980s.
A321 -5B3 -5B2 -5B1 TOTAL Production The -5B series can be split into five
years main groups: the baseline engines; and
Thrust 32,000 31,000 30,000 baseline /2P engines, /P engines, /3 engines,
rating - lbs and /3 PIP engines. The /3 and /3 PIP
-5BX engines also include a small number of
-5BX/2P 8 8 1998-2004 engines with a thrust bump, and are
-5BX/P 98 13 27 138 1994-2008 exclusively used by A321s.
The CFM56-5B-powered A320ceo
-5BX/3 53 27 3 83 1998-2011
fleet can also be sub-divided between the
-5BX/3PIP 397 9 2 408 2013-2019
A318, A319, A320 and A321. The A318
-5BX/3B1 5 5 2008-2009
was a minority fleet, with only 43 active
-5BX/3B1PIP 19 19 2015-2017 aircraft.
The A320 is the largest fleet, with
Total 580 49 32 661 2,389 active aircraft or on order with -5B
engines. The A319 and A321 had similar
Overall total 3,842 success, and 751 and 697 of these aircraft
are now in service or on order. This totals
3,889 aircraft. There are also another 309
aircraft that have been retired or in storage.
included HPC guide vanes and blades, components,” says Weinz. “Examples are There are almost no aircraft left in
HPT blades, and two of the LPT stages. the improved combustion chamber design, operation with baseline engines. There are
The most notable change is that it has 76 the new variable stator vane (VSV) bushing 49 aircraft with /2P baseline engines. The
HPT blades in a shipset, a change from the system, and improved HPT blades. These biggest fleets are equipped with /P, /3, and
80 blade configuration of previous all contribute to a full first removal interval /3 PIP engines.
standards. of 20,000EFC.” Most of the original baseline engines
There are also a small number of /3 PIP have been upgraded to /P standard. There
engines that have a thrust bump for hot are 24 A318s, 427 A319s, 477 A320s and
and high operations. Life limited parts 138 A321s with /P engines (see table, this
“The overall benefit of the modification The -5B’s life limits for its LLPs affect page). There is therefore a total of 1,066
programmes is that they solved certain management of engine maintenance. aircraft with /P engines.
technical problems and improved the on- The -5B has 19 main LLPs in its four There are 896 aircraft equipped with /3
wing performance of particular parts and main modules (see table, page 35). These engines, including 15 A318s, 187 A319s,

AIRCRAFT COMMERCE ISSUE NO. 128 • FEBRUARY/MARCH 2020

38 I MAINTENANCE & ENGINEERING
611 A320s, 83 A321s, and 43 A318s.
The largest sub-fleet are aircraft with /3
PIP engines. Totalling 1,828 units, it
includes 4 A318s, 118 A319s, 1,274
A320s and 432 A321s (see table, page 36).
The 432 A321s include aircraft with thrust
bump capability. Engines powering these
aircraft were either /3 engines modified to
/3 PIP standard, or factory-built as /3 PIP
engines.
These three sub-fleets of aircraft with
/P, /3 and /3 PIP engines total 3,790 active
aircraft, which are divided between 2,362
A320s, 732 A319s, 653 A321s, and 43
A318s.
Of the 3,790 active aircraft, four main
types account for the majority. The first
two are -5B5- and -5B6-powered A319s
that account for 279 and 289 active
aircraft. These two groups account for
15% of the active CFM56-5B-powered
A320ceo fleet. Most of the aircraft have /P
engines.
The third and largest group is 2,162
-5B4-powered A320s, which is 56.5% of
the -5B-equipped A320ceo family fleet.
This is a mix of 477 aircraft with /P, 611
aircraft with /3, and 1,274 aircraft with /3
PIP engines.
The fourth largest group comprises 580
A321s equipped with -5B3 engines, equal
to 15.2% of the -5B-powered fleet.
These four groups total 3,310 aircraft,
and 86.6% of the -5B-equipped A320ceo
family global fleet (see table, page 36).
CFM56-5B in service
The A320 family has been steadily
improved since its service entry in the late
1980s, especially in terms of maximum
take-off weight (MTOW), fuel capacity,
and sfc and fuel burn performance. These
AIRCRAFT COMMERCE
have all led to increased range. Many
airlines now use A320 family members in
both short- and medium-haul operations.
The first aircraft served with Air Inter
and Air France, and operated typical short-
haul sectors such as French domestic
routes. These CFM56-5A-powered aircraft
operated at average FC times of 1.0FH and
up to 1.3FH.
Most -5B-powered aircraft operate
longer average routes and FH:FC ratios.
The high coreflow and cooler core engine
temperatures are just some factors that
have kept the rate of engine hardware
degradation relatively low compared to
previous generation engines. This has
allowed aircraft to fly high cycle operations
while achieving long removal intervals.
As described, about 15% of the
CFM56-5B-powered A320 family fleet is
A319s with -5B5 and -5B6 engines. These
are operating at 1.60-2.05EFH per EFC.
The largest portion of the total fleet is
A320s with -5B4 engines, and many are
operating in the 1.85-2.40EFH per EFC
range. Another 15% of the fleet are A321s
with -5B3 engines operating at 2.05-2.55
EFH per EFC.
These average flight times can mean
that aircraft weights are relatively high at
take-off. Weinz at Lufthansa Technik
estimates that the average take-off thrust
de-rate is 15-20% in most cases. “The rate
of thrust de-rate is not so critical on the
-5B because of the cool core temperatures,
unless you are considering the highest-
rated 31,000lbs and 32,000lbs engines,”
says Alex Marom, director of Bedek MRO
heavy maintenance, engines and
components, at Israel Aircraft Industries
(IAI).
The -5B series for the CFM was
specifically designed for the A321’s higher
Later modification standard -5B engines that
power the A319 and A320 have high enough EGT
margins and hardware durability to remain
on-wing for the full LLP limit of 20,000EFC. Such
engines may only need two or three shop visits
in their operational life.
thrust requirements. “The A319 and A320
have been fortunate to benefit from the
effects of de-rating,” says Francesco
Baccarani, vice president of technical at
SGI Aviation. “The A319 and A320
operate at 1.7-1.9FH:FC in most cases,
and have the low- and medium-rated
engines. These do not experience any
particular hardware degradation of EGT
margin erosion problems at this operating
ratio. The two highest rated variants for
the A321 do, however, experience similar
rates of degradation to previous generation
engines. The typical average EFC time of
1.7EFH is not good for the -5B3 and -5B2
rated at 32,000lbs and 31,000lbs. An
average EFC time of 2.5EFH or longer is
better for these engines, if it is possible for
airlines to achieve this.”
Engine management
The in-service performance of engines
will determine their removal interval and
their SV workscope, workscope patterns
and overall engine management.
Engines powering the A319 and A320
can all generally achieve long removal
intervals up to their LLP life limits before
exhausting all EGT margin. Engines
powering the A321 lose EGT margin at a
rate that does not allow them to stay on-
wing for as long as LLP lives, and have to
be managed around shorter planned
removal intervals.
The removal intervals between SVs that
engines can achieve, and their resulting SV
patterns, will influence the portion of LLP
lives that can actually be used before being
removed and scrapped, and therefore the
reserves paid per EFC for LLP
replacement.
If all parts can achieve 100% life
utilisation, then the reserves that have to be
paid for 2020 list prices for all 18 parts are
$169 per EFC. The actual reserves required
will have to consider probable life
utilisation, and the likely list price at the
time replacement comes due.
Because of different intervals and their
effects on maintenance management,
engines for the A319 and A320 are
considered differently to the A321.
A319 & A320 engines
As described, there are 749 A319s in
service with -5Bs. Most are 279 aircraft
with -5B6s, and 289 aircraft with -5B5s.
The majority of both of these two groups
ISSUE NO. 128 • FEBRUARY/MARCH 2020
 39 I MAINTENANCE & ENGINEERING
are /P engines, and total 427 active aircraft. CFM56-5B REMOVAL & SV MANAGEMENT - A319/320 ENGINES
Fewer than 200 A319s have /3 engines,
and only 118 aircraft have PIP engines. Removal First Second Third
The A320 fleet is more diverse. The
largest group or sub-fleet comprises aircraft
EFH:EFC ratio
equipped with -5B4 engines that are of /3
Removal interval - EFC 18,000-20,000 10,000-12,000 8,000-10,000
PIP standard. There are 1,175 of these out
of the -5B-powered A320ceo fleet. There Removal interval - EFH
are a further 99 aircraft with -5B6 engines Total time - EFC 18,000-20,000 28,000-30,000 36,000-40,000
of the 3/ PIP standard, taking the total
number of aircraft with /3 PIP engines to Module workscope Core overhaul Core performance Core overhaul
1,274 out of 2,389 active A320s with -5B restoration
engines.
The second smallest group is 611 New parts $3.6 million $2.5-2.6 million $2.5 million
aircraft with /3 standard engines, and then Parts repairs $0.7 million $0.6-0.7 million $0.8 million
there are 477 aircraft with /P engines.
Labour 3,500-4,000MH 3,000-3,500MH 3,500-4,000

Removal & workscope pattern

The initial EGT margins of engines are
in the range of 110-165 degrees centigrade
for low-rated engines up to 23,500lbs
thrust, and 100-110 degrees centigrade for
engines rated at 27,000lbs thrust. These
are the -5B4, -5B5, -5B6, -5B7, -5B8 and -
5B9 variants.
The EGT margin deterioration rate is
equal to 17 degrees for the first 2,000EFC
on-wing. The remaining margin at this
point will therefore be 93-148 degrees for
the lower-rated engines, and down to 83-
93 degrees for -5B4s rated at 27,000lbs.
The EGT margin deterioration and
erosion rate from 2,000EFC is 2.75-3.00
degrees per 1,000EFC. All low- and
medium-rated engines should therefore
have enough EGT margin to allow a
removal interval up to the full life limits of
HPC and HPT LLPs of 20,000EFC.
“Most operators have upgraded their
engines to /P as a minimum,” says Marom.
“These engines have been around since
1996. The /3 mod programme came later
in 2004 as an upgrade and in 2007 as
production standard. The consequence of
this is that most of these engines have only
been flying for about eight years. We are
only now beginning to see large numbers
of /3 engines coming into the shops.
“The /3 engines have an improved
EGT margin over the /P engines,”
continues Marom. “Because of this, the /3
engines get close to their LLP life limits of
20,000EFC on their first removal interval.
With typical rates of utilisation, this is
equal to more than 10 years of operation.
This long period explains why there are
about 5,700 engines in operation with no
SVs so far. This includes engines with
thrust ratings of up to 27,000lbs, and
engines operated in a temperate
environment. Engines operated in a sandy
environment will have a high rate of EGT
margin and hardware degradation, and so
will have a shorter removal interval.”
Weinz comments that restored EGT
margins following a first SV are about
80% of the brand-new EGT margin.
“Moreover, there is no particular difference
between the EGT margin erosion rate of
LLP replacement $2.1 million
Module workscope LPT overhaul
New parts $ 0.6 million
Parts repairs $ 0.4-0.5 million
Labour 700-900MH
LLP replacement $1.14 million
the first and subsequent removal intervals,”
adds Weinz.
1st removal
Baccarani similarly says that engines
rated for the A319 and A320 will stay on-
wing for up to 44,000EFH and 20,000EFC
for their first removal interval. “Most
engines get close to their HPC and HPT
LLP life limits,” says Baccarani. “The main
removal cause for these engines for the first
SV is LLP expiry and hardware
deterioration.”
This is confirmed by Air France, which
operates the entire A320 family. “Typical
first run intervals for engines on the A319
and A320 are up to 20,000EFC, and the
LLP limit is the main removal driver,” says
Michael Grootenboer, senior vice president
of engines product at Air France Industries
KLM Engineering & Maintenance. He
adds that the same is true of the second
and third removals, which are also mainly
driven by LLP limit. EGT margin loss is
not a removal driver.
Weinz adds that Lufthansa generally
has a first removal interval of 20,000EFC
or 35,000EFH, whichever occurs first. “We
find that the main removal causes are core
LLP expiry, but also looseness of the VSV
bushing, or findings in the combustion
chamber after about 35,000EFH,” says
Weinz.
“The improvement between /P and /3
engines is as much as 2,000 EFC in on-
wing life and a removal interval
improvement of 1,000-1,500EFC,” adds
$2.1 million
Fan/LPC overhaul
$0.2 million
$0.35 million
500-650
$0.92 million
Baccarani. “It is too early at this stage to
know what the improvement will be
between the /3 and /3 PIP standard. We are
only now seeing the first PIP engines
coming off-wing for their first SVs, and
these are mainly engines operated in hot
environments.”
Marom says that so far IAI does not
have any experience of /3 PIP engines, but
it expects them to be similar to the /3
standard engines.
The main consideration at the first
removal is the appropriate and required SV
workscope. This raises the issue of what
restored EGT margin can be achieved after
the first SV, since this will affect the
subsequent and second potential removal
interval. The restored EGT margin will be
determined by the level of workscope, and
the ratio of new versus repaired and
restored parts. A high degree of parts
replacement will generally result in a higher
restored EGT margin and longer
subsequent interval in relation to hardware
deterioration.
The main objective will be to balance
the possible second removal interval with
the remaining LLP life limit. Larger SV
workscopes will ideally be required when
LLPs have to be replaced, so ideally the
workscope on the remaining parts and
assemblies in each affected module should
match this. At a first removal interval of
18,000-20,000EFC (see table, page 42),
the remaining LLP life in the LPT will be
just 5,000-7,000EFC. The remaining life
LLP in the fan/LPC will be another
5,000EFC at this stage, so 10,000-

