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Aircraft Economics Training
Maintenance Engineering
Bombardier Aerospace
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CONFIDENTIAL
Agenda
• Maintenance Cost Familiarization
• Material Cost Basics & Calculation
• Budgeting for Systems
• Exploring DMC of Components
3
15
34
40
Appendix
• Economic Assessment of top URR drivers 49
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Maintenance Cost Familiarization
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Life Cycle Cost
Total Operating
Cost
Other (disposal)
Direct Operating
Cost
Indirect
Operating Cost
Maintenance
Cost
Other
Cost
Other
Cost
Indirect
Maintenance
Cost
Direct
Maintenance
Cost
Overhead
Engineering
GSE / Tools
Infrastructure
Unscheduled
Maintenance
Scheduled
Maintenance
Part
s
Labour
Part
s
Labour
Airline Costs
Other DOC include: Spare parts, Fuel Costs, Acquisition & Finance Costs, Crew Costs,
Insurance Costs, Landing & Navigation Fees, and cost of compensating costumers due to
delays and cancellations
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Direct Maintenance Cost
Material and Labour cost incurred due to
performing maintenance on an item or aircraft
Indirect Maintenance Cost
Maintenance Cost that occurs as a result of
maintenance support and operation.
Maintenance Cost
Maintenance Cost = DMC + IMC
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Direct Maintenance Cost
On Wing Off Wing
Line Base Components
Shop Visits
Engine
Shop Visits
Line Checks
Pilot Reports
Deferred Tasks
Up to C-
Checks
Hangar Checks
Repairs
Modifications
C-Checks and
higher
Bench Checks
Repairs / OH
Modifications
Repairs / OH
Refurbishment
Modifications
Maintenance Cost Breakdown
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Removals
include:
•Scheduled
•Unscheduled
•Routine
•Non-Routine
How Much and How Often…
Costs include:
•Test
•Repair
•Overhaul
•New part purchase
•Modification
A major driver of direct maintenance is the material and labour associated with
component removal
Note: New part purchase is considered a capital expenditure and hence
excluded from Direct Maintenance Cost DMC, unless the part is bought due
to a Beyond Economical Repair (BER) case.
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Types of Components
Consumables:
Generally bulk-type materials such as fuel, lubricants, cements, compounds, paints,
chemicals, dyes, splices, patches, etc., called out in maintenance and repair
procedures for aircraft, engines, equipment, and component end items. These materials
are items used only once.
Examples: Grease, Oil, Sealent
Expendables:
Items for which no authorized repair procedure exits, and for which cost of repair would
normally exceed that of replacement.
Examples: Light bulbs, filters, screws
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Types of Components Continued…
Repairable:
An item comprising or including replaceable parts, commonly economical to repair, and
subject to being rehabilitated to a fully serviceable condition over a period less than the
life of the flight equipment to which it is related.
Examples: De-Ice Boots, Harness, Tires
Rotables:
An item that can be economically restored to a serviceable condition and, in the normal
course of operations, can be repeatedly rehabilitated to a fully serviceable condition over
a period approximating the life of the flight equipment to which it is related.
Examples: Generators, Auxiliary Power Unit (APU), Shock Strut
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Indirect Maintenance Cost
Maintenance management, engineering, maintenance planning & control,
reliability monitoring, maintenance documentation, record keeping
Material management, warehousing, logistics
Facility management, hangars, workshops, support offices
Information technology systems
Tooling, test equipment
Examples of Indirect Maintenance Costs include:
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Maintenance
Cost Drivers
Airline
Operation &
Environment
Maintenance
Philosophy
Aircraft
Type
Driver
Maintenance Cost Drivers
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Aircraft Type – Maintenance Cost Drivers
Examples Include:
Maintenance Program
Aircraft Type and Design Philosophy
Product design & quality
Vendor Selection
Product support from Original Equipment Manufacturer
Aircraft Age
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Maintenance Philosophy – Maintenance Cost Drivers
Examples Include:
Labour cost & productivity
Maintenance Schedules (block vs phase checks)
Contract vs In-house
Service Bulletins & modifications
Aircraft cleaning
Material / Component stock levels
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Airline Operation and Environment – Maintenance Cost Drivers
Examples Include:
Operating Environment
Utilization (hours / cycle ratio)
Overnight time and locations
Turnaround times
Number, locations and capabilities of own maintenance facilities
Maintenance service contracts and component pooling arrangements
Operational Factors (Low / High Utilization, Care)
Hangar availability during overnight (type of maintenance to be performed)
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Material Cost Basics & Calculation
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Direct Maintenance Cost
Material Costs
Labour Costs
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Direct Maintenance Cost
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I have a whole bunch of component cost
invoices… but how do I calculate DMC
from that?
Calculating Material DMC
Hmmm…
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Calculating Material DMC Continued…
DMC is commonly expressed as
dollar per flight hour ($/FH)
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Average: DMC:
So the DMC is simply an
average of cost for a
specific time frame!
Cost Summation Method
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Example Time!
Operator ABC has given you their maintenance cost invoices for the past two
years for component XYZ.. What is their DMC impact for that component for
those 2 years?
SUM (ABC Fleet Cost of invoices for the past 2 years for component XYZ)
____________________________________________________
SUM (Flight Hours for the fleet of operator ABC for those same 2 years)
DMC =
This is also called a
Cumulative DMC.. In this
case it’s a Cumulative DMC for
the past 2 years
Essentially DMC is a
parameter that describes how
much the system or item
costs to repair/replace, and
how often it fails!
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Why a Cumulative DMC?
