How Old is Too Old?
The costs of aging aircraft
By Bill de Decker
April 2000
Aircraft, like cars, require more maintenance as they get older. This increased maintenance has a major impact on operating cost, reliability, availability, and, at some point, continued viability as part of a fleet. But how old is too old?
There is only limited data available on the impact of aging on maintenance costs. In our Aircraft Cost Evaluator and our Life Cycle Cost program, we have used an aging curve for the cost of parts and labor for some years. We recently revised this curve, based on better data. We used three new sources, and while some of the data is for parts and some for labor, it does show a very clear trend. One source of data was provided by the published cost of parts for two business aircraft guaranteed maintenance cost programs. Both programs are well accepted and can be assumed to be fairly representative of what operators face when they buy parts as required. We took the published prices and normalized them so that they are at 100 in year five. The results can be seen in the graph (Figure 1).
In Aircraft Economics magazine, we also discovered an interesting article about the ratio of scheduled to unscheduled maintenance labor for "D" checks for the Boeing 727 aircraft. These checks, which are typically required every five years, show that at the first "D" check, the ratio of scheduled to unscheduled labor is 1:1. However, at the fifth check (at year 25), the ratio has increased to 2.7:1. In short, the amount of scheduled time for inspections doesn't change, but the unscheduled work that results from the inspection goes up by a factor of almost three over the course of 25 years. To plot this data on the graph below, we again normalized it so that the total labor required at year five equaled 100.
The graph shows very clearly that aging has a profound impact on maintenance costs. The early years, when the aircraft are young and warranties are in effect, show very low maintenance costs — less than half of what they are at year five. However, when the aircraft is 30 years old and wear and tear is taking its toll, the maintenance costs are 2.2 times what they were at year five.
First, availability is defined as the number of days an aircraft is available for flight operations divided by the total number of days in the operating year. Reliability is usually measured as the percentage of departures that leave within a specified number of minutes of the scheduled departure time and is referred to as the "dispatch reliability." Thus, if on average, one departure in 50 is delayed for maintenance reasons, the "mechanical dispatch reliability" is 98 percent. Airlines aim for and get a 98 to 99 percent mechanical dispatch rate, and the data shows that operators of corporate aircraft achieve the same kind of reliability.
As aircraft age, the increase in unscheduled maintenance associated with scheduled inspections also requires a great deal more maintenance downtime. Similarly, it will take more and more maintenance to achieve any kind of acceptable dispatch reliability. Both detract from the availability of the aircraft for flight operations. Available data shows that availability drops from the 95 percent range for aircraft up to 15 to 20 years of age to an average of 70 percent at age 25 and 55 percent at age 30.
What this means for a charter operator is that as the aircraft availability decreases, so does its revenue and profit potential. Consider, for example, a typical operator with a Hawker 700 that flies about 725 revenue flight hours per year. That equates to just about two revenue hours per day. Thus, for each day that the aircraft does not fly because of lack of availability, the operator loses $4,400 in revenues (at a typical rate of $2,200 per hour). Let's assume for this analysis that the 95 percent availability up to age 20 is acceptable. Then as availability decreases to 70 percent at age 25 and 55 percent at age 30, Figure 2 shows what happens to revenues.
A similar picture can be painted for corporate operators of old aircraft. The difference is that decreased availability translates into increased cost for charter rentals to provide the air transportation required by the company.
Clearly, at some point, an old aircraft is no longer economically viable and should be withdrawn from service. In fact, the in-service rate of older aircraft parallels the availability rate. Up to age 20, almost 100 percent of the aircraft produced are in service. At age 25, the average in-service rate is 90 percent, but can be as low as 75 percent for some makes/models of aircraft. At age 30, the average in-service rate is just under 80 percent and below 50 percent for some makes/models. And at age 35, the average rate is just about 50 percent.
Unfortunately, there is no clear standard that spells out when an aircraft should be withdrawn from service because of these factors. Instead, what needs to be done is to keep track of the key parameters:
• Mechanical dispatch reliability
• Aircraft availability
• Maintenance cost per flight hour
Keeping careful track of these parameters is the best way to support senior management in their decision to keep or to retire an aircraft from your fleet.