ISSUE NO. 128 • FEBRUARY/MARCH 2020 AIRCRAFT COMMERCE

40 I MAINTENANCE & ENGINEERING
12,000EFC.
“The first SV will clearly have to be a
full overhaul that includes LLP
replacement for the HPC and HPT,” says
Marom. “It will therefore require a high
level of airfoil and parts replacement
because of the accumulated time on-wing.”
A main issue will be what workscope
to perform on the LPT. A remaining LLP
life of 5,000-7,000EFC will clearly impose
the same interval limit on the second SV.
For this reason many operators also decide
to perform a full overhaul on the LPT at
the first SV to allow LLP replacement at
the same time, and thus allow a second
removal interval of 10,000-12,000EFC as
allowed by the LLP life limits of fan/LPC
LLPs. This will be at a total time of
28,000-30,000EFC by the second removal
(see table, page 42). The second SV
workscope will therefore clearly include an
overhaul of the fan/LPC.
“The restored EGT margin after a full
core overhaul at the first SV will be 70
AIRCRAFT COMMERCE
degrees centigrade for a medium-rated
-5B4 powering the A320, and up to 110
degrees centigrade for lower-rated engines
such as the -5B6 at 23,500lbs thrust for the
A319,” says Marom. “This will be
sufficient to allow a second removal
interval up to 30,000EFC, and so 10,000-
12,000EFC.”
The length of the first removal interval
not only means that HPC and HPT LLPs
will have to be replaced, but also that there
will be a high degree of replacement of
airfoils and other parts. “Although EGT
margin loss is not a removal driver,
hardware deterioration is an issue after a
long interval,” says Marom. “Combustion
chamber distress is one example. A high
level workscope after 20,000EFC will
allow two subsequent intervals of
10,000EFC and 10,000EFC.”
Baccarani explains that the first SV will
have to include the overhaul of three of the
four main modules, as described, and that
the engines can achieve second intervals of
Engines powering the A321 are the higher rated
-5B3, -5B2 and -5B1 variants. These are sensitive
to EGT margin erosion. As a consequence, the
majority of A321s are equipped with engines
that are the /3 or 3 PIP standard that have higher
EGT margin and so longer on-wing life than
earlier standard engines.
up to 12,000-14,000EFC as a result.
“A harsh operating environment, in
high ambient temperatures and sandy
conditions, will lead to more hardware
deterioration and distress,” says Baccarani.
“This will be in the major components of
the hot section such as the nozzle guide
vanes (NGVs), the HPT blades and the
combustor.
2nd & 3rd removals
The policy of overhauling the HPC,
HPT and LPT modules and replacing LLPs
in all three modules at the first SV will
allow a second removal after another
10,000-12,000EFC and up to a total time
of 28,000-30,000EFC. “This would take it
up to the fan/LPC LLP limit, and so force
an overhaul on this module,” says Marom.
“Little or no work needs to be done on the
core and LPT at this second SV.”
If the general pattern is followed, as
described, then the second SV after a total
time close to 30,000EFC will clearly
include a fan/LPC overhaul to allow
replacement of its LLPs. “Most low- and
medium-rated engines are getting close to a
total time of 30,000EFC by the second
SV,” says Baccarani. The second set of
LLPs in the core and LPT modules will
have a total time of 10,000-12,000EFC at
this stage, so the HPC and HPT parts will
have 8,000-10,000EFC remaining. The
HPC and HPT modules will therefore
require a performance restoration or a light
SV with a high degree of parts repairs. The
LPT can be left, which will have 13,000-
15,000EFC remaining at this stage. By this
ISSUE NO. 128 • FEBRUARY/MARCH 2020
42 I MAINTENANCE & ENGINEERING
CFM56-5B REMOVAL & SV MANAGEMENT - A321 ENGINES
Removal First
EFH:EFC ratio
Removal interval - EFC 8,000-11,000
Removal interval - EFH
Total time - EFC 8,000-11,000
SV workscope Core performance
restoration
New parts $2.9 million
Parts repairs $0.5 million
Labour 3,000-3,500MH
LLP replacement
SV workscope
New parts
Parts repairs
Labour
LLP replacement
stage the aircraft has been flying for about
20 years.”
The pattern of the first two SVs and the
total time also implies the length of the
third removal. This is for two reasons.
The first is because the HPC and HPT
LLPs are replaced at the first SV. The new
installed LLPs with 20,000EFC will have
accumulated 10,000-12,000EFC by the
second SV, and so limit the third removal
to 8,000-10,000EFC, and a total engine
time of 36,000-40,000EFC (see table, this
page).
At this third SV the two core modules
will therefore require a second overhaul
and second replacement of LLPs if they are
to continue operating for a subsequent
fourth interval.
The LPT will have another 3,000-
7,000EFC of LLP life remaining. This may
be sufficient for an aircraft that will be 22-
26 years old at this stage, and will have
gone through two heavy airframe check
cycles. The LPT with this much LLP life
remaining may also have some value on
the used market as a time-continued
module.
This pattern of removal intervals and
SV workscopes (see table, this page) can
generally be followed by most operators of
low- and medium-rated -5B engines
powering the A319 and A320 for the first
three SVs. This takes the engines up to a
total time of 40,000EFC, equal to 22-26
years of operation at typical annual rates of
utilisation.
“Airlines with their own engine shops
AIRCRAFT COMMERCE
Second Third
6,000-8,000 6,000-7,000
14,000-19,000 20,000-25,000
Core overhaul Core performance
restoration
$3.25 million $3.25 million
$0.7 million $0.7 million
3,500-4,000 3,000-3,500
$2.1 million
LPT overhaul
$0.6 million
$0.4 million
500-650
$1.14 million
have more flexibility, even though the
general pattern is 20,000EFC, 10,0000EFC
and 10,000EFC for the first three removal
intervals; and the first SV involves
overhauls of the HPC, HPT and LPT,”
explains Baccarani. “Some airlines will
perform overhauls on the HPC and HPT,
but will leave the LPT and perform an
overhaul and full LLP replacement on it at
the second SV and a total time of
25,000EFC. The core modules will thus
only require a minor SV at this stage after a
short second interval.”
Another issue to consider is that the
age of the engine at the first SV will
coincide with possible aircraft retirement.
While secondary markets are possible
conversion to freighter or use by another
passenger airline, only a minority of
aircraft actually realise these new roles. A
large portion of the fleet is likely to face
retirement. This will be partly due to an
increasing number of new generation
aircraft being delivered to replace A320ceo
fleets. A portion of CFM56-5B engines are
therefore likely to be purchased for parts
salvage at this stage. The expense of
installing new LLPs and performing a core
overhaul is therefore likely to be seen as
uneconomic by many airlines when they
come due.
While these potential intervals indicate
the SV pattern and general engine
management for planned intervals, there is
also the issue of unplanned removals.
“These account for 10-20% of engines,”
says Marom. “These can be after short
intervals, and may only require small SVs if
light repairs are required.”
The age of the engines by the time they
go through the third and fourth SVs will be
22-24 and close to 30 years. “These SVs
present the opportunity to use USM to
lower the cost of materials and parts,” says
Marom. “This will be acceptable for older
engines, since the USM and repaired parts
will not compromise removal intervals.
The availability of USM, however, depends
on the supply of teardown engines.”
A321 engines
The higher-rated variants that power
the A321 have to be managed with shorter
removal intervals that affect the pattern of
SV workscopes.
Initial EGT margins of the highest-
rated -5B3 variants at 32,000lbs thrust are
about 66 degrees centigrade, and a little
higher at 90-100 degrees for the -5B2 and
-5B1 rated at 31,000lbs and 30,000lbs.
The active -5B-powered A321 fleet is
about 660 aircraft, and 580 are -5B3
engines. The /3 PIP standard is the most
numerous, with 432 aircraft equipped with
these engines. Of these, 621 are powered
by -5B3 engines, equal to 64% of the A321
fleet.
Another 83 have /3 engines. There are
138 aircraft with /P engines, and most are
-5B3 rated.
Given the performance, durability and
EGT margin improvements of the /3 and
PIP modification programmes, it is not
surprising that almost two-thirds of the
-5B-powered A321 fleet is equipped with
engines of a /3 PIP standard.
Loss of EGT margin and performance
is clearly a removal driver in these three
variants, and has a bigger influence for the
highest rated -5B3. The initial EGT margin
loss of about 17 degrees centigrade in the
first 2,000EFC on-wing leaves only about
49 degrees, equal to an EGT margin loss
rate of 3.5 per 1,000EFC. On this basis,
the engine will only be capable of a total
on-wing run of about 16,000EFC. The
more likely interval will be 14,000-
15,000EFC for -5B3 engines.
1st removal
“We are actually seeing high-rated -5Bs
coming for their first SV after just 8,000-
9,000EFC. So far we only have SV
experience with the /P standard engines,
and not the higher standard /3 or /3 PIP
engines,” says Marom. “These engines are
especially vulnerable to performance and
EGT margin loss in harsh and higher
temperature environments. The engine gets
a lot of hardware distress and deteriorates
very fast. We do expect the /3 and /3 PIP
engines to achieve an additional 1,000-
2,000EFC on-wing for their first removal
intervals. At best this would increase the
interval to 10,000-11,000EFC.”
ISSUE NO. 128 • FEBRUARY/MARCH 2020
 43 I MAINTENANCE & ENGINEERING
Grootenboer explains that the Air France 14,000-19,000EFC will have been
fleet is powered by lower rated B1 engines, accumulated by the second SV. This will 3rd removal
and so EGT margin loss is less of a require a full core module overhaul and The third removal interval is likely to
removal driver than higher rated engines. LLP replacement (see table, page 42). be 6,000-7,000EFC, taking total time to
“Another issue of operating the -5B at The remaining LLP life of LPT parts 20,000-25,000EFC (see table, page 42),
32,000lbs thrust is that the engine’s redline will be just 6,000-11,000EFC, while the equal to 12-15 years of operation.
EGT limit is often reached,” explains fan/LPC parts will still have 11,000- At this stage the set of LLPs installed in
Marom. 21,000EFC remaining. These two modules the core modules at the second SV will
Baccarani explains that the -5B series could therefore be left at this stage, have 13,000-14,000EFC of life remaining.
was designed to provide the higher thrust although the LPT would possibly require The total time at this stage will mean a full
requirements of the A321, and that it is a an inspection, and any findings would workscope on the LPT will be required to
de-rated engine on the A319/320. “This is result in a workscope. allow LLP replacement (see table, page 42).
why the engines on these aircraft perform
well, but intervals more typical of older
generation aircraft are seen on the A321,”
says Baccarani.
“The first intervals of -5B3s of /P
standard have been 11,000-13,000EFC,
when the aircraft is operated at an average
FC time of 1.8FH and in a temperate
climate and non-sandy environment,”
continues Baccarani. “In a harsh
environment, these engines are only getting
half the on-wing intervals. For some
engines operated in the Middle East it is
good to get intervals of about 6,000EFC.
“If the aircraft operation is changed to
longer FC times of 3.0FH, then the engine
will still stay on-wing for about
11,000EFC, but will of course be equal to
33,000EFH,” adds Baccarani.