We use Cumulative DMC for year x to y so we can see what the average cost
per flight hour is for those years…. A system / aircraft incurs many different costs
as time goes by due to change in reliability, failure modes etc. – the Cum DMC
parameter will capture the cost and reliability for that time period.
Picking the correct time period
is essential and is dependent
on what you are analyzing
If you’re calculating the DMC for a
component that fails on average once a
year… then your time period for
calculating Cum DMC should be more
than a year.. You don’t want to calculate
your DMC based on a couple of
premature fails
Mature DMC refers to the DMC of a
system / aircraft where the Cum DMC is
calculated for a sufficient amount of
time so that the system / aircraft is
considered mature
Hmm..?
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More on Mature DMC…
When the aircraft is new,
components are less worn out
and components are in
warranty. That is why the DMC
is low in the beginning. As the
aircraft ages, the major
overhauls and heavy checks will
occur. That is why the DMC
increases with time.
Time
DMC
Mature DMC
Cum DMC at
a given time
Aircraft DMC with time
Notice that the Mature DMC line is higher than the last
Cum DMC value. This is because there are some
components that far exceed the life of the aircraft. So the
red line represents the mature Cum DMC at the life of the
aircraft, whereas the Mature DMC blue line represents the
theoretical Mature DMC (which incorporates components
that exceed the aircraft’s life)
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More on Mature DMC Continued…
The component’s DMC will
change as a result of change
in reliability, and failure
modes.
DMC at a
given point
Mature DMC
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A Different Method of Calculating DMC
Recall that DMC is a
parameter describing
cost and reliability of
a system…ergo
DMC can be
represented as…
DMC=
MTBMA is the average time it takes for the system to
require unscheduled or scheduled maintenance.
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QPA x Avg. Repair Cost
Mean Time Between Maintenance Action
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A Quick Lesson on Mean Time
Mean Time between Unscheduled Removals (MTBUR) is calculated for
unscheduled removals.
However, there are times when a removal is deemed, “no fault found” (NFF). If
you exclude these NFF removals from the Mean Time, then you are left with the
Mean Time Between Failure (MTBF).
MTBUR =
MTBF =
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A Quick Lesson on Mean Time Continued…
Sometimes it is important to calculate MTBF as oppose to
MTBUR when calculating DMC, because the Cost of a Failure
might vary significantly to a cost of a No Fault Found.
Sometimes it is useful to find the mean time between any removal
(scheduled/unscheduled)
MTBR =
26
NFF rate is the ratio of number
of removals that are NFF, to
the total number of removals
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Example Time!
Operator ABC says that a component (QPA: 2) fails on average every 2000
FH. They say that on average they have to pay $10,000 for every repair.
DMC =
$10,000 x 2
2000 FH
DMC = = $10 / FH
27
Ah ha! This means that the airline is spending $10 for
every flight hour just on repairing this component!
X QPA
Open Excel Tab “Example Pg. 27”
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What is the cost of brakes expressed in Dollars/Flight Cycle?
Brake Overhaul Price: $13,500
Mean Cycles Between Repair (MCBR): 3500 Cycles
QPA: 4
Answer: $15.43/FC
Practice Time! Open Excel Tab “Practice Pg. 28”
Recall: DMC = QPA*Brake Overhaul Price / MCBR
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Practice Time! (Continuation)
What is the cost of brakes expressed in Dollars/Flight Hours
assuming the average flight length is 50 minutes?
Answer: $18.51/FH
Recall: 1 FC = 50/60 FH
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Different Types of Costs
Besides different failure modes: a system will have different costs
depending whether the removal is a:
No Fault Found (NFF)
Unscheduled Removal
Scheduled Removal
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Depending on what you are
analyzing, it might be useful to
calculate the DMC parameters
for each of these types of
removals as oppose to an
overall DMC.
Also the intensity of repair (minor, standard etc.)
will influence the cost
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Another Example!
Open Excel Tab “Example Pg. 31”
You want to know what your $/Flight Hour cost is for your Radome. This will
provide you with a good indication of how the radome is performing
There are 10 Radome removals among 75,000 FH. In the 10 removals, we
discover that there are two removal reasons: foreign object damage (FOD) and
delamination.
You want to exclude FOD because these types of damages are not
caused by the components performance.
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DMC Example Continued…
MTBUR (Delamination) = 75,000/4 = 18,750 Flight Hours
The cost to repair the Radome from Delamination is $5,000
The DMC is 1 x $5000 / 18750 = $0.27/FH
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Total DMC Impact of these components?
Practice Time! Open Excel Tab “Practice Pg. 33”
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Practice Time! (Continuation)
Recall:
MTBUR = Flight Hours * QPA / Number of Removals
MTBF = Flight Hours * QPA / [Number of Removals (1-NFF rate)]
MTBF = MTBUR/ (1-NFF rate)
DMC = QPA * Average Cost / MTBF
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Practice Time! (Continuation)
Answer: $18.63/FH
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Summation Vs. Mean Time Method
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What method should I
use when calculating
DMC?
Essentially:
Summation method Mean Time Method
However, based on data availability, it might be
more useful to use one approach over the other
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Budgeting for Systems
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A Real World DMC Application
Expressing DMC in dollars per flight hour is a common practice.
Lessors will charge a dollar per flight hour rate when leasing a
system / aircraft to an operator.
Why do they do this? Why can’t
they just charge for whenever
something fails and needs to
get repaired or whenever a
scheduled maintenance is
needed?
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Lessors do this because even though a component might not fail yet, and might
not reach its scheduled interval yet, it is still being used. As a result, the
scheduled maintenance time and the unscheduled failure time is being used up.
