Aircraft Maintenance Reserve Development Conference

Presented By:
Shannon Ackert
Vice President, Capital Markets
October 20th, 2010
Maintenance Cost Conference
1IATA Maintenance Cost Conference, Abu Dhabi, UAE October 20th, 2010Jackson Square Aviation
Elements of Aircraft Maintenance Reserve Development

Jackson Square Aviation, LLC Overview
 Jackson Square Aviation is a global
commercial aircraft lessor headquartered
in San Francisco, California
 Current satellite offices : London, Seattle, Miami & Buenos Aires.
Opening Asia office in 2010.
 The company has a $500 million commitment from Oaktree
Capital, which has financed the management team since the
mid 1990’s with a high degree of success.
 Jackson Square Aviation is focused on acquiring – primarily
through Sale & Leaseback (SLB) :
 Narrowbody & widebody
 Passenger & freighter

Agenda
3
1. Significant Maintenance Events
2. Maintenance Reserve Parameters
3. Maintenance Reserve Escalation
4. Maintenance Reserve Development
I. Appendix A – Maintenance Reserve Information Resources
II. Appendix B – Maintenance Costs & Reserve Rates
IATA Maintenance Cost Conference, Abu Dhabi, UAE October 20th, 2010Jackson Square Aviation

• Heavy Structural
Inspection (HSI)
• C-Checks
• Performance Rest
• LLP Replacement
Mtx EventsEquipment
• APU Restoration
• Landing Gear
Overhaul
Airframe
Engine
Components
Hard-Time
Mtx Interval Process
Condition-Monitored
Hard-Time
Condition-Monitored
Hard-Time
1.0 – Significant Maintenance Events

Variable Cost
Fixed Interval
Airframe HSI
Landing Gear Ovhl
Fixed FC Interval
Fixed Cost Engine LLP
Replacement
Event Application
Engine Module &
APU Restoration
Reserve Equation Comments
• Variability in costs, which
can be difficult to predict if
equipment is new or ageing
• Predictable, very little
variability in both costs
and time on-wing
• Variability in both costs
and time on-wing
• Often difficult to quantify if
equipment is new or ageing
• Time on-wing heavily
influenced by operation
2.0 – Maintenance Reserve Parameters
Variable Cost
Variable
FH Interval

Source : Boeing
3.0 – Maintenance Reserve Escalation
ECI - Aircraft Mfg, Wages & Salaries PPI - Industrial Commodities
I. Annual Escalation Policies – Varies By Lessor, But Typically:
1. Fixed (i.e. 3%)
2. Indexed to Core Producer Price (CPI) Index
3. Computed Using OEM escalation formula – weighted using labor &
material Indices (ECI – Labor & PPI - Material)

I. Airframe Heavy Structural Inspection
 Costs Factors
I. Airframe Age (First, Mature, & Ageing Runs)
• Costs are escalated to account for
airframe ageing, which results in higher
non-routine tasks.
• General “non-routine” factor
escalations: 10% - 15% per phase.
II. Flight Cycles
• Cost may be increased to
account for high cycle operation.
Routine
Non
Routine
Newness
< 6 Years
Maturity
6 – 15 Yrs
Aging
> 15 Years
Non
Routine
Non
Routine
Routine Routine
4.0 – Maintenance Reserve Development

 Costs Factors - continued
III. Scope of Work
 Not driven by the aircraft operation, instead
 Policy established by Lessor
 Generally Falls Under Two Structures:
Structure A - Scope of work includes reimbursement for material and
routine & non-routine labor for systems, structural & zonal tasks.
Structure B - Scope of work includes reimbursement for material and
routine & non-routine labor for structural & zonal tasks.

 Interval Factors
Two Types of Calendar Interval Structures:
Structure A : Calendar interval based off the OEM generic and/or
sample block program.
• Example Generic Block : A320 / A330 Family : 4C/6Yr &
8C/12Yr Structural Inspection Checks @ 6 & 12 Yr Intervals,
• Example Sample Block : 737NG Family : @ 8 Yr Intervals
Structure B : Calendar interval based on timing of majority of zonal /
structural tasks. Reflective of a customized maintenance program.
• Example : 737NG Family – 8, 10, & 12 Year Intervals
• Example : 747-8 Family – 8 Year Intervals

 Example : A330-300 HSI Costs
Scope of work assumption: includes routine & non-
routine labor for systems, structural & zonal tasks, and material.
A. First-Run Phase - New - 6 Yr
• 4C/6Yr SI Cost : $1.75M
B. Mature-Run Phase - 6 Yr - 12 Yr
C. Ageing-Run Phase - > 12 Yr
4C/6YR Check Escalated
15% off First-Run Costs
Both 4C/6YR & 8C/12YR Checks
Escalated 10% off Mature-Run Costs

II. Landing Gear Overhaul
 Cost Factors - generally impacted by:
• Supply & demand of exchange unit cost plus removal and
installation labor costs.
 Interval Factors – generally consisting of two limiter:
I. Calendar time (i.e. 10 years)
II. Flight cycles (i.e. 20,000 flight cycles)
Timing of event: “whichever is more limiting”.

II. Landing Gear Overhaul
Notes:
• In cases where there is a calendar limiter, this establishes
the minimum monthly rate required.
• Some models have different limiters for main and nose gear assemblies.
 Example : 737NG Landing Gear Reserve
Exchange Cost Assumption : $320,000
Limiters: 10 Years / 18,000 FC
Scenario 1 - Annual FC = 1,250 FC
Cyclic limiter = 16 Yr(18,000/1,250)
TOW Limiter = 10 Yr = 120 Mo
Mo Rate :(320,000/ 120) = $ 2,666
Scenario 2 - Annual FC = 2,250 FC
Cyclic limiter = 8 Yr (18,000/2,250)
TOW Limiter = 8 Yr = 96 Mo