2nd interval
A first interval of 8,000-11,000EFC
probably means that the first SV performed
will be a performance restoration. “This
has to be considered against the likely
second interval, which can be 8,000-
9,000EFC,” says Baccanari. “Clearly the
two combined intervals cannot exceed the
HPC and HPT LLP life limits of
20,000EFC. This means it is only worth
considering a full overhaul on the two core
modules at the first SV if the interval is as
long as 15,000EFC or more.”
This long first interval is unlikely,
however, and older original standard
engines or /P standard engines have only
achieved second removal intervals of
5,000-6,000EFC in some cases. The total
time by the second removal and SV can
therefore be as long as 17,000EFC, but can
be as short as 13,000EFC. The longer total
time would clearly call for a full overhaul
and LLP replacement at the second SV to
avoid compromising the subsequent
interval, but the shorter total time would
provide sufficient remaining LLP life for a
third on-wing interval before full overhaul
and LLP replacement in the two core
modules.
Many older and /P standard engines
are achieving first removal intervals of
8,000-11,000EFC (see table, page 42).
This leaves sufficient core module LLP life
for a second removal interval without
being compromised by LLP life. The
second interval of these engines is 6,000-
8,000EFC in most cases, so a total time of

ISSUE NO. 128 • FEBRUARY/MARCH 2020 AIRCRAFT COMMERCE

44 I MAINTENANCE & ENGINEERING
The actual time accumulated will
determine if there is enough LLP life left
for the fan/LPC LLPs to remain for a
fourth interval before a full workscope to
allow LLP replacement at the fourth SV.
This will be at a total time of 22,000-
30,000EFC (see table, page 42).
The longer intervals that are possible
for /3 standard engines mean a different SV
pattern will be required. The first removal
interval of 14,000-16,000EFC is possible.
Since a second and subsequent interval of
about 11,000EFC is also possible, it means
that a full workscope on the HPC and
HPT core modules and full LLP
replacement will be required at the first SV
(see table, page 42).
The combined first and second
intervals will come conveniently to
25,000EFC, or 1,000-2,000EFC fewer, and
so provide an opportunity to replace LPT
LLPs at close to their full life limit (see
table, page 42). The core modules at this
second SV would therefore require a
performance restoration. The core module
LLPs would have 9,000-10,000EFC of life
remaining.
The fan/LPC LLPs at this stage would
have 5,000-7,000EFC remaining. A third
removal interval of 9,000-10,000EFC may
be possible, so a decision would have to be
taken at this stage of whether or not to put
the fan/LPC through a full overhaul to
avoid limiting the subsequent interval due
to LLP limits. A fan/LPC overhaul would
be required if the total time at the second
SV was 23,000-25,000EFC and a third
interval of 9,000-10,000EFC was possible
(see table, page 42). This would take total
time to about 34,000EFC, equal to 21
years of operation at a typical utilisation
rate of 1,650EFC per year. Aircraft
operating longer cycle times of 2.0-3.0FH
AIRCRAFT COMMERCE
will accumulate 1,000-1,350FC per year,
so the third SV will come due at 25 years
or more.
While there may be a surplus of A319s
and A320s when the third planned SV
comes due because of a limited secondary
market, the A321 is likely to be in high
demand as a freighter conversion
candidate. There will therefore be a degree
of demand for time-continued engines and
modules, and salvaged parts and airfoils
from dismantled engines.
SV inputs
A portion of engines are maintained via
fleet-hour, maintenance cost per hour
(MCPH) and other similar agreements. A
portion of aircraft are owned or financed
with debt arrangements, while others are
acquired via operating lessors. Similarly
some airlines have chosen alternative
methods of engine management and engine
maintenance contracts. These can include
the actual cost of time (labour) and
material used, fixed price, and not-to-
exceed contracts.
The approximate costs of the SVs
described here are analysed on a time and
material basis, and so analyse the cost of
the expected labour and material inputs.
The main elements of SV costs are
labour, new parts, sub-contract and in-
house airfoil and turbomachinery parts
repairs, and the repairs of accessories. They
also include the cost of LLPs fitted during
the SV. There can be a net cost for LLPs,
with the sale proceeds of time-continued
LLPs removed from the module during the
SV. A sale of time-continued LLPs is only
likely in a small number of cases.
Moreover, time-continued LLPs will be
bought on a relatively low pro-rated basis
Without interference from unplanned removals
and shop visits, most -5B engines can be
managed around removal intervals that closely
match LLP lives. The fan and LPC module may
only require one overhaul for LLP replacement in
the engine’s operational life.
by operators that are interested in
acquiring parts for some modules. This will
allow them to run for a few thousand EFC
as a low-cost way of extracting a few more
years of service from an old engine. For
this reason any possible sales value of time-
continued LLPs are not included in the cost
estimates.
The largest cost element of SVs is the
cost of new parts and materials. Airfoils
and engine parts can generally be repaired
for a small percentage of the list price of a
new part. That is, the repair cost can be in
the order of 25% of list price. While such a
saving may be appealing, the use of
repaired parts or used serviceable material
(USM) will only be satisfactory for
relatively short removal intervals following
the SV. A high percentage of parts will
have to be replaced if long subsequent
removal intervals are aimed for. This is
particularly the case with airfoils in the
HPT.
The list price for shipsets of new parts
and materials in each module are high,
with the HPT having some of the highest.
A full shipset of HPT blades has a cost of
about $1.2 million, a shipset of nozzle
guide vanes (NGVs) in the HPT about $1.5
million, and a shipset of shrouds about
$250,000. The three main sets of parts
total about $3.0 million.
A full shipset of combustion chamber
liners and casings has a list price of about
$1.2 million.
A shipset of HPC blades and stators
has a list price of about $1.0 million.
The fan/LPC and LPT equally have
high list prices for complete shipsets of
airfoils. A higher portion of these can be
repaired compared to parts in HP modules,
however. Moreover, many parts can be
repaired twice before requiring
replacement. Full shipsets of airfoils and
parts in the fan/LPC and LPT are $3.2
million and $2.8 million. A repair cost of
about 25% clearly provides the possibility
of providing large savings in the combined
cost of new parts and parts repairs for
these two modules.
A319/320 engines
The core overhaul in the case of the
A319/320 engines at their first SV, that is
now likely to occur 18,000-20,000EFC
since new, will require a new shipset of
LLPs, as described. This will be $2.1
million.
ISSUE NO. 128 • FEBRUARY/MARCH 2020
46 I MAINTENANCE & ENGINEERING
The long interval up to this removal
will mean that a high percentage of parts
will have to be replaced. “Our experience
is that once we can see that material will
not last 40,000EFC, two full cycles of
20,000EFC, then it needs to be replaced at
the SV after 20,000EFC,” says Weinz.
“This will include the replacement of all
HPT blades and NGVs.”
A new shipset of HPT blades, for all 80
blades, is about $1.2 million. The same
applies to the 76 HPT blades installed on
the /3 PIP engines. HPT blades have soft
lives of 20,000EFC or 25,000EFC, and so
all will have to be replaced at this stage.
The cost of providing all other new
parts is in region of $2.4 million. This
represents about two-thirds of parts in the
HPC and HPT modules, other than the
HPT blades, being replaced.
The cost of repairs for parts not
replaced can be expected to be in the
region of $400,000. The cost of repairing
accessories is about another $300,000. The
cost elements of materials and parts repairs
will thus total about $4.3 million (see
table, page 42). The engine shop labour
used will be 3,500-4,000 man-hours (MH)
for these two modules.
The same SV will also involve the LPT
overhaul. A new shipset of LLPs is $1.14
million at 2020 list prices. List price for all
parts in the LPT is about $2.8 million. In
contrast, the cost of new parts is expected
to be $600,000, while cost of repairs for
the majority of parts will be $400,000-
500,000, taking the total to $1.0-1.1
million (see table, page 42). Labour
consumption will be 700-900MH.
AIRCRAFT COMMERCE
The second SV will incur a core
performance restoration, and fan/LPC
overhaul.
The core performance restoration will
require about 50% of HPT blades to be
replaced, while the other 50% can be
repaired. The variation in the HPT blade
scrap rate will be from 40% for a low
thrust engine operating in a temperate
climate, but can climb to as much as 60%
in a harsh environment.
Cost of new HPT blades will thus be
$500,000-600,000. The cost of other parts
and materials in the core modules will be
less than the first SV, but still be in the
region of $2.0 million. The cost of parts
repairs will be $300,000-400,000. This
will take the total for new parts and repairs
to about $3.0 million. Another $300,000
will be incurred for the repair of
accessories. Labour used will be 3,000-
3,500MH.
The workscope on the fan/LPC will see
all LLPs be replaced at a cost of $924,000.
A shipset of new parts has a list price of
$3.2 million. Only about $200,000 will be
required for new parts, and another
$300,000 required for the repair of 40-
50% of parts in this module. A further
$50,000 should be allocated for accessory
repairs. Total for parts, materials and parts
repairs is therefore $550,000. Labour used
is 500-650MH.
The third SV will possibly involve
another core overhaul. At 2020 prices this
will be $2.1 million for LLPs. At this stage
of the engine’s operational life it will not be
necessary to replace the same percentage of
parts as in the first SV. Cost of new parts
Airlines that have more flexibility or freedom to
determine shop visit workscopes can be in the
position where the majority of later standard /P,
/3 and /3 PIP engines only require two or three
major shop visits in their operational life.
excluding the HPT, will be about $2.0
million for an engine that could achieve a
post-SV interval of at least 10,000EFC.
About 40% of HPT blades may need
replacing at a cost of about $500,000,
while others will require repairs. The cost
of all airfoil parts repairs will be about
$500,000, and a further $300,000 for
accessory repairs, as in the first SV. This
will take the cost of all new airfoil parts
and repairs to about $3.0 million (see
table, page 42). A similar amount of labour
will be used as in the first SV.
A321 engines
While higher rated engines powering
the A321 will not be able to achieve the
same removal intervals as on the
A319/320, these engines will be able to
offset this affect to a degree by lower SV
inputs.
The first SV will require a core
performance restoration. This will require
about two thirds of all non-HPT blade
parts to be replaced, and 40-50% of HPT
blades to be replaced. The cost for these
two elements will be $2.4 million and $0.5
million. A further $0.5 million will be
required for parts repairs. This will take
the total for new airfoils and airfoil repairs
to about $3.4 million (see table, page 42).
The cost of accessory repairs will be similar
to lower rated engines at $300,000.
Labour used will be 3,000-3,500MH.
Other modules are left during this SV.
The second SV will be a full overhaul
of the same two core modules, as
described. This will incur similar costs to
the overhaul of the same modules for
lower rated engines.
The replacement of the LLP shipset at
2020 list prices is $2.1 million. This will
require a similar portion of parts and
airfoils being replaced as in the fist SV, and
so incur a cost of about $2.4 million at
today’s prices. A larger portion, about
65%, of HPT blades will have to be
replaced, and so incur a cost of about
$850,000. The total for new parts will thus
be about $3.25 million. Airfoil parts
repairs will cost about $400,000, because a
smaller portion will be repaired. Another
$300,000 will for the repair of accessories.
These elements will total about $4.0
million. Labour used will be 3,500-
4,000MH.
The third SV will involve a
performance restoration of the core
ISSUE NO. 128 • FEBRUARY/MARCH 2020