Hence charging in a dollar per flight hour basis, will enable them to “Reserve”
some costs in a linear manner even though a removal might have not occurred
yet. Also, sometimes maintenance facilities offer a Cost by the Hour (CBH) or
Power by the Hour (PBH) agreement to operators, which is also expressed in a
dollar per flight hour basis. This technique is also very useful for airline budgeting.
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A Real World DMC Application Continued…
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Budgeting Example
Let’s assume that you are an airline and you want to budget some money
for a main landing gear overhaul and its unscheduled removals
You know that on average unscheduled repairs costs $6000 and they occur
on average every 223,000 FH
You know that that cost of restoration is on average $66,000 and the
restoration interval is 25,000 FC
What amount should you budget?
DMCunscheduled = $6000*2/223,000 = $0.05
DMCscheduled = 2*2*$66,000/60,000 = $4.4
The gears design life is 60,000 cycles -> Average flight length is 60 minutes
DMCbudget = $4.45/FC
Cost
FH
4.45
40
Open Excel Tab “Example Pg. 40”
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Budgeting Example Cont.
This means you should be saving 4 dollars for every flight cycle. And this will ensure that
you have enough reserved to compensate for unscheduled removals, and restorations to
come throughout the life of the gear
Please note that this is expressed in a per Flight Cycle basis, so if you know
you’re average flight length, you can convert it to a per Flight hour basis
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Practice Time!
You have a system of components, and you want to know how much you should
budget throughout their life. The components have both schedule maintenance,
and unscheduled maintenance. How much should money should you save per
Flight Hour (assuming you have an average flight length of 60 minutes)
Component Restoration Cost Restoration
Interval
Unscheduled
Cost
MTBUR NFF Rate
MLG Shock
Strut
$66,000 25,000 Cycles $6000 120,000 Cycles 5%
Auxiliary Power
Unit
$120,000 12,000 FH 5%
NLG Shock
Strut
$97,000 20,000 Cycles $5000 25,000 Cycles 5%
Explain in words what the final result signifies
Open Excel Tab “Practice Pg. 42”
Assume the life of the aircraft is 60,000 Flight Cycles
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Practice Time! (Continuation)
Recall:
MTBF = Flight Hours * QPA / [Number of Removals (1-NFF rate)]
Number of Restorations throughout life of aircraft = (60,000/Restoration Interval) - 1
Unscheduled DMC = QPA*Unscheduled Cost / MTBF
Scheduled DMC = QPA*Unscheduled Cost / MTBF
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Practice Time! (Continuation)
Answer: $17.42/FH
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Exploring the DMC of Components
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Different DMC Values
My Supplier has offered
me a $1.55/FH material
guarantee for a
component
A different supplier
has offered me the
same thing!
Which offer saves my airline more money?
The components of both suppliers have the
same fit, form, function, and certification
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Different DMC Values Continued
Two different components may have the same material $/FH cost, however, it is
important to look at the cost and reliability measure.
 If one component has a high cost and has a high time between failures, its DMC
value may be the same as a component that has a low cost but fails more often
Which one works better for your airline?
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Example Time!
There is a structural component on your aircraft that has a visual inspection every
6000FH. Every time you inspect this component, you find the component out of limits
and are require to change it. You are frustrated because of the vast labour hours
involved in replacing and removing – luckily since it is a 6000FH inspection, you can
tie it with a Base check, so there is no Out of Service Hour impact.
You have a meeting with a supplier to negotiate getting a better component. The
supplier has said that with this upgrade, the new part should last you 12000FH but
the cost to buy a new one will be more expensive (you cannot repair the part, you
need to buy a new one).
Before you go and negotiate pricing with the supplier, what should be your
not-to-exceed cost for this new part?
Not-to-exceed cost: New part cost which will result in no increase or decrease
in maintenance cost
Open Excel Tab “Example Pg. 48”
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Example Time Continuation
Current Part
• Quantity per Aircraft = 2
• MTBF = 6000FH
• Purchase price (no repairable part) = $2,400
• Labour Hours = 24 hours per part to Remove
and Replace, with 2 AMEs assisting each other
• Labour rate = $80/labour hour
New Part
• Quantity per Aircraft = 2
• MTBF = 12000FH
• Purchase price (no repairable part) = not-to-exceed?
• Labour Hours = 24 hours per part to Remove and
Replace, with 2 AMEs assisting each other
• Labour rate = $80/labour hour
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Example Time Continuation
Old part New part
For a not-to-exceed material cost:
= 2*$2,400/6000FH = $0.80/FH
= 2*48Hrs*$80/6000FH = $1.28/FH
Old part
= 2*$?/12000FH = $?/FH
= 2*48Hrs*$80/12000FH = $0.64/FH
New part
So we can see right away that the labour DMC impact is far more significant than the
material impact. This signifies that you have the potential to increase the material cost
significantly and still get savings
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Example Time Continuation
Solving the equation, you get a material purchase price of $8,640
This means that anything less than this price will amount to saving
regarding this component.
But I want my total cost to
be at least 25% less than
current Well if your material and
labour cost was $2.80/FH, let’s
find what the new material
purchase price should be to
achieve a total cost of $1.56/FH
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Example Time Continuation
Solving for the equation above you get, $5,520 for a new purchase part
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Example Time Continuation
RECAP
Material Purchase
price
Total Cost
($/FH)
Percent reduction in Total
Cost
$2,400 $2.08/FH NA
$8,640 $2.08/FH 0%
$5,520 $1.56/FH 75%
$2,400 $1.04/FH 50%
Old part
New part
Economic Assessment of Top
URR Drivers
Maintenance Engineering
Bombardier Aerospace
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Synopsis
• The first portion of the workshop will show how to obtain the top Unscheduled
Removal Rate (URR) components. The tool which will enable you to do this is the
Airline Performance Analytics tool (APA).
