Save on Maintenance Costs

March 1, 2000

Save on Maintenance Costs

By Bill de Decker

March 2000

Bill de Decker is a Partner with Conklin & de Decker Associates, publishers of aircraft operating cost databases. MxManager® integrated maintenance management software, and consultants on cost analysis and fleet planning. He has over 35 years experience in fixed and rotary wing design, marketing, training, operation, and management. He also teaches a number of aviation management courses.

Average maintenance costs for a typical business jet range from about $300 to over $800 per flight hour, depending on the size and the age of the aircraft. Not only is this a large percentage of the total operating cost, it is also the most variable of all items in the operating budget.

Many operators seem to think that there is not much they can do about these costs, yet, a survey we did some years ago suggests the opposite. This survey examined 17 operators; all operating the same three or four makes and models of aircraft, all engaged in the same general business, and all operating in the western U.S. The survey results showed there was a variation in maintenance costs among operators from 25 percent below to 50 percent above the average for each make and model aircraft. But, the most fascinating finding of the survey was that the operators with low maintenance costs for one particular make and model, also usually had lower than average maintenance costs for the other makes and models in their fleets. It was clear that some operators managed their maintenance costs better than others did.

How? Discussions with operators and analysis suggested that operators who have consistently low maintenance costs, focus a great deal of management attention on the subject. They track, analyze, and understand the details of what is included in their maintenance costs. They assume that there is no cost that cannot be reduced and they are not afraid to spend a little time and money to save a lot. Let's look at some examples.

Track warranties
Everyone knows about new aircraft warranties, but it's easy to forget that on some aircraft, warranties now extend out to five or ten years after the aircraft is delivered. And what about older, used aircraft? A lot of people forget that there are warranties involved every time you install a new or overhauled part or component on your aircraft, no matter how old the aircraft is. Sometimes those warranties can be very significant. To take advantage of these potential savings, you have to have two things in place: (1) A system that tracks the warranty on each part and component installed on an aircraft, and (2) The discipline to use the system to determine whether the warranty still applies.

One operator who installed such a system said that once he got the maintenance staff to think about warranty, the savings ranged from over 50 percent on aircraft in warranty to five or ten percent on aircraft long out of warranty. An important thing to remember is that vendors have no way of knowing whether your inoperative part is under warranty — you have to be pro-active to get the savings.

Use competitive bidding
Competitive bidding is a great way to control costs on major overhauls and modifications. The essence of the competitive bidding process is that the specifics of the work to be performed and the qualifications of the potential vendors are defined in detail before price is discussed. This approach allows the maintenance manager to establish the exact scope, content, and schedule of the job and allows elimination of unqualified vendors; after which the job can be awarded to the lowest bidder without having to worry about whether or not they will do a good job.

Sometimes company policy or personal preference dictates that only the factory authorized maintenance facility can be used for heavy engine or airframe maintenance. It is still worthwhile to include the other vendors who do not have factory authorization. First, you will have a much better idea of the premium that must be paid for the "factory authorized" status. And second, competition tends to lower prices. At other times, there may be only one vendor for the job, but if they have multiple sites, put all of them on your potential vendor list. You'll be amazed at how often they will compete against each other, not on price, but on completion schedule and extras. Every once in a while, they'll even compete on price! What if there is no other vendor? Go through the process anyway. You'll marvel at the opportunities for savings when you discuss the details of the job before you discuss the price.

The downside of competitive bidding is that it requires time. Smart managers will start as much as a year before the expected due date for major heavy maintenance jobs with the minimum amount of time being three to six months. Remember, all major corporations, including the airlines use this process to get the quality and schedule they want at the lowest price.

"Babysitting" aircraft
When I worked for a major business jet manufacturer, I was always amazed when I saw a senior maintenance person on-site during the entire time that their aircraft was in heavy maintenance, interior installation or major refurbishment. The travel expenses alone seemed way too high compared with the potential savings.

Expenses today run about $200 per day plus airfare for a total of perhaps $1,500 to $2,000 per week. If the aircraft is in heavy maintenance for six weeks, that adds up to about $10,000, so where are the savings? Consider what happens when a part is found that does not meet specifications. The choices are simple - repair, overhaul, exchange, new generic part, or new OEM part. Absent input from you, the maintenance organization will make the choice that maximizes their profit and minimizes their risk, which usually means installing a new OEM part. With you or one of your deputies on the scene, you can make a decision that can give you the same quality at a lower cost (i.e. to repair or exchange the component). Similar choices apply to service bulletins and other tasks encountered. In all cases, a decision must be made and if you are not there, the maintenance organization will make the decision for you. The result will be a quality product, but the cost will be high.

A chief pilot once told me, "We've never saved less than twice what it cost us to send someone with the aircraft and usually it's a lot more".