Engines powering the A319 and A320 may only
require an overhaul on the HPC and HPT
modules for a second time close to the end of
their operational life. Many airlines may decide
to scrap engines at this stage for parts salvage.
modules, and an overhaul of the LPT. The
core restoration will incur similar costs to
that of the first SV, although a higher
percentage of HPT blades will require
replacing at this stage. The cost of new
non-HPT blade parts will be similar to the
previous core restoration, plus about $0.85
million for HPT blades, taking the total to
$3.25 million (see table, page 42). Repairs
of airfoils will incur a further $400,000,
and another $300,000 will be required for
accessory repairs. Labour used will be
3,000-3,500MH.
The costs for the LPT overhaul will be
similar to that of the lower-rated engines
for the A319/320. This will be $1.14
million for a full shipset of LLPs, plus
about $600,000 for new parts and
$400,000 for parts repairs.
Other considerations
Besides these main SV events, and their
input costs, there are several other issues
that have to be considered.
The first of these is that older engines
that were of the original standard will have
experienced shorter removal intervals, and
so have had different SV workscope
patterns to /P and /3 engines that are
capable of longer removal intervals. Their
overall costs per EFH for non-LLP
replacement costs will be higher than for
the engines that are capable of achieving
the removal intervals as modern standard
engines as described.
Another issue to consider is
unscheduled or unplanned removals. These
events may be smaller and lower cost than
planned SVs.
If the SV events following an
unscheduled removal are similar in
workscope and cost to planned visit then
they will increase maintenance costs per
EFH. If they are major events they will also
upset the removal and workscope pattern.
The main effect will be to compromise the
replacement of LLPs, and cause some parts
to be replaced early. Overall it will result in
earlier than planned major SV events, and
so increase costs per EFH for SV inputs,
and costs per EFC for LLP replacement.
A third issue to consider is the
availability of time-continued engines on
the market. These can be a source of parts
that can be repaired, and provide USM for
third and fourth SVs, and thus provide
savings in relation to cost of parts and
materials.
ISSUE NO. 128 • FEBRUARY/MARCH 2020
The supply of USM is likely to increase
as more aircraft are scrapped as more new
generation aircraft are delivered, and a
large portion of A320ceo family aircraft do
not find markets to keep them operational.
The extent to which USM parts might be
used would be 25-35% in the HPC and
HPT modules.
These engines can also provide time-
continued LLPs.
The low-cost parts will suit an operator
that has engines at 20 years or older, and is
seeking to make savings by building
engines to provide a few more years service
instead of the optimum number of EFC
possible.
This will only be possible if there is a
sufficient supply of engines or modules on
the market. About 310 A320ceo family
aircraft equipped with CFM56-5B engines
have been retired or scrapped. Supply of
aircraft has been tight over the past year,
however, due to the effects of the 737
MAX grounding. This situation is now
likely to change because of the worsening
Corona virus pandemic. Large numbers of
older A320ceo family aircraft could
become available as airlines offload older
aircraft.
The use of parts manufactured
approved (PMA) components and parts
has the potential to provide significant
savings on parts consumption at SVs.
Despite being legal alternatives to the
original equipment manufacturer’s
(OEM’s) parts, PMAs are typically priced
at 60-75% of the OEM’s list prices.
Airlines may find it easier to use PMA
parts in later SVs.
Providers of OEM parts for the
47 I MAINTENANCE & ENGINEERING
CFM56-5B are HEICO Aerospace, which
provides HPC airfoils.
The use of USM can provide similar
savings, since USM repaired parts are often
sold at 60-70% of the OEM list price for
new parts. Consideration has to be given
here for the risks of using repaired parts,
and the probable on-wing life. The use of
USM is more likely to be considered in
later SV events. Potential savings are
several hundred thousand dollars in each
module. This will be an attractive
proposition for airlines operating engines
that are more than 20 years old, and for an
anticipated short interval.
In addition to using PMA parts and
USM to lower the cost of SV inputs,
engines that are free to be maintained
under time and material type contracts can
be sent to totally independent engine
shops. This is particularly important,
considering the surge in the -5B’s SV
activity over the past few years. These are
increasing in number, and include shops
such as Aerothrust and Global Engine
Maintenance (GEM). These both have
shops in the Miami area.
GEM is already experienced with the
CFM56-3 and -7B series, and is entering
the -5B market. It has capacity for about
60 SVs per year, but can increase this to
84. GEM also has the in-house repair
tooling, such as high-speed compressor
grinding and a 3-D scanner, to minimise
SV turn times. GEM can provide long-term
contracts to big airlines.
To download more than 1,200
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www.aircraft-commerce.com
AIRCRAFT COMMERCE
48 I MAINTENANCE & ENGINEERING
Spec 2000 Work Package (Chapter 18) contains the guidelines for the
seamless exchange of maintenance information between operators, MROs
and M&E providers. The scope of Spec 2000 Work Package standards and
its current limitations are examined here
Spec 2000 Work
Package to ease the
transfer of
maintenance data
S
pec 2000 Work Package (Chapter
18) is a digital standard for the
transfer of maintenance data
between participants in maintenance
activity function. Previous paper-based
maintenance activities were based on the
ATA Spec 200, an analogue punch card
system that was designed in the 1950s.
The aviation sector is at the forefront
of technological advancement, but
maintenance activities still are carried out
on a paper-based philosophy, and the use
of physical storage of records. Only in the
past decade have airlines and maintenance
repair and overhaul (MRO) shops started
to transition between a paper-based format
to a digital environment.
Spec 2000 used has been divided into
chapters, and Work Package has been
mainly designed for the exchange of
information between maintenance
departments and third party suppliers,
although other scenarios are applicable.
Spec 2000 has evolved to include
standards for the aviation industry to
provide and procure remote frequency
identification (RFID) and barcoding,
reliability, operational and maintenance
data exchange.
Spec 2000 Work Package (chapter 18)
in particular deals with the exchange of
information between maintenance and
engineering (M&E) IT systems, operators
and MRO providers during maintenance
activities. The main elements of the Work
Package Spec are described here.
AIRCRAFT COMMERCE
Background
The main objective of the Spec 2000
Work Package is to provide standards for
the exchange of aircraft maintenance data
between airlines and maintenance
providers.
The aim of these unified standards is to
offer a data transfer methodology that is
compatible with most players in the
aviation sector, and makes it easy for their
disparate Maintenance IT systems to
interact electronically with maintenance
activities. As this is an e-Business initiative,
cybersecurity has been incorporated into
the development of the standards to limit
information breaches or violation of access
to confidential maintenance information.
The Spec 2000 Work Package
standards will ultimately give the industry
a common framework for future
developments to keep pace with rapid
technological advances. The entire
programme is focused on reducing the cost
and improving the efficiency of all
maintenance activities.
The ATA e-Business Specifications have
come a long way from their original
specifications. ATA 200 was focused on
procurement: buying and selling parts.
ATA 100, a specification for the formats
for technical manuals, introduced the ATA
part numbering and maintenance task
numbering systems which are still widely
used in the industry.
There is a full list of specifications
developed and maintained by the ATA e-
Business Program. “The standards in
Chapter 18 aim to allow the smooth
transfer of information between IT
systems,” says Ken Jones, director of
electronic data standards at the ATA e-
Business Program.
Spec 2000 Work Package offers a
method for the streamlined exchange of
maintenance data. “For example, an MRO
provider is running one M&E IT system,
and the operator is running another,”
continues Jones. “All these M&E solutions
have tools to import and export data, but
they are all customised for the final user.”
Spec 2000 Work Package provides an
industry standard that simplifies the
importation of information related to the
work that needs to be done, and the export
of the work that has been done.
Spec 2000 Work Package has been
designed for the exchange of work
packages, work orders, maintenance tasks,
findings and other information between
operators, MROs and M&E systems.
The creation of Spec 2000 Work
Package is one initiative for implementing
a unified standard for the maintenance
function to become paperless in the airline
industry. M&E IT systems providers’
approach to the use of this standard is
focused on the exchange of information
between M&E IT systems. “Spec 2000
Work Package should always apply when
an airline maintenance planning system
and a separate maintenance execution
ISSUE NO. 128 • FEBRUARY/MARCH 2020
50 I MAINTENANCE & ENGINEERING
system need to exchange work package
information,” says João Jorge, senior
product owner at Swiss Aviation Software.
However, the Spec 2000 Work Package
standards are not restricted to the
exchange of information between systems.
There are several scenarios when the
exchange of information is necessary. They
will be illustrated later on.
There are key elements in the process
of managing the maintenance function and
activities under it. A typical flow of
information for a base maintenance
activity, for example, starts with the
creation of work orders grouped in work
packages. This information is transferred
from maintenance planning to
maintenance execution for example, or to a
third-party maintenance provider. Using
Spec 2000 Work Package standards
decreases the amount of data that needs to
be typed manually by the MRO or any
receiving party. Even in the best planned
scenario, undertaking a maintenance
activity seldom follows the initial schedule.
There are always unforeseen events that
create the need to update work orders and
packages as the maintenance work is
carried out. For example, extended periods
of time on a task are not uncommon
because of longer-than-planned labour
time to complete the task and the inclusion
of extra activities.
Once the maintenance activity has been
completed, a report of work has to be
generated. This includes signing off all the
completed tasks, description of findings,
man-hours (MH) and materials used
AIRCRAFT COMMERCE
during the maintenance activity, and
maintenance release. Spec 2000 Work
Package also facilitates the description of
the scheduled and accomplished tasks, and
the incorporation of airworthiness
directives (ADs) and service bulletins (SBs)
so activities are carried out in line with the
most updated regulatory practices.
Scope
Spec 2000 Work Package standards
have the flexibility to be adopted by all
parties involved, and ensure the accurate
exchange of information during the
maintenance function. “Formats have been
created for the MRO to provide data and
findings back to the operator electronically,
and to report the occurrence of any work
or deferrals that cannot be finished,” says
Jones. The aim is to automate all the
transactions within a maintenance activity.
The issue of secure exchange of
information has also been addressed. For
example, if an MRO is using an IT system
that is different to the operator’s, and a
password to access the other party’s
internal systems has to be provided, it is
unlikely that the companies involved
would be willing to share that type of
access. This is because a lot information is
going back and forth, including
confidential information from parties that
might not be directly involved in a
maintenance visit. The standards therefore
aim to address these shortcomings and
subsequent versions will incorporate
enhanced levels of security so that
For large third party MRO providers, transfer of
information in Spec 2000 Chapter 18 standard is
fundamental.
proprietary information exchange between
the parties remains confidential.
ATA now has an electronic definition
of the work package, which is mainly a
bundle of information for a maintenance
visit. This bundle comprises work orders
that primarily reference scheduled
maintenance tasks for the maintenance
activity, and can also include references to
non-routine items, modifications and SB
incorporation.
The Spec 2000 Work Package also
allows information to be better tagged.
“For example, if a crack is found during an
inspection, the MRO records the length,
width and depth of that crack and the
units. Spec 2000 allows these values to be
entered into numeric fields from which
calculations can be made, and requires
metric or imperial to be specified as the
unit of measurement, so that all parties will
understand exactly what is being reported
without having to sift through text fields,”
says Jones. There are also specific rules
such as using ISO formats for dates and
times. The specifications are not static, and
are always changing for improvement.
For example, Spec 2000 e-Logbook
(chapter 17) was developed to allow
interoperability between onboard
electronic logbook systems and ground-
based maintenance IT systems. Five
different versions of that Spec have now
been released since the introduction of
Chapter 17. Each version improves the
interaction between systems and addresses
new requirements from users.
Common general concepts
The ATA e-Business programme has
representatives from OEMs, system
providers, MROs, airlines, lessors and
others. It tries to develop the standard at
very common general concepts. For
example, a work order simply describes a
piece of work that needs to be done, and
points to tasks. If the M&E system breaks
the tasks down into steps, then Spec 2000
allows all the details, steps, descriptions
and sign-offs to be handled very effectively.
Under the current way of exchanging
information, references to a specific task
line number, or to the operator’s or OEM’s
task number tend to be customised and
inconsistent. At this point the MRO has to
determine what needs to be done within a
task, including the resources used. Also,
findings like dents, scratches and corrosion
have to be recorded and reported to the
ISSUE NO. 128 • FEBRUARY/MARCH 2020