• The second portion of this workshop will show how to calculate the economic impact
of the top URR components
• The third portion of this workshop encourages the operator to find the available
Mods that will help reduce the economic impact of the top URR components. The
Service Bulletin tool can be used to determine the return on investment of
implementing a Service Bulletin.
Both the Airline Performance Analytics tool (APA) and the Service Bulletin tool are
provided free of charge on www.iflybombardier.com
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Accessing APA
To access APA, Login to iflybombardier.com
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iflybombardier
A separate log-in is currently required – same username is created, but a different password for initial
log-on
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APA main page
Main page after log-in, click on “Reports” at top left corner
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Selecting the Top Component URR Drivers
Click to obtain the
top URR drivers
Select the URR
drivers for an operator
Select the URR drivers
for the fleet
Select the time period
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Fleet top URR Drivers Query Results
In this case the query period was selected from Aug 2010 to July 2011
for the fleet. The same can be done for a specific operator
The top URR components are
sorted from highest to lowest
removal impact
Can export to Excel
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Making a Cost Assessment based on the URR results
• Unscheduled Component removal is part of Direct Maintenance Cost (DMC)
• The following formula can be used to obtain the DMC impact for the top URR
components:
DMC =
MTBUR stands for Mean Time Between Unscheduled Removals expressed in Flight
Hours
URR Stands for Unscheduled Removal Rate expressed in Removals per 1000 Flight
Hours
MTBUR= 1000/URR
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URR DMC Results
The top URR components are sorted
from highest to lowest DMC impact.
Notice that the order of components that have the
most economic impact might not be the same as
the order of components that have the most
unscheduled removal impact
This means that the component
that is costing you the most might
not necessarily be the component
that is getting removed the most
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Next Step ?
Now that you know your top DMC Drivers based
on URR, see what Service Bulletins there are
that will help reduce the DMC
I can use the Service Bulletin tool to
determine the return on investment of
implementing a Service Bulletin…. Also,
this tool is free!
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BREAKEVEN ANALYSIS
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
0 1 2 3 4 5 6 7 8 9 10
YEAR
COST
PER
AIRCRAFT
• Calculates the return on investment of implementing an SB
What is the SB tool?
YEARS
Pre SB Post SB
Breakeven
Point
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SB Background
• Bombardier issues Service Bulletins (SB’s) to operators which will help improve:
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Reduction in Operational Costs
Direct Maintenance Cost ($/FH)
Dispatch Interruption Rate (delays, cancellations)
Out of Service hours
No Fault Found
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What the Tool Contains
The tool
contains a list
of SBs with
pre-calculated
DMC savings
and DIR
improvements
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How does the SB tool Calculate my ROI?
1. Delays
2. Cancellations
3. OOS Hours
4. Number of unscheduled
removals
5. NFF Rate
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Continuation
Pre SB
Cost Post SB
Cost
Pre SB costs =
Cost of delays, cancellations, OOS hours, number of unscheduled
removals and NFF
Post SB cost =
SB kit Cost + Labour + Pre SB cost – DMC & DIR savings
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Breakeven
Point
Continuation
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Can I add my own SB?
Calculating a DMC and DIR benefit is difficult so instead you can enter percent reductions in:
YES – The operator can add their own SB
1. Cancellations
2. Delays
3. OOS Hours
4. Unscheduled Removals
5. NFF Rate
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CONFIDENTIAL
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Enter
Data
In
All the
fields
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How does the SB tool Calculate this ROI?
Pre SB
Cost Post SB
Cost
Pre SB costs =
Cost of delays, cancellations, OOS hours, number of unscheduled
removals and NFF
Post SB cost =
SB kit Cost + Labour + Pre SB cost – Percent Reductions
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Breakeven
Point
Continuation
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Where is the tool located?
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SB Tool Demonstration
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SB Tool Input Parameters
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SB Tool Output
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Conclusion
FREE
This workshop has shown:
How to use the Airline Performance Analytics tool (APA) to obtain your
top URR components.
How to calculate the economic impact of these URR components
How to use the Service Bulletin tool to calculate a return on investment
of implementing a Service bulleting

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Maintenance Cost - by BOMBARDIER.pdf

  • 1. Aircraft Economics Training Maintenance Engineering Bombardier Aerospace
  • 2. 2 Pg. BOMBARDIER CONFIDENTIAL Agenda • Maintenance Cost Familiarization • Material Cost Basics & Calculation • Budgeting for Systems • Exploring DMC of Components 3 15 34 40 Appendix • Economic Assessment of top URR drivers 49
  • 4. 4 Pg. BOMBARDIER CONFIDENTIAL Life Cycle Cost Total Operating Cost Other (disposal) Direct Operating Cost Indirect Operating Cost Maintenance Cost Other Cost Other Cost Indirect Maintenance Cost Direct Maintenance Cost Overhead Engineering GSE / Tools Infrastructure Unscheduled Maintenance Scheduled Maintenance Part s Labour Part s Labour Airline Costs Other DOC include: Spare parts, Fuel Costs, Acquisition & Finance Costs, Crew Costs, Insurance Costs, Landing & Navigation Fees, and cost of compensating costumers due to delays and cancellations
  • 5. 5 Pg. BOMBARDIER CONFIDENTIAL Direct Maintenance Cost Material and Labour cost incurred due to performing maintenance on an item or aircraft Indirect Maintenance Cost Maintenance Cost that occurs as a result of maintenance support and operation. Maintenance Cost Maintenance Cost = DMC + IMC
  • 6. 6 Pg. BOMBARDIER CONFIDENTIAL Direct Maintenance Cost On Wing Off Wing Line Base Components Shop Visits Engine Shop Visits Line Checks Pilot Reports Deferred Tasks Up to C- Checks Hangar Checks Repairs Modifications C-Checks and higher Bench Checks Repairs / OH Modifications Repairs / OH Refurbishment Modifications Maintenance Cost Breakdown
  • 7. 7 Pg. BOMBARDIER CONFIDENTIAL Removals include: •Scheduled •Unscheduled •Routine •Non-Routine How Much and How Often… Costs include: •Test •Repair •Overhaul •New part purchase •Modification A major driver of direct maintenance is the material and labour associated with component removal Note: New part purchase is considered a capital expenditure and hence excluded from Direct Maintenance Cost DMC, unless the part is bought due to a Beyond Economical Repair (BER) case.
