Pay as you go

Power by the Hour is slowly gaining ground in the region as carriers increasingly see that the concept works

  • E-Mail
By  Barbara Cockburn Published  September 26, 2006

|~||~||~|Airlines sign contracts for the use of power plants based on the amount of thrust they can ac tually use and these are called power-by-hour contracts. So far, these contracts have proved increasingly popular in the airline industry as a whole, but have yet to really take hold in the Gulf region. The main reason that is cited for this is that airlines in the Middle East, led by Emirates, have had a preference to do things in-house, building up vertically integrated companies that prefer to be in control rather than work with joint-venture partners. And with Emirates setting the benchmark for other carriers in the region, this has become something of a regional business model, with even low-cost start-ups tending to utilise the services of the national flag carriers. Some airlines in the region, however, are already making use of power-by-the-hour contracts. Rolls-Royce, which pioneered the concept (and indeed, owns the trademark) counts Etihad, Qatar Airways, Gulf Air, Middle East Airlines and Egypt Air among its customer base. The engine manufacturer believes that the concept works. Mark Kerr, business development manager for after market services at Rolls-Royce explains that the concept was developed in the early-to-mid 1990s. “Customers were telling us that things had to be done differently,” he says. Since those days, when power-by-the-hour essentially meant a simple dollar payment per hour flown, the concept has developed and changed. Rolls-Royce now offers what it calls its Total Care package - with the manufacturer offering a comprehensive support package as well as a payment plan. A key advantage that Rolls-Royce can offer, Kerr explains, is economies of scale. “If you look at airline fleets, many do not have more than ten aircraft of a particular type. If you don’t have more than ten of a type, then predictive maintenance becomes difficult. If you have just two or three aircraft of a particular type, it becomes very hard indeed. Why not let us take responsibility, when we are monitoring 200, 300, or even 400 engines of that type. We have access to data across whole fleets. Why try to do it yourself?” He adds that the maintenance performance of engines tends not to vary that much based on how many hours they fly. Rather than the cruise phase, the key parts of the flight, from an engine maintenance point of view, are take-off and climb. The cornerstone of Total Care is engine maintenance. “The engine is viewed much more as an asset,” says Kerr. “It is a service we have expanded and developed. We help airlines in the day-to-day running, repair and overhaul, and shipping.” As part of the Total-Care package, Rolls-Royce will offer to send its own engineer to sit alongside the operations teams at airline customers. While the operations team is fire-fighting, concentrating on getting the aircraft back in the air, the Rolls-Royce engineer will take care of the wider issues, liaising with Rolls-Royce engineers back in Derby in the UK. “He is more concerned with the strategy. Leaving the airline’s own team to take care of the tactics,” says Kerr. Information has a critical role to play. The system that Rolls-Royce has developed for the Trent 1000, on the new Boeing 787, will be capable of storing information on 50 flights, for instance. Although Total Care is tailored towards individual airlines, Kerr makes clear that there are certain minimum aspects of the contract that the manufacturer considers as necessary. “If an airline comes to us and says we don’t want the engine’s health monitoring, then we say fine, but we will not offer the Total Care brand,” explains Kerr. On the other hand, he says that the manufacturer is willing to offer the Total Care package, where the airline does not want to take the option of having a Rolls-Royce engineer sitting with its operations team, noting that some airlines are sensitive about labour relations issues and security of data. “Some services are optional and some are key,” he says. Another must have, as far as Rolls-Royce is concerned, is to let the manufacturer take care of shipping. “We offer guaranteed turn-around times of around ten days. If it takes five days to deliver the engine to us, then this won’t work. It will leave us just five days to get the engine back to the customer,” he explains. In addition to its Derby headquarters, Rolls-Royce has centres in North America (a joint venture with American Airlines), Germany, where it works with Lufthansa Technik, and Hong Kong and Singapore. The Middle East and North Africa have not built-up the critical mass to warrant a facility in the region yet, but Rolls-Royce does have managers on the ground in Dubai and Riyadh, along with representatives working with the Total Care customers it does have in the region. The nerve-centre of operations, however, is in Derby, where the company has an operations room which is manned 24-hours a day, seven days a week. “That’s where data gets turned into statistics and analysed,” explains Kerr. “What we are really looking to do is to highlight the unnatural.” Information from engines or aircraft flying around different parts of the globe is beamed back to Derby by satellite - Kerr estimates that Derby-based engineers can be analysing data within five minutes. The engineers will then converse with the Rolls-Royce engineers around the world, with the airlines themselves and even with the pilots who are flying the aircraft. “They have access to the engineering teams virtually at their fingertips, and are up-to-date with all the various engineering bulletins that apply to all the various different types of engine,” explains Kerr. “Some people have referred to the operations room as the help desk, but it really is so much more than that.” A key advantage of the Total Care package from a customer point of view, Kerr says, is that the manufacturer has a major incentive to keep the engine running as smoothly as possible. “We are getting paid on a dollar per flying hour basis. If the asset is not generating revenue for the customer, then it is not generating revenue for us. This is a fundamental change in the buyer/suppler model,” says Kerr. He insists that the value generated by Total Care more than justifies the costs involved. Apart from the benefits from the access to information, he points to the money that carriers will not have to spend when an airline doesn’t “go tech” as a fault, has been spotted and dealt with. He estimates the average cost to an airline, in such cases, can be as high as US$500,000 once aspects, such as feeding and, possibly finding a hotel room for passengers, has been taken care of. “It is effectively an insurance policy,” he says. The fact that Total Care minimises the need for the carrier’s own engineers to work on the engines is also a plus, he says. “The human factor is something to consider. It is a key source of errors,” he says. Total Care also means that Rolls-Royce’s engineers have more incentive, and are therefore more likely to use new materials when they are carrying out maintenance on engines, rather than using repaired parts. “People often don’t realise that there are all these hidden benefits,” Kerr says. Some Middle East, and one North African carrier have already been won over by the argument. Whether the concept wins wider acceptance in the region, only time will tell.||**||

Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code