operator, along with where they were
found and the seriousness of the finding.
The operator may return with a new
sequence of information if a fix is required
following a finding.
Again, even allowing for
customisation, any M&E system provides
the same basic information on the type of
job done, and where it was done, plus the
resources, time, materials and parts used
for a task. The expectation is that under
this commonality, information can flow
back and forth even though the way
concepts are handled by every MRO and
M&E system are different.
“Many of the M&E system providers
participate in the working groups
organised by the e-Business programme.
These help to determine information that
needs to be incorporated in the Spec, how
it is structured, and try to find the best way
to make an M&E system compatible,
irrespective of the interface.” The e-
Business programme is always receiving
input from the industry. “Operators and
MROs that use different systems have
participated, and they have validated the
fields and structure of the information to
ensure compatibility,” says Jones.
If an operator is based in one of the
large and longest-established jurisdictions
under the supervision of regulators like the
Federal Aviation Administration (FAA) or
ISSUE NO. 128 • FEBRUARY/MARCH 2020
European Aviation Safety Agency (EASA),
operators in these regions could be very
close to the point of becoming fully
paperless if they choose.
However, this is not straightforward,
depending on the size of the operator, such
as: a large carrier with a limited number of
aircraft with a lessor that is only willing to
accept records in paper format; a small
carrier with limited resources; an airline
operating a limited number of routes; and
aircraft in Europe under a Public Service
Obligation rule (PSO) or in the US under
the Essential Air Services (EAS)
programme; it would incur a higher cost to
comply with Spec 2000 Work Package
standard.
Training costs for these operators,
changes in internal processes, and the time
and resources required to adopt the Spec
2000 Work Package standards under the e-
Business programme may make this a
difficult financial decision. In some
instances operators may be unable to
adopt the Spec 2000 Work Package
standards and undertake their maintenance
electronically. If an airline is operating a
fleet of, for example, five ageing Saab 340s
to remote regions, and subcontracts all
maintenance to a third-party provider, it is
unlikely to be willing to invest in the
software, hardware and training needed to
comply with the Spec 2000 Work Package
51 I MAINTENANCE & ENGINEERING
standards.
The third-party provider, however, may
already be executing its maintenance
activities electronically, which would help
the small operator in achieving a paperless
maintenance standard. Some M&E
providers are focused on the niche market
of small operators and MROs, and offer a
customised budget solution for this type of
organisation.
“We believe that there are many
benefits to be achieved from the Spec 2000
Work Package, including cost reductions,
consistency, accuracy, compliance and
efficiency. So far not many systems are
compliant with this spec, so we think it will
take some time for the aviation industry to
prove these benefits,” says Jorge.
Version 1 of Work Package
Version 1 of Spec 2000 Work Package
was published in 2019. Version 2 is
currently under development. The scope of
Version 2 is highly relevant to the industry
because it focuses on the need to manage
changes to the work package over the
course of the aircraft in maintenance. It is
more relevant for major maintenance tasks
than for line maintenance.
As already mentioned, maintenance
activities rarely go 100% according to
plan. For example, when an aircraft is in a
AIRCRAFT COMMERCE
52 I MAINTENANCE & ENGINEERING
base check at an MRO facility for several
weeks, a lot of information flows back and
forth. Prioritising items, or reporting
findings where a new work order needs to
be approved are examples of some of the
many changes that occur during execution.
Sometimes these changes entail removal of
work if the deadline for completion of the
heavy check is approaching. Version 2 is
highly important because it improves the
ability to adapt to the changing
environment during the performance of a
maintenance visit.
All of the Specs have to be updated
regularly because maintenance needs
change regularly, and there is always the
need to stay on top of technological
advances.
Working groups
Different types of organisations
currently participate in the working groups
dealing with the development of the Spec.
These include more than 20 of the largest
airline groups worldwide, some of the big
lessors, more than 25 OEMs, some of the
largest MRO providers, parts distributors,
and more than 30 M&E system providers.
The International Air Transport
Association (IATA), International Civil
Aviation Organization (ICAO) and some
universities are also part of the working
groups. “About 110 organisations are
working on every level of standards to
exchange information, initially from
company to company, but also from
system to system, and procuring parts and
sourcing engineering materials,” says
Jones. “All these stakeholders have the
opportunity to participate, give input and
AIRCRAFT COMMERCE
feedback in the process of developing the
electronic Specs.”
All of the Specs are constantly evolving.
For example, if an M&E provider needs a
feature or functionality that is not covered
by the Spec, it can propose changes to be
assessed. Similarly, OEMs sometimes
require new items in their maintenance
programmes to be covered by the Spec.
“Currently, our main challenge is to
find a standard for the aviation industry.
We are attending the ATA Working Group
meetings to discuss the industry standards,
and at the same time we need to create
interfaces in our system to be compliant,”
says Jorge.
ATA has been working with IATA and
ICAO to update guidance to organisations
on implementing maintenance activities
that are executed electronically, which
eventually leads to the production of
electronic maintenance records as well.
Changes are taking place, albeit more
slowly in some jurisdictions than in others.
Aircraft maintenance practices were
developed in the early days of aviation
when paper was the only available tool to
keep track of record activities.
Technological changes have only started
gaining traction in the past few years, but
the transition to electronic records will
happen despite a slow early adoption.
Data transfer scenarios
There are several instances where data
transfer is required. The most common
scenario is when an operator sub-contracts
maintenance to a third-party provider.
Under this scenario more often than not
the MRO would have to accept PDFs and
Transfer of maintenance data is time consuming,
and always has to be ‘translated’ into electronic
versions.
paper records, and re-enter the data in their
internal systems. This adds costs, and is
time-consuming and inefficient in terms of
resources for both the operator and the
MRO.
If an aircraft has to stay on the ground
for four weeks instead of three, because of
the relative inefficiency of administration
time and paperwork, it generates extra
cost.
The second instance where a large
transfer of data is required is when an
aircraft moves from one operator to
another that uses a different M&E system.
If the two M&E systems do not operate at
the same standard, then that makes data
transfer a complex activity.
A third instance is when maintenance
data has to be transferred at the end of a
lease term. “Some members of the industry,
like the big lessors, are now not only
encouraging operators and MROs to go
paperless, but to adhere to the same data
transfer standards,” says Jones. An aircraft
transfer is a process that requires a large
amount of auditing and compliance. If an
aircraft is on lease, the return conditions
also need to be verified. Usually a C check
or other major maintenance activity is
contractually required before any
redelivery. All of these activities are made
more efficient by adopting paperless
technology for maintenance tracking and
record-keeping.
ATA Spec 2500 provides for electronic
exchange of this type of information, and
implementations of this specification are
beginning. When Spec 2000 Work Package
is fully implemented across the industry,
however, it will become even faster, more
reliable and efficient to transfer
maintenance data.
Another instance when maintenance
data transfer is required is when an
operator sub-leases an aircraft that
operates with a different M&E system or
one of the operators in the sub-lease
transaction still carries out maintenance on
a paper-based system. When maintenance
tasks are completed these have to be
‘translated’ into digital format.
Probably the most complex
maintenance data transfer is when an
operator or an MRO adopts a new M&E
system. A change of provider is not a
decision taken lightly. It is based on
company strategy, maintenance
philosophies or return on investment.
M&E systems operating under a brand
usually deliver very customised solutions to
their customers. When an operator changes
ISSUE NO. 128 • FEBRUARY/MARCH 2020
54 I MAINTENANCE & ENGINEERING
M&E provider, the decision is mainly
based on the composition of its fleet and its
associated maintenance practices, so the
operator is looking at a best-fit solution.
On the other hand, an MRO that delivers
third-party services to many operators
would change M&E systems because it
needs more flexibility and integration to
accommodate the unique maintenance
needs of each of its customers. The MRO
therefore needs an M&E system that can
simultaneously exchange information
effectively from different operators, and
adapt to their specific maintenance
philosophies and requirements.
Challenges
Eventually all M&E providers would
have to implement the Spec 2000 Work
Package standard to make it work.
“Because of the size of the industry and the
different objectives and the approach of
each organisation in the sector, finding a
common framework is a challenge, but
implementing a common standard reduces
the extent of that challenge,” says Jones.
While the creation of the Specs is an
on-going process, it is important that
M&E providers eventually support the
most updated versions of the Chapters on
the Specs. A good example of this can be
drawn from the implementation of version
5 of Spec 2000 Chapter 17. This Spec
typically entails a narrow integration,
because the provider is integrating its e-
Logbook system with its M&E system.
With Chapter 17, there will soon be a
small change. “It is likely that many e-
Logbook providers will not adopt the
revision for a few years,” says Jones.
AIRCRAFT COMMERCE
Many organisations feel comfortable
with the standards incorporated in the
previous version of Chapter 17. In the case
of Chapter 18, large MROs that have to
deal with many different M&E systems are
the most likely to adopt any updated
revision to the Specs than an airline that
does in-house maintenance or subcontracts
part of its maintenance function to a large
third-party provider like Lufthansa
Technik. The latter would be compliant
and would have the most updated versions
of all the chapters on the ATA e-Business
programme.
Every organisation has a different
approach, but it all comes down to a
business decision which is usually related
to cost, in particular for small players.
“The advantage of participating early on in
the development programme is that the
final Spec standards will align better with
the particular needs of your organisation,”
says Jones. “M&E providers that are not
participating in the development of the
Specs are at a disadvantage because when
the latest version is published, the
providers that did participate will be able
to quickly adopt it,” adds Jones. The
upside to this is that even if an organisation
did not participate in the development of
the Spec, there is always the flexibility for
them to incorporate the standards of the
Spec into their maintenance systems. So,
the adoption of the Spec is open to be
implemented by any organisation that
wants to use it. “We feel confident in the
development of the Spec because there is a
large base of stakeholders participating in
the working groups, and they know what
the requirements of the industry are,” adds
Jones.
The intention of Spec 2000 Work Package is to
transfer maintenance data and information
seamlessly between airline and maintenance
provider. This will save engineering time
converting data and information between
standards.
The move towards electronic,
standardised data exchange has sometimes
been met with reluctance. Recently,
however, large lessors like AerCap and
GECAS are highly motivated and
encouraging companies to use the
electronic Spec 2500 that deals with
aircraft transitions. “Some of the smaller
lessors are more reluctant to adopt
electronic standards, but that stance is
likely to change eventually,” adds Jones.
“We believe that these lessors may be on
the leading edge of encouraging the
adoption of Spec 2000 Work Package and
other electronic formats.”
Spec 2000 Work Package is one of the
newest specifications to be developed.
Because the Spec has only recently been
released, adoption of the standard across
the industry will take time. Every M&E
provider has its own internal systems, so
they will have to map how to get to the
most recent specification, which will
require a lot of investment in IT.
Nonetheless, adoption of the Spec will
probably be encouraged by operators and
MROs, so there is an incentive to conform
to it. The first implementations of Spec
2000 Work Package will present the
biggest challenges to achieving a common
ground, but as knowledge is gained, and
changes are implemented, with each
subsequent version, the adoption and
implementation of common standards will
be faster and easier.
“Our current solution AMOS is not yet
Spec 2000 Chapter 18 compliant.
Moreover, the full scope of the Spec 2000
Work Package is not yet finished,” says
Jorge. “There is still a need to use printed
documents because there are airlines that
are not paperless, and some authorities do
not accept electronic signatures. Our vision
is to support a paperless Ecosystem and we
see AMOS as the main driver to help our
customers to achieve this,” says Jorge.
Previous generation aircraft
The 737 and A320 families were all
designed around paper-based maintenance
programmes. Most of the large operators
have used the OEM portals and services
provided by M&E systems to upgrade
their maintenance functions to a paperless
standard. The transfer of information has
been very much simplified, even though
there are still medium-size operators and
regional franchises that are in the transition
ISSUE NO. 128 • FEBRUARY/MARCH 2020
56 I MAINTENANCE & ENGINEERING
period, or that have not adopted a
paperless philosophy. On the other hand,
all newly-launched aircraft have been
designed around a paperless maintenance
philosophy. The 787, the A350 and the
A220 make it easier to become fully
paperless. The operator needs to adopt an
M&E system that provides them with the
best solution in line with their internal
maintenance practices. All upcoming new
aircraft programmes will facilitate fully
paperless operations, which will eventually
lead to total cost reductions for operators
and MROs.
There are still many legacy types like
the MD-80 series and the A300 flying in
North America and Europe. In some cases,
operators in these large jurisdictions are
using both paper and electronic records. It
takes a lot of resources to transition from
paper-based maintenance and ‘translate’ all
the information into an electronic format,
but is not impossible if the operator thinks
that this can generate a return on the
investment, for example with a sizeable
fleet of 717s that are not slated for
retirement in the near future.
By acquiring a content management
system (CMS) that enhances the
capabilities of an M&E solution, the
operator can bridge the gap and become
for the most part paperless. All transfers of
maintenance data can be made under the
Spec 2000 Work Package standard. The
organisation would not become fully
electronic, but at least this is a step towards
enhancing the ability to transfer data more
efficiently and search through the aircraft’s
historic records.
All this information should be
AIRCRAFT COMMERCE
‘translated’ so that it can be rendered in
XML. The organisation can still provide
paper documentation if required. XML is
the preferred and, for the most part, the
default format in the industry. As
technology evolves, new and more efficient
mark-up languages may emerge that could
become the new standard for electronic
maintenance activities.
XML interface
XML is one of several mark-up
languages that enable the creation of
information that is readable both by
humans and machines. XML was created
before the advent of the internet, but it has
been widely adopted to deliver content
over the web. XML is defined by schemas
that are customised, depending on the
needs of the end user.
The functionality of maintenance task
cards depends on raw data being made
compatible across different devices in the
correct language and format. In the case of
maintenance information, XML is the
format of choice. XML has the flexibility
to deliver content in HTML and also PDF.
When a maintenance function is fully
electronic, the ability to deliver content in
XML/HTML to any device in the
organisation is vital for carrying all aircraft
maintenance activities. When an
organisation is still paper-based, the ability
to render documents in PDF format is also
vital for record keeping and compliance.
“To be compliant with Spec 2000 Work
Package, you need to have software and IT
systems that can extract data in an XML
format with the same data structure
Seamless transfer of maintenance information is
achieved by implementation of Spec 2000 Work
Package.
defined in the schema of the Spec,” says
Jorge.
Any format can be used to store
maintenance records and information, but
converting it into XML format is the most
efficient method to exchange data between
parties. For example, an organisation may
run its internal system for tracking
maintenance parts using a database with
an SQL interface. ‘Translating’ this
information from an operator or MRO
provider is essential, since XML is the
current industry standard for seamless
exchange of information related to
maintenance activities. Parts, tasks, and
workscopes are more efficiently managed
when XML is used. Chapter 18 consists of
many fields so that the standard is able to
store as much information as possible and
support whatever data is exchanged during
a maintenance activity. The standards of
Chapter 18 are being developed around the
XML format.
In summary
Spec 2000 Work Package is one of the
most recent developments of Spec 2000. Its
aim is to facilitate the efficient transfer of
information between the parties involved
in heavy maintenance. This is part of a
trend in the industry to make all
maintenance activities paperless. Many
stakeholders are involved in developing the
standards of this Spec, but its adoption has
been relatively slow, particularly because
the modules are not yet mature enough to
become an industry standard. This is partly
due to the fact that the Spec aims to
capture as many data and parameters and
measure as many elements in the task card
as possible, to achieve top functionality
when transferring maintenance data.
Subsequent versions of the Spec will be
released following the feedback of the
working groups involved in its
development. The objective is to generate a
standard that is applicable across the
industry. This process is being done in
incremental steps. The needs of all parties
are assessed so that in the near term a
standard can be generated that is fit for all
the organisations involved in the transfer of
information for maintenance purposes.
This will be a big step in creating a
virtually paperless industry.
To download more than 1,200
articles like this, visit:
www.aircraft-commerce.com
ISSUE NO. 128 • FEBRUARY/MARCH 2020