  • 8. 8 Pg. BOMBARDIER CONFIDENTIAL Types of Components Consumables: Generally bulk-type materials such as fuel, lubricants, cements, compounds, paints, chemicals, dyes, splices, patches, etc., called out in maintenance and repair procedures for aircraft, engines, equipment, and component end items. These materials are items used only once. Examples: Grease, Oil, Sealent Expendables: Items for which no authorized repair procedure exits, and for which cost of repair would normally exceed that of replacement. Examples: Light bulbs, filters, screws
  • 9. 9 Pg. BOMBARDIER CONFIDENTIAL Types of Components Continued… Repairable: An item comprising or including replaceable parts, commonly economical to repair, and subject to being rehabilitated to a fully serviceable condition over a period less than the life of the flight equipment to which it is related. Examples: De-Ice Boots, Harness, Tires Rotables: An item that can be economically restored to a serviceable condition and, in the normal course of operations, can be repeatedly rehabilitated to a fully serviceable condition over a period approximating the life of the flight equipment to which it is related. Examples: Generators, Auxiliary Power Unit (APU), Shock Strut
  • 10. 10 Pg. BOMBARDIER CONFIDENTIAL Indirect Maintenance Cost Maintenance management, engineering, maintenance planning & control, reliability monitoring, maintenance documentation, record keeping Material management, warehousing, logistics Facility management, hangars, workshops, support offices Information technology systems Tooling, test equipment Examples of Indirect Maintenance Costs include:
  • 12. 12 Pg. BOMBARDIER CONFIDENTIAL Aircraft Type – Maintenance Cost Drivers Examples Include: Maintenance Program Aircraft Type and Design Philosophy Product design & quality Vendor Selection Product support from Original Equipment Manufacturer Aircraft Age
  • 13. 13 Pg. BOMBARDIER CONFIDENTIAL Maintenance Philosophy – Maintenance Cost Drivers Examples Include: Labour cost & productivity Maintenance Schedules (block vs phase checks) Contract vs In-house Service Bulletins & modifications Aircraft cleaning Material / Component stock levels
  • 14. 14 Pg. BOMBARDIER CONFIDENTIAL Airline Operation and Environment – Maintenance Cost Drivers Examples Include: Operating Environment Utilization (hours / cycle ratio) Overnight time and locations Turnaround times Number, locations and capabilities of own maintenance facilities Maintenance service contracts and component pooling arrangements Operational Factors (Low / High Utilization, Care) Hangar availability during overnight (type of maintenance to be performed)
  • 16. 16 Pg. BOMBARDIER CONFIDENTIAL Direct Maintenance Cost Material Costs Labour Costs 16 Direct Maintenance Cost
  • 17. 17 Pg. BOMBARDIER CONFIDENTIAL I have a whole bunch of component cost invoices… but how do I calculate DMC from that? Calculating Material DMC Hmmm…
  • 18. 18 Pg. BOMBARDIER CONFIDENTIAL Calculating Material DMC Continued… DMC is commonly expressed as dollar per flight hour ($/FH)
  • 19. 19 Pg. BOMBARDIER CONFIDENTIAL Average: DMC: So the DMC is simply an average of cost for a specific time frame! Cost Summation Method
  • 20. 20 Pg. BOMBARDIER CONFIDENTIAL Example Time! Operator ABC has given you their maintenance cost invoices for the past two years for component XYZ.. What is their DMC impact for that component for those 2 years? SUM (ABC Fleet Cost of invoices for the past 2 years for component XYZ) ____________________________________________________ SUM (Flight Hours for the fleet of operator ABC for those same 2 years) DMC = This is also called a Cumulative DMC.. In this case it’s a Cumulative DMC for the past 2 years Essentially DMC is a parameter that describes how much the system or item costs to repair/replace, and how often it fails! 20
  • 21. 21 Pg. BOMBARDIER CONFIDENTIAL Why a Cumulative DMC? We use Cumulative DMC for year x to y so we can see what the average cost per flight hour is for those years…. A system / aircraft incurs many different costs as time goes by due to change in reliability, failure modes etc. – the Cum DMC parameter will capture the cost and reliability for that time period. Picking the correct time period is essential and is dependent on what you are analyzing If you’re calculating the DMC for a component that fails on average once a year… then your time period for calculating Cum DMC should be more than a year.. You don’t want to calculate your DMC based on a couple of premature fails Mature DMC refers to the DMC of a system / aircraft where the Cum DMC is calculated for a sufficient amount of time so that the system / aircraft is considered mature Hmm..?
  • 22. 22 Pg. BOMBARDIER CONFIDENTIAL More on Mature DMC… When the aircraft is new, components are less worn out and components are in warranty. That is why the DMC is low in the beginning. As the aircraft ages, the major overhauls and heavy checks will occur. That is why the DMC increases with time. Time DMC Mature DMC Cum DMC at a given time Aircraft DMC with time Notice that the Mature DMC line is higher than the last Cum DMC value. This is because there are some components that far exceed the life of the aircraft. So the red line represents the mature Cum DMC at the life of the aircraft, whereas the Mature DMC blue line represents the theoretical Mature DMC (which incorporates components that exceed the aircraft’s life)
  • 23. 23 Pg. BOMBARDIER CONFIDENTIAL More on Mature DMC Continued… The component’s DMC will change as a result of change in reliability, and failure modes. DMC at a given point Mature DMC
  • 24. 24 Pg. BOMBARDIER CONFIDENTIAL A Different Method of Calculating DMC Recall that DMC is a parameter describing cost and reliability of a system…ergo DMC can be represented as… DMC= MTBMA is the average time it takes for the system to require unscheduled or scheduled maintenance. 24 QPA x Avg. Repair Cost Mean Time Between Maintenance Action
  • 25. 25 Pg. BOMBARDIER CONFIDENTIAL A Quick Lesson on Mean Time Mean Time between Unscheduled Removals (MTBUR) is calculated for unscheduled removals. However, there are times when a removal is deemed, “no fault found” (NFF). If you exclude these NFF removals from the Mean Time, then you are left with the Mean Time Between Failure (MTBF). MTBUR = MTBF = 25
  • 26. 26 Pg. BOMBARDIER CONFIDENTIAL A Quick Lesson on Mean Time Continued… Sometimes it is important to calculate MTBF as oppose to MTBUR when calculating DMC, because the Cost of a Failure might vary significantly to a cost of a No Fault Found. Sometimes it is useful to find the mean time between any removal (scheduled/unscheduled) MTBR = 26 NFF rate is the ratio of number of removals that are NFF, to the total number of removals
  • 27. 27 Pg. BOMBARDIER CONFIDENTIAL Example Time! Operator ABC says that a component (QPA: 2) fails on average every 2000 FH. They say that on average they have to pay $10,000 for every repair. DMC = $10,000 x 2 2000 FH DMC = = $10 / FH 27 Ah ha! This means that the airline is spending $10 for every flight hour just on repairing this component! X QPA Open Excel Tab “Example Pg. 27”
  • 28. 28 Pg. BOMBARDIER CONFIDENTIAL What is the cost of brakes expressed in Dollars/Flight Cycle? Brake Overhaul Price: $13,500 Mean Cycles Between Repair (MCBR): 3500 Cycles QPA: 4 Answer: $15.43/FC Practice Time! Open Excel Tab “Practice Pg. 28” Recall: DMC = QPA*Brake Overhaul Price / MCBR
  • 29. 29 Pg. BOMBARDIER CONFIDENTIAL Practice Time! (Continuation) What is the cost of brakes expressed in Dollars/Flight Hours assuming the average flight length is 50 minutes? Answer: $18.51/FH Recall: 1 FC = 50/60 FH
  • 30. 30 Pg. BOMBARDIER CONFIDENTIAL Different Types of Costs Besides different failure modes: a system will have different costs depending whether the removal is a: No Fault Found (NFF) Unscheduled Removal Scheduled Removal 30 Depending on what you are analyzing, it might be useful to calculate the DMC parameters for each of these types of removals as oppose to an overall DMC. Also the intensity of repair (minor, standard etc.) will influence the cost
  • 31. 31 Pg. BOMBARDIER CONFIDENTIAL Another Example! Open Excel Tab “Example Pg. 31” You want to know what your $/Flight Hour cost is for your Radome. This will provide you with a good indication of how the radome is performing There are 10 Radome removals among 75,000 FH. In the 10 removals, we discover that there are two removal reasons: foreign object damage (FOD) and delamination. You want to exclude FOD because these types of damages are not caused by the components performance.