The very successful 737 Classic passenger to freighter conversions was
due to be superseded by the 737 Next Generation programme. MAX delays
have stemmed the used narrowbody market that is ushering in a new
demand for 737 Classic freighters.
The second coming
of 737 Classic
freighter conversions
I
t was expected that demand for the
737 Classic (CL) passenger-to-
freighter (P-to-F) conversion
programme would have reduced to
almost zero by 2020. This was due to the
fact that both freight operators and lessors
had prepared to migrate to the 737 Next
Generation (NG) P-to-F programme when
these aircraft were expected to become
available in sufficient numbers.
The 737 MAX was intended to replace
the NG, which were expected to transition
to lower-tier passenger airlines or become
available for conversion to freighter.
However, in March 2019 regulatory
authorities around the world grounded the
737 MAX following accidents.
The withdrawal of the 737 MAX from
service was detrimental to the NG
conversion programme. Airlines held back
NGs from retirements and extended leases.
This has limited the supply of NGs suitable
for conversion, and boosted market values.
The resultant shortage in suitable NG
feedstock, and its high prices, is therefore
leveraging the legacy 737 Classics P-to-F
conversion programmes.
At the end of 2019 NG buyers began
to realise that they would be unable to
source an affordable NG airframe for
conversion anytime soon. If a short-haul
freight operator needs to expand its
capacity economically, then investing in a
737 Classic is its most viable option.
Once the Federal Aviation
Administration (FAA) approves the 737
MAX for re-entry into service, it could
take longer before the European Union
Aviation Safety Agency (EASA) and the
Civil Aviation Administration of China
(CAAC) grant their approval.
Furthermore, it is expected that there will
be many logistical problems concerning
delivery of the many stored aircraft to
ISSUE NO. 128 • FEBRUARY/MARCH 2020
airlines, resulting in long delays. Therefore,
it is forecast that the MAX grounding
could affect all 737 values for three to five
years before the market eventually settles
down.
737 Classics
There is a valid case for the 737 Classic
(CL) conversion, because its acquisition or
capital cost is low enough to make
conversion of a -300/-400 economic.
The 737CL is the second evolution of
the narrowbodied airliner, and was
manufactured from 1984 to 2000, with a
production run of 1,988 aircraft. Boeing
made three series of the 737 CL platform
that are designated -300, -400 and -500.
The standout difference between these
series is the length of the fuselage. With an
overall length of 119 feet, the -400 is 10
feet longer than the -300, which has a
fuselage length of 109 feet.
At 101 feet the -500 is the shortest of
the three series, so it would have a low
volumetric capacity as a freighter. A P-to-F
conversion supplemental type certificate
(STC) has therefore never been developed
for it.
Totalling 1,113 units delivered, the
-300 series was produced in the largest
numbers, followed by the -400 series, with
486 units, and the -500 series with 389.
There are two active 737-CL P-to-F
conversion programmes in operation, by
Aeronautical Engineers Inc (AEI) and
Pemco Conversions.
Israel Aircraft Industries (IAI) recently
decided to cease its CL conversion
programme, and concentrate on its NG
conversion programme.
737 Classics are powered by the CFM-
56-3 series of engines. Available variants of
the CFM56-3 series are the -3B1, -3B2 and
57 I FREIGHT BUSINESS
the -3C1. These are differentiated by their
thrust ratings.
Boeing’s replacement for the CL was
the NG, which was introduced in 1998,
and powered exclusively by the CFM56-7B
series.
737-400
AEI is noticing a rebound for -400 P-
to-F conversions, and expects to convert 10
-400s during 2020. However, as the -400
ages, it is becoming increasingly hard to
find aircraft in suitable condition for
conversion.
This problem is further compounded
because passenger operators which fly
them are now holding onto these assets,
rather than retiring them as was previously
expected. Typically, they do not have a
direct economic replacement, so these
airlines are not letting go of the 737-400s
easily.
There was a total of 10 Classic P-to-F
conversions completed in 2019. Out of this
number AEI converted four -400s and
Pemco Conversions competed five -300
and one -400. In 2018 there were 23 737-
400s converted compared to a single -300
conversion.
The -400 is considered to be the best
conversion candidate because of its mix of
payload, range and container positions.
There have been a limited number of
-400s slowly reaching the market, however.
Some of the feedstock that has been
released for conversion is of good pedigree,
and AEI has recently converted a couple of
aircraft built in 1998 and 1997. Yet
aircraft built in 1991, 1992 and 1993 have
also been converted. These are 27-29 years
old.
Non-specific age ranges of P-to-F
candidates show that operators are
AIRCRAFT COMMERCE
58 I FREIGHT BUSINESS
converting any asset they can acquire. As
soon as an airframe is released on to the
market, it is often sold very quickly, so
airlines are not being picky.
According to AEI senior vice president,
sales and marketing, Robert Convey: “We
are seeing a dramatic price increase for
-400s. Feedstock values can be as high as
$4.9-5.0 million for a 1997-built aircraft.
Recently an aircraft was released for sale
with a $5.7 million price tag.”
Much of the asset price depends on the
maintenance condition of the airframe and
the available maintenance hours left on the
engines. Younger aircraft with a good
pedigree were typically marketed at $4-5
million 12 months ago. Prices are
remaining buoyant because the supply of
suitable conversion feedstock is low, which
is being exacerbated by the 737 MAX
delays.
Despite this, it is still cheaper for
operators and lessors to pay extra for a
-400 airframe than pay extra for a 737-
800, because of the exponential price
difference between CL and NG aircraft.
According to vice president and
managing director at ICF, Stuart Rubin:
“They are not widely available, but if you
are prepared to spend $18-20 million you
can buy a passenger 737-800. It will cost
$3.7 million for the conversion, and $2
million for maintenance. The typical on-
ramp cost for a service-ready 737-800
freighter will be $23-25 million.”
After acquisition, conversion and a
maintenance check, the on-ramp cost for a
CL ranges from $7 to $9 million, in the
current economic situation. It is hard to
understand how operators can absorb the
extra cost of an NG conversion when they
are achieving a single extra container of
freight.
“We have another year on the -400
AIRCRAFT COMMERCE
conversion and will end up doing 10 or 12
modifications in 2020. In 2021 I see that
the numbers will reduce. We could still
potentially do another 10 conversions, but
because of the feedstock situation I do not
know if that will actually happen,” says
Convey.
The number of aircraft still in service
and that were built from 1993 onwards, so
up to 27 years old, is fewer than 50. Of
this group, 20 were built in 1993. If the
younger aircraft, built from 1994 to 2000
are put through conversion, they will be
20-26 years old.
-400 weight variants
Operational costs such as landing fees
and navigational charges are formulated
against an aircraft’s weight. Original
equipment manufacturers (OEMs) will
typically market their aircraft with options
of several maximum take-off weights
(MTOW) to allow airlines to match their
performance requirements with their route
networks, and so reduce in-service costs
and fees. An airline that typically operates
at the lower end of its aircraft’s MTOW
can reduce these charges by buying a
lower-rated weight variant.
Boeing manufactured three variants of
the 737-400 that are differentiated by their
MTOW, to enable operators to choose the
most suitable weight variant for their
operation.
The MTOW for the standard gross
weight (SGW) variant is 139,500lbs, and is
150,500lbs for the high gross weight
(HGW) variant.
All purpose-built SGW airframes can
be upgraded to an MTOW of 143,500lbs
via a simple logbook certification
amendment. It is, however, only possible to
upgrade an SGW-certified aircraft to HGW
The availability of feedstock for conversion is
currently low and Classic prices are buoyant,
since airlines are unable to procure economic
replacements. Airlines are typically extending
leases and ageing aircraft are remaining in
service for longer.
if the airframe is manufactured with the
appropriate modifications.
“There are two factory variants, which
can both achieve 139,500lbs and go to
143,500lbs. Only the HGW can be
increased to 150,500lbs. For the HGW
upgrade you need the correctly built
aircraft which has a stronger wing box and
different landing gear. It is not just a simple
paper change as it is with some aircraft
types,” says Convey. “Many HGW aircraft
were originally delivered at 139,500lbs, so
it will be a simple paper exercise to bring
these types to the higher limit. To do this
you need an aircraft that has the capability
to be upgraded to the HGW variant.”
If an HGW aircraft is certified at an
MTOW of 143,500lbs, it will be possible
to increase the MTOW to the maximum
by a paper change.
If an HGW aircraft has been de-rated
to a 139,500lbs MTOW variant, then it
may require a brake calliper and tyre
upgrade before it can be certified at the
highest weight requirements.
Most airfreight operators and lessors
will invest to upgrade the airframe’s
MTOW to the maximum possible, since
this will increase its marketability and add
operational flexibility.
The different weight variants do not
affect the P-to-F STC. Boeing does,
however, recommend that operators obtain
certification for any weight changes before
the conversion. Yet it is not unknown for
the OEM to facilitate MTOW changes
post-conversion. The recertification cost to
update the aircraft weight is estimated to
be close to $250,000.
The list price to increase the MTOW
typically reduces as the aircraft ages and
the demand for re-certification decreases.
Purpose-built SGW airframes represent
two-thirds of all 737-400s built. HGW
aircraft were built sporadically throughout
the entire build sequence and cannot be
identified by a block build serial number
(S/N).
Boeing is reluctant to share
information about individual aircraft and
their gross weight build status. Details of
an aircraft’s maximum weight limit cannot
be derived from its technical logbook, nor
are any modifications straightforwardly
identifiable.
SGW aircraft were not picked for
conversion early in the 737-400 P-to-F
conversion programme because operators
only wanted to convert HGW feedstock.
ISSUE NO. 128 • FEBRUARY/MARCH 2020
60 I FREIGHT BUSINESS
Most 737 freighter aircraft are now
operating for integrators such as Amazon,
DHL and UPS. Typical express cargo
packing densities mean that operators
flying HGW aircraft operate well within
SGW limitations.
“Over the past couple of years, SGW
aircraft have been the mainstay of the 737-
400 programme, because there are many
more SGW airframes in the fleet and
typically operators do not need the higher
weights,” says Convey.
The HGW variant will allow operators
to carry general freight loads if they need
to. Yet analysis suggests general freight
loads are rarely flown on 737s except in
niche markets.
Markets
About 80% of all converted 737 CL
aircraft are operating in the express
package market. Typically, these aircraft
are operating at low packing densities.
Including the tare weight, standard
AAA or AAY main deck express freight
containers, used on the 727, 737 and 757
freighters, each weigh about 4,000lbs
when loaded.
The 737-400 with 10 full main-deck
positions will be capable of a gross
structural payload of 45,000-46,000lbs.
Yet express carriers are consistently
operating at a sub 40,000lbs gross
structural payload, and typical loads are
38,000-39,000lbs.
Operating at a packing density of 6.5
lbs/cu.ft, a 737-300 will have a net
structural payload of about 31,000lbs,
while the larger 737-400 will have a net
structural payload of about 37,500 lbs.
ASL, West Atlantic, DHL, FedEx and
UPS express cargo requirements are all
AIRCRAFT COMMERCE
designed around the AEI 737-400SF.
Therefore, contractual express carrier
requirements are for 10 pallet positions, so
airlines do not yield any extra revenue by
operating the more expensive 737-800
under these arrangements.
It is likely the 10-pallet position
agreement will be updated in the future to
reflect the diminishing feedstock for 737-
400 P-to-F modifications, and the eventual
lapse in CL conversions.
737-300 operator markets
About 20% of the 737CL’s freight
operations are for dedicated loads, such as
equipment for the oil and gas industry
which particularly suits the -300 airframe.
Oil and gas companies typically do not fly
palletised or containerised freight.
There is still a great deal of interest in
the 737-300 because many airlines do not
want to fly with a 737-400 when they are
only flying 80% full with a -300.
According to Pemco Conversions,
director of conversion programmes Mike
Andrews: “If we had the feedstock, we
would be converting a lot of Classics. All
conversion facilities are unable to get hold
of suitable feedstock 737s to convert. We
have a lot of customers which require
Classics for conversion, but are trying to
find the feedstock to do them. We have got
a number of 737 Classics booked in for
conversion during 2020. From a market
standpoint, it is possible for the Classic
conversion market to continue up until
2023. Even after this date there will be the
odd single aircraft being converted.”
The major factor for feedstock is the
number of flight hours (FH) and flight
cycles (FC) accumulated by the aircraft.
Boeing recommends that when the total
Many operators and lessors have lost
confidence in any proclaimed return to service
promises pertaining to the MAX. The shortage of
narrowbody aircraft in the market means that
operators are having to convert any feedstock
asset they can source.
time reaches 75,000FC, the airframe needs
to be retired.
“A freight operator needs to look at it
in one of two ways. Most freight operators
only run two FC per day, and only operate
five days per week, so they will only
accumulate about 500FC per year. If you
get a converted aircraft with 35,000FC,
then once it is modified and ready for
service, it will be possible to get 10 years of
operation from it,” says Andrews.
Lessors
Lessors agree that demand for 737 CL
freighters remains high, in part due to the
MAX groundings and high NG lease rates
compared to CL lease terms. Typical
monthly lease rate terms for an NG are
$175,000-$200,000 for a 737-700, and
$210,000-$234,000 for a -800.
Depending on aircraft age and
condition, typical lease rates for a 737-300
freighter, built from 1986 to 1998 with an
appraised value of $5.6-$7 million, will
start at $100,000 per month and rise to
$115,000.
For a 737-400 freighter, built from
1990 to 1999, the appraised market value
is $7.8-$9.0 million, and the typical
monthly lease rate will be $118,000-
$138,000.
Lease rates for CL freighters are
expected to remain buoyant as long as the
MAX remains out of service.
According to chief leasing and trading
officer, Vallair, Alistair Dibisceglia: “When
it comes to pricing for the 737-400, much
of the value depends on the engine
condition and if the aircraft is secured by a
lease. Lessors have approached us asking
to trade a -400 with a lease attached.
Nevertheless, the MAX issue means there
is still a good demand for 737 CL assets,
and I do not see prices going down for the
next 12 to 18 months.”
In Europe there is a lot of operational
demand for a freighter of this size. There is
more demand for 737-400 freighters than
-300s at present, implying the -400 is the
better investment. Moreover, Vallair is in
the process of repossessing a couple of CL
freighters, and has been inundated with
solid leads, so they are able to immediately
redeploy them.
Many operators that lease 737 CLs are
in the volumetric business, so they prefer
the 737-400’s extra volumetric capacity.
The -400 is typically deployed in shipping
pharmaceuticals. Compared to general
ISSUE NO. 128 • FEBRUARY/MARCH 2020
 61 I FREIGHT BUSINESS
freight, pharmaceuticals are light, and Ideally feedstock aircraft will have 30,000- the modification must be completed before
consume more of the total volume 40,000FC so that these inspections can be the aircraft reaches 45,000FC. The cost for
available than weight. avoided during the course of operation. In the repair is estimated at $1 million.
“The 737-300 and -400 are better the current climate, AEI is completing Repair costs have the potential to push
suited to 1:1 FH to FC ratio or similar,” conversions on airframes with 40,000FC an aircraft into early retirement, depending
says Dibisceglia. “CLs are capable of flying and 45,000FC. on where it is in terms of age.
longer sectors, but this is where we see the AD 2011-08-51 is an emergency AD It is likely that airframes that have
assets being used by operators in the that was prompted by a Southwest 737- completed more than 45,000FC will be
market today. Regardless, the aircraft is a 300 that experienced rapid decompression, identified as having scribe-line and skin-
workhorse and is very reliable.” when a lap joint cracked and opened. The cracking issues. Even though such repairs
While completing financial summaries, aircraft had accumulated just under are costly, they do not impact the asset’s
lessors have observed that lessees operate 40,000FC. If the cracks are detected then conversion possibilities.
737-700/-800s freighters for longer routes
because the engines are more modern with
a lower fuel burn.
There is a strong demand for both CL
and NG aircraft, but airline lessees need to
assess if the NG’s higher lease rate is worth
the better margins that it is capable of.
Nevertheless, a lot depends on the
architecture of the lease agreement between
the lessor and lessee and its contractual
arrangement.
“Feedstock pricing is an issue. The
MAX delays have clogged up the system
because we need these aircraft in the
market to release other assets. It is difficult
to secure feedstock now because there is a
lot of demand for the few assets that are
released,” says Dibisceglia.
Generally, passenger operators are
currently not releasing their assets and are
extending the leases with lessors. Many
airlines are extending lease agreements by
six to 12 months, and some are extending
for up to six years.
It is easier for a lessor to extend a lease
agreement for a passenger aircraft with the
current operator, than it is to put the
aircraft through a conversion programme.
Operators that need to increase their
capacity to meet demand, must choose
between buying an expensive NG or
waiting until CL feedstock prices fall.
Lessors are not looking at removing CL
aircraft from storage to meet demand.
Many of the aircraft in storage have been
at these facilities for many months. It has
been reported that the general condition of
these airframes is poor, while other issues
include sourcing and installing engines.
If the feedstock situation worsens and
the general demand for narrowbody
capacity increases, initiatives to
recommission aircraft in storage may
begin, to avoid them deteriorating much
further.