  • 32. 32 Pg. BOMBARDIER CONFIDENTIAL DMC Example Continued… MTBUR (Delamination) = 75,000/4 = 18,750 Flight Hours The cost to repair the Radome from Delamination is $5,000 The DMC is 1 x $5000 / 18750 = $0.27/FH
  • 33. 33 Pg. BOMBARDIER CONFIDENTIAL Total DMC Impact of these components? Practice Time! Open Excel Tab “Practice Pg. 33”
  • 34. 34 Pg. BOMBARDIER CONFIDENTIAL Practice Time! (Continuation) Recall: MTBUR = Flight Hours * QPA / Number of Removals MTBF = Flight Hours * QPA / [Number of Removals (1-NFF rate)] MTBF = MTBUR/ (1-NFF rate) DMC = QPA * Average Cost / MTBF
  • 36. 36 Pg. BOMBARDIER CONFIDENTIAL Summation Vs. Mean Time Method 36 What method should I use when calculating DMC? Essentially: Summation method Mean Time Method However, based on data availability, it might be more useful to use one approach over the other
  • 38. 38 Pg. BOMBARDIER CONFIDENTIAL A Real World DMC Application Expressing DMC in dollars per flight hour is a common practice. Lessors will charge a dollar per flight hour rate when leasing a system / aircraft to an operator. Why do they do this? Why can’t they just charge for whenever something fails and needs to get repaired or whenever a scheduled maintenance is needed? 38
  • 39. 39 Pg. BOMBARDIER CONFIDENTIAL Lessors do this because even though a component might not fail yet, and might not reach its scheduled interval yet, it is still being used. As a result, the scheduled maintenance time and the unscheduled failure time is being used up. Hence charging in a dollar per flight hour basis, will enable them to “Reserve” some costs in a linear manner even though a removal might have not occurred yet. Also, sometimes maintenance facilities offer a Cost by the Hour (CBH) or Power by the Hour (PBH) agreement to operators, which is also expressed in a dollar per flight hour basis. This technique is also very useful for airline budgeting. 39 A Real World DMC Application Continued…
  • 40. 40 Pg. BOMBARDIER CONFIDENTIAL Budgeting Example Let’s assume that you are an airline and you want to budget some money for a main landing gear overhaul and its unscheduled removals You know that on average unscheduled repairs costs $6000 and they occur on average every 223,000 FH You know that that cost of restoration is on average $66,000 and the restoration interval is 25,000 FC What amount should you budget? DMCunscheduled = $6000*2/223,000 = $0.05 DMCscheduled = 2*2*$66,000/60,000 = $4.4 The gears design life is 60,000 cycles -> Average flight length is 60 minutes DMCbudget = $4.45/FC Cost FH 4.45 40 Open Excel Tab “Example Pg. 40”
  • 41. 41 Pg. BOMBARDIER CONFIDENTIAL Budgeting Example Cont. This means you should be saving 4 dollars for every flight cycle. And this will ensure that you have enough reserved to compensate for unscheduled removals, and restorations to come throughout the life of the gear Please note that this is expressed in a per Flight Cycle basis, so if you know you’re average flight length, you can convert it to a per Flight hour basis
  • 42. 42 Pg. BOMBARDIER CONFIDENTIAL Practice Time! You have a system of components, and you want to know how much you should budget throughout their life. The components have both schedule maintenance, and unscheduled maintenance. How much should money should you save per Flight Hour (assuming you have an average flight length of 60 minutes) Component Restoration Cost Restoration Interval Unscheduled Cost MTBUR NFF Rate MLG Shock Strut $66,000 25,000 Cycles $6000 120,000 Cycles 5% Auxiliary Power Unit $120,000 12,000 FH 5% NLG Shock Strut $97,000 20,000 Cycles $5000 25,000 Cycles 5% Explain in words what the final result signifies Open Excel Tab “Practice Pg. 42” Assume the life of the aircraft is 60,000 Flight Cycles
  • 43. 43 Pg. BOMBARDIER CONFIDENTIAL Practice Time! (Continuation) Recall: MTBF = Flight Hours * QPA / [Number of Removals (1-NFF rate)] Number of Restorations throughout life of aircraft = (60,000/Restoration Interval) - 1 Unscheduled DMC = QPA*Unscheduled Cost / MTBF Scheduled DMC = QPA*Unscheduled Cost / MTBF
  • 46. 46 Pg. BOMBARDIER CONFIDENTIAL Different DMC Values My Supplier has offered me a $1.55/FH material guarantee for a component A different supplier has offered me the same thing! Which offer saves my airline more money? The components of both suppliers have the same fit, form, function, and certification
  • 47. 47 Pg. BOMBARDIER CONFIDENTIAL Different DMC Values Continued Two different components may have the same material $/FH cost, however, it is important to look at the cost and reliability measure.  If one component has a high cost and has a high time between failures, its DMC value may be the same as a component that has a low cost but fails more often Which one works better for your airline?
  • 48. 48 Pg. BOMBARDIER CONFIDENTIAL Example Time! There is a structural component on your aircraft that has a visual inspection every 6000FH. Every time you inspect this component, you find the component out of limits and are require to change it. You are frustrated because of the vast labour hours involved in replacing and removing – luckily since it is a 6000FH inspection, you can tie it with a Base check, so there is no Out of Service Hour impact. You have a meeting with a supplier to negotiate getting a better component. The supplier has said that with this upgrade, the new part should last you 12000FH but the cost to buy a new one will be more expensive (you cannot repair the part, you need to buy a new one). Before you go and negotiate pricing with the supplier, what should be your not-to-exceed cost for this new part? Not-to-exceed cost: New part cost which will result in no increase or decrease in maintenance cost Open Excel Tab “Example Pg. 48”
  • 49. 49 Pg. BOMBARDIER CONFIDENTIAL Example Time Continuation Current Part • Quantity per Aircraft = 2 • MTBF = 6000FH • Purchase price (no repairable part) = $2,400 • Labour Hours = 24 hours per part to Remove and Replace, with 2 AMEs assisting each other • Labour rate = $80/labour hour New Part • Quantity per Aircraft = 2 • MTBF = 12000FH • Purchase price (no repairable part) = not-to-exceed? • Labour Hours = 24 hours per part to Remove and Replace, with 2 AMEs assisting each other • Labour rate = $80/labour hour