Airworthiness directives
Airworthiness directives (ADs) are
prevalent across the whole CL fleet,
especially in relation to ATA chapter 53 for
fuselage inspections. Compliance with
these chapter 53 ADs is typically linked to
the aircraft’s total FC utilisation count or a
set period of calendar time.
When the aircraft reaches a maximum
of 52,000FC, the owner must complete
many repetitive inspections on its structure.

ISSUE NO. 128 • FEBRUARY/MARCH 2020 AIRCRAFT COMMERCE

62 I FREIGHT BUSINESS
“Every couple of weeks a new AD is
released, which means that feedstock with
a higher number of FC will become
increasingly expensive to maintain.
Eventually, it will be uneconomic to keep
the aircraft in service. The relatively high
asset cost of an NG will appeal to
operators against the Classics’ high
maintenance,” says Convey.
Feedstock will also require regular
fuselage inspections to identify any
corrosion, cracks and skin delamination,
regardless of latest AD release. Most ADs
have a time of compliance meaning the
actions will need to be completed within
five years. Sometimes the opportunity to
terminate the ADs is best at the point of
conversion.
Clearing all the ADs could mean
replacing structural components. If
operators choose not to replace the
structure and not terminate the ADs by
putting the aircraft on a monitoring
process, the repairs and/or repeat
inspections will still need to be done.
“If there are no findings then no
maintenance actions will be required. It all
depends on what you find when you do the
inspection. Typically, we think about the
worst-case scenario, but this is not always
the case,” says Rubin. “From our research,
there are cases when the inspection will not
yield anything untoward.”
Clearing all the ADs could mean
replacing the structure. If operators choose
not to replace the structure and not
terminate the ADs by putting the aircraft
on a monitoring process, the repairs will
still need to be done.
Scribe lines
AD 2010-05-13: supersedes the 2006
AIRCRAFT COMMERCE
directive that is still active for scribe lines.
This AD requires the ongoing inspection of
the airframe for scribe lines until the
aircraft is retired. Scribe lines are scratches
in the aircraft’s skin that occur as result of
maintenance.
AD 2010-05-13 pertains to the
inspection for scribe lines and cracks on the
fuselage skin, at certain lap joints, butt
joints and external repair doublers. It
expands the requirement for certain
aircraft to be inspected. Corrections can be
expensive and uneconomic, and can lead to
the aircraft being retired.
It is likely many feedstock aircraft will
have been heavily scribed. Specific
maintenance programme inspections
required mechanics to scrape the lap joint
sealant off to inspect for defects, such as
corrosion or cracks. Often mechanics used
metal scrapers to remove the sealant,
creating scribe lines. Sealant would be
reapplied once the inspections have been
completed. Repetitive FCs can mean that
the scribe line will fatigue and ultimately
crack. These cracks can be inches in length,
or scribe line damage can be 10 ft long in
places. Typical scribe line damage is found
where the metal is very thin.
Many operators are requesting that
sealant is not replaced after an inspection,
because when the lapjoint next needs to be
inspected, there will be an increased risk of
creating a scribe line by scraping the
sealant off again.
According to maintenance and
engineering director, Aircraft Analytics
Sandra Everest: “In the past, if an operator
changed livery, fitters would often scrape
away the old decals with heavy duty
scrapers. Sometimes scribe lines can be
created by a sharp piece of plastic that is
strong enough to scribe the metal.
Manufactured in lower numbers, the 737-400 is
believed to be a better conversion proposition
for express package operations. Packing
densities in the express cargo market are
typically low, meaning the -400 is favoured by
its higher volumetric capacity.
Therefore, it is imperative to inspect any
area where decals have been applied to the
aircraft and any repairs where sealant has
been scraped off.”
Feedstock cannot usually be returned
from lease with any Limited Return to
Service (LTRS) in its maintenance records.
Therefore, active aircraft with scribe lines
problems that are being monitored must be
repaired by the operators before the
aircraft is transitioned off lease.
If the fuselage is repaired too many
times it will become less flexible, so
regulators set a maximum square inch
allowance of repairs before the skin
sections need replacing.
Aircraft with a high number of fuselage
skin repairs are typically handed back to
the leasing agency with a fuel burn penalty.
The fuel burn penalty is applied because of
the additional weight of the aircraft and
the effect the repairs have on the aircraft’s
laminar flow dynamics.
Window belts
The initial window belt inspection was
introduced because of delamination and
fatigue found around the fuselage belt
skins. Because of rivet-to-rivet
delamination and fatigue, cracks join up
and the fuselage will eventually fail if not
detected.
Many repairs around the windows,
down to the lap joints, will mean the
aircraft’s OEW will be increased. This is
detrimental to the aircraft’s gross structural
payload, meaning its capacity to lift freight
is reduced, and its fuel consumption.
Repairs to the window belt mean that
the damage must be removed first. The
section must be filled and strengthened on
both the outside and on the inside. This
results in multiple layers of aluminium skin
and extra rivets around the corrected area,
which adds weight to the aircraft.
“Most of the aircraft that we see have
little patches, but we do not see the large
sections of badly repaired window belts.
Even though some aircraft have been
heavily repaired, there is no reason why
they cannot be converted,” says Convey.
“Because many of the aircraft are not
grossing out, then it is not too much of a
problem for an aircraft that has undergone
many repairs and has a higher OEW. An
extra 500lbs of sheet metal and rivets will
not prevent an operator from using the
airframe. AEI can delete any bad repairs by
replacing the affected areas with new
ISSUE NO. 128 • FEBRUARY/MARCH 2020