  • 50. 50 Pg. BOMBARDIER CONFIDENTIAL Example Time Continuation Old part New part For a not-to-exceed material cost: = 2*$2,400/6000FH = $0.80/FH = 2*48Hrs*$80/6000FH = $1.28/FH Old part = 2*$?/12000FH = $?/FH = 2*48Hrs*$80/12000FH = $0.64/FH New part So we can see right away that the labour DMC impact is far more significant than the material impact. This signifies that you have the potential to increase the material cost significantly and still get savings
  • 51. 51 Pg. BOMBARDIER CONFIDENTIAL Example Time Continuation Solving the equation, you get a material purchase price of $8,640 This means that anything less than this price will amount to saving regarding this component. But I want my total cost to be at least 25% less than current Well if your material and labour cost was $2.80/FH, let’s find what the new material purchase price should be to achieve a total cost of $1.56/FH
  • 52. 52 Pg. BOMBARDIER CONFIDENTIAL Example Time Continuation Solving for the equation above you get, $5,520 for a new purchase part
  • 53. 53 Pg. BOMBARDIER CONFIDENTIAL Example Time Continuation RECAP Material Purchase price Total Cost ($/FH) Percent reduction in Total Cost $2,400 $2.08/FH NA $8,640 $2.08/FH 0% $5,520 $1.56/FH 75% $2,400 $1.04/FH 50% Old part New part
  • 54. Economic Assessment of Top URR Drivers Maintenance Engineering Bombardier Aerospace
  • 55. 55 Pg. BOMBARDIER CONFIDENTIAL Synopsis • The first portion of the workshop will show how to obtain the top Unscheduled Removal Rate (URR) components. The tool which will enable you to do this is the Airline Performance Analytics tool (APA). • The second portion of this workshop will show how to calculate the economic impact of the top URR components • The third portion of this workshop encourages the operator to find the available Mods that will help reduce the economic impact of the top URR components. The Service Bulletin tool can be used to determine the return on investment of implementing a Service Bulletin. Both the Airline Performance Analytics tool (APA) and the Service Bulletin tool are provided free of charge on www.iflybombardier.com
  • 56. 56 Pg. BOMBARDIER CONFIDENTIAL Accessing APA To access APA, Login to iflybombardier.com
  • 57. 57 Pg. BOMBARDIER CONFIDENTIAL iflybombardier A separate log-in is currently required – same username is created, but a different password for initial log-on
  • 58. 58 Pg. BOMBARDIER CONFIDENTIAL APA main page Main page after log-in, click on “Reports” at top left corner
  • 59. 59 Pg. BOMBARDIER CONFIDENTIAL Selecting the Top Component URR Drivers Click to obtain the top URR drivers Select the URR drivers for an operator Select the URR drivers for the fleet Select the time period
  • 60. 60 Pg. BOMBARDIER CONFIDENTIAL Fleet top URR Drivers Query Results In this case the query period was selected from Aug 2010 to July 2011 for the fleet. The same can be done for a specific operator The top URR components are sorted from highest to lowest removal impact Can export to Excel
  • 61. 61 Pg. BOMBARDIER CONFIDENTIAL Making a Cost Assessment based on the URR results • Unscheduled Component removal is part of Direct Maintenance Cost (DMC) • The following formula can be used to obtain the DMC impact for the top URR components: DMC = MTBUR stands for Mean Time Between Unscheduled Removals expressed in Flight Hours URR Stands for Unscheduled Removal Rate expressed in Removals per 1000 Flight Hours MTBUR= 1000/URR
  • 62. 62 Pg. BOMBARDIER CONFIDENTIAL URR DMC Results The top URR components are sorted from highest to lowest DMC impact. Notice that the order of components that have the most economic impact might not be the same as the order of components that have the most unscheduled removal impact This means that the component that is costing you the most might not necessarily be the component that is getting removed the most
  • 63. 63 Pg. BOMBARDIER CONFIDENTIAL Next Step ? Now that you know your top DMC Drivers based on URR, see what Service Bulletins there are that will help reduce the DMC I can use the Service Bulletin tool to determine the return on investment of implementing a Service Bulletin…. Also, this tool is free!
  • 64. 64 Pg. BOMBARDIER CONFIDENTIAL BREAKEVEN ANALYSIS $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 0 1 2 3 4 5 6 7 8 9 10 YEAR COST PER AIRCRAFT • Calculates the return on investment of implementing an SB What is the SB tool? YEARS Pre SB Post SB Breakeven Point
  • 65. 65 Pg. BOMBARDIER CONFIDENTIAL SB Background • Bombardier issues Service Bulletins (SB’s) to operators which will help improve:
  • 66. 66 Pg. BOMBARDIER CONFIDENTIAL Reduction in Operational Costs Direct Maintenance Cost ($/FH) Dispatch Interruption Rate (delays, cancellations) Out of Service hours No Fault Found
  • 67. 67 Pg. BOMBARDIER CONFIDENTIAL What the Tool Contains The tool contains a list of SBs with pre-calculated DMC savings and DIR improvements
  • 68. 68 Pg. BOMBARDIER CONFIDENTIAL How does the SB tool Calculate my ROI? 1. Delays 2. Cancellations 3. OOS Hours 4. Number of unscheduled removals 5. NFF Rate
  • 69. 69 Pg. BOMBARDIER CONFIDENTIAL Continuation Pre SB Cost Post SB Cost Pre SB costs = Cost of delays, cancellations, OOS hours, number of unscheduled removals and NFF Post SB cost = SB kit Cost + Labour + Pre SB cost – DMC & DIR savings
  • 71. 71 Pg. BOMBARDIER CONFIDENTIAL Can I add my own SB? Calculating a DMC and DIR benefit is difficult so instead you can enter percent reductions in: YES – The operator can add their own SB 1. Cancellations 2. Delays 3. OOS Hours 4. Unscheduled Removals 5. NFF Rate
  • 74. 74 Pg. BOMBARDIER CONFIDENTIAL How does the SB tool Calculate this ROI? Pre SB Cost Post SB Cost Pre SB costs = Cost of delays, cancellations, OOS hours, number of unscheduled removals and NFF Post SB cost = SB kit Cost + Labour + Pre SB cost – Percent Reductions
  • 83. 83 Pg. BOMBARDIER CONFIDENTIAL Conclusion FREE This workshop has shown: How to use the Airline Performance Analytics tool (APA) to obtain your top URR components. How to calculate the economic impact of these URR components How to use the Service Bulletin tool to calculate a return on investment of implementing a Service bulleting