A 737 Classic conversion is still relevant for
freight operators which want to increase their
capacity. Low in-service-costs translate to a
competitive lease rate when compared to the
737 Next Generation. Low utilisation rates in this
class will yield a minimum 10-year in-service life
for Classic freighters.
skin.”
Individual window repairs do not solve
the problem long-term. If the adjacent
window needs fixing, then its repair needs
to be incorporated into the original repair.
For the CL, one of the recommended
solutions is to replace the whole window
belt.
“Initially the service bulletin (SB) was
to inspect the window belts and repair.
Later revisions of the SB included an
option to replace the belts. Before this,
operators were replacing the belts by going
to Boeing and obtaining the applicable
permissions and drawings,” says Everest.
“Boeing put the ‘repair by replacement’
option into the SB. At the time, this
assisted many operators that were planning
fleetwide window belt skin repair or
replacement programmes.”
When assessing CL feedstock, it is
recommended to check its AD status. This
includes checking what work has been
done in the repeat inspection, and what
actions have been taken to terminate these
inspections? In addition, it is important to
identify the investment the previous owner
has put into the airframe. Has the airline
just kept the aircraft flying on repeat
inspections, or has it completed the
terminating modifications?
Winglets
Only limited numbers of 737-300s
have winglets, and are aircraft that were
fitted to some of the Southwest fleet. The
737-400s were not fitted with winglets.
“Pemco is the only conversion facility
that is able to covert feedstock with
winglets. We would not take the winglets
off, but if the feedstock aircraft is equipped
with winglets than we can convert it,” says
Andrews.
The Pemco STC does not design
outside the OEM designation as far as the
aircraft limits. Feedstock with winglets
offer savings in fuel efficiency and range.
“Our last three conversions have been
for aircraft with winglets. I do not think it
is a big concern for operators. Some of our
operators will require longer legs for their
routes so the winglets play a factor in
getting the payload to a destination further
away,” says Andrews. “The cumulative
weight of the winglets does not really hurt
the aircraft because the light express loads
that the aircraft is operating at are volume-
based, not high gross-based.”
ISSUE NO. 128 • FEBRUARY/MARCH 2020
Age restrictions
It is believed that CLs can no longer be
imported and placed on the Chinese
register because of age restrictions set by
the CAAC. Many operators in China will
only invest in feedstock for P-to-F
conversion, however, when asset values are
sufficiently low. Current high values of NG
feedstock mean that Chinese operators will
have to wait until values fall to a suitable
level. The CAAC does not like older
aircraft, and is committed to the NG going
forward. Rulings on Chinese age
restrictions for freighters can be
ambiguous, but the CAAC has some
regulatory flexibility.
“We have customers which have
successfully registered aircraft that have
exceeded the country’s age limitation in
China,” says Andrews. “When it comes to
age restrictions, China will look at the
pedigree of the aircraft. If you have a
feedstock with single-owner pedigree, such
as Southwest or a major airline, then it is
possible that the CAAC will waive the age
limitation for an aircraft.”
Typically, the CAAC accepts imported
aircraft on an individual ‘case-by-case’
basis, and will typically want to know who
maintained and operated the aircraft.
Preference will be given to assets that have
had only a few owners and have been
scrupulously maintained.
Yet it is unlikely that the CAAC will
accept even a perfectly maintained, single-
owner aircraft that was built in 1991,
because it will consider it to be too old.
Additionally, it is unlikely that an aircraft
which has been maintained in the Asia
Pacific will satisfy CAAC requirements.
Russian authorities are much stricter
on age restrictions regulations imposed on
imported aircraft. Russian aviation
63 I FREIGHT BUSINESS
authority regulations state that no aircraft
over 15 years of age can be imported.
Engines
Freight operators typically fly 800-
1,000 FC per year, and as few as 500-
600FC per year. 737CL operators and
lessors like to source engines that have
3,000-4,000FC of maintenance life
remaining. These engines are hard to find
in the current market because many lessors
will fly them down to nothing. Therefore,
when the aircraft lease expires, the engines
should go into transition or be parted out.
Finding engines with significant green-
time remaining is not easy. Only a few are
available. High demand for such engines
means their values are strong.
CFM56-3C1s are rising in price and
their availability is scarce. “The market for
the CFM56 engine is cyclic now, and has
peaked and troughed over the past 12
months. CFM56-3 engine values are in an
upstream. There is still a lot of feedstock
and availability out there, but the pricing is
still on the high side for the Classic,” says
Convey. “Many engines are consumed by
airlines that want to replace engines with
shop visits (SV) coming up, so the freight
operators are stuck in the middle.”
CFM56-3C1s have become expensive
after periods of them being cheap. Market
values for green-time engines are $1.5-2.0
million per engine if they have some
maintenance time on them. Overhauls for -
3C1s can be expensive, but the market for
this engine ebbs and flows between low
and high availability.
The 737-500 provides a good supply of
engines. Because the airframe is at the end
its useful life, operators will often remove
the engines and scrap the airframe. Because
there is little demand for the shortened
AIRCRAFT COMMERCE
64 I FREIGHT BUSINESS
737-500 airframe, the type is often the first
in line to be dismantled for parts. However,
passenger airlines are now holding onto
this type because the grounding of the 737
MAX has put pressure on replacement
assets. Operators of -500s are likely to
upgrade to -600s or -700s, and -700s are
not readily available.
According to AirFax, a CFM56-3
engine in operation with about 3,000EFC
remaining is valued at $700,000. This will
give a freighter about three years of
operation. An engine that has been fully
overhauled, and has about 5,000FC
remaining, is valued at about $1.5 million.
Thrust ratings
The CFM56-3 series of engines is
available to the CL with three thrust
settings. The -3B1 produces 20,000lbs of
thrust, the -3B2 produces 22,000lbs, and
the -3C1 23,500lbs.
All the engine hardware is the same, so
it is possible to modify the software
settings within the engine’s computer to
adjust the engine power settings. It is
therefore possible to increase a -3B-2’s
thrust setting to -3C1 levels, and vice versa.
“It is not a significant challenge to
adjust the thrust rating on these engines.
There is probably a data plug that needs
updating, but it is possible to change the
engine data plate,” says Rubin.
For airlines that operate a mixed fleet,
changing the thrust settings is desirable,
because it allows the operator to simply
interchange engines between aircraft to
reduce its overheads. Changing an engine’s
thrust setting is advantageous in the P-to-F
conversion market, since it gives operators
and lessors the ability to procure different
CFM56 variants, increasing the engines’
availability.
AIRCRAFT COMMERCE
An operator needs a Flex Thrust
agreement with CFM before it can change
an engine’s thrust rating. If it does not, a
thrust rating change can cost up to $1
million. “As a lessor if we source an engine
with 20,000lbs thrust, and we need
23,500lbs, then we will need to pay for the
higher thrust. If we go to the market and
find an engine with a lower thrust rating
than is needed, it means I will still have the
ability to place it because the rating can be
changed. If engines are rare, then we need
to source whatever engines are available,”
says Dibisceglia. “If we source a strong
engine, then sometimes it is worth
changing the thrust settings to match a
customer’s needs.”
It is possible that an arrangement can
be made with the lessee on the cost of the
modification. Alternatively, if the operator
has a Flex Thrust agreement then it can
complete the modification.
“Some engines are floating in the
market, but not as many as we would like
to see. If there are five engines and
everyone is jumping on them, you can
imagine what happens to the pricing,” says
Dibisceglia. “It is preferable to avoid an
SV, because first of all we need to wait for
the slot to open. Also, once you open an
engine, you do not know exactly when it
will be closed. Often there can be surprises
that can drive the cost up and delay you.”
An exchange is much better because
operators can control the timings better.
The Coronavirus pandemic means some
Chinese engine shops are closed. Therefore,
it is expected that the backlog for SVs will
increase, and operators will have to draft
lease extensions.
Both factors mean that engines are in
service for longer and there will be a longer
waiting time for SVs because the engine
shops are at full capacity.
Because of the increase in 737NG market values
over the past year, it is considered economic to
terminate the major structural ADs on 737
Classics, given their likely remaining operational
life.
Considerations
Even though feedstock prices are high,
the capital cost is low enough to make the
conversion economic. Ideally feedstock
aircraft need a good maintenance life
remaining on the airframe.
“You want to source an aircraft with as
much time remaining before its next D
check and landing gear overhaul. It is best
to buy an aircraft that you can get on the
ramp with the minimum amount of
maintenance through the conversion
process,” says Rubin.“We see the focus is
on the 737-400, because the -300 does not
match what the integrators are looking for
in terms of payload and routes.”
As aircraft age, they can become less
reliable. Operators will need to determine
how important reliability is for them; if it is
an issue, it could be preferable to put an
NG through a conversion.
Parts pricing trends for 737 CL
material and CFM56-3 engines have
declined as more and more aircraft are
being retired and dismantled. There are
about 360 airframes in storage, and over
the years there have been about 800
retirements. As aircraft are retired and
parted out, the increase in available
material means that the price declines.
Good accessibility to parts and spares
and being able to maintain the aircraft at
an economic price is a positive.
Because NG feedstock is difficult to
source and prices remain high, it is still
economically viable to invest in an Classic
airframe and operate the aircraft for many
years.
In the current freighter market the
Classic’s typical low utilisation rate means
it is possible to get more than 10 years’
service life from a -300/-400 P-to-F
conversion.
It makes economic sense to invest in
any necessary repairs to terminate any
ADs. Factoring in the cost of the remedial
work is likely to translate to a lower in-
service cost compared to that of an NG.
It is believed that the Coronavirus
pandemic will accelerate the availability of
both Classics and ageing NGs. If the global
crisis is prolonged it has the potential to
release the bow-wave of NG retirements
that were forestalled by the MAX.
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ISSUE NO. 128 • FEBRUARY/MARCH 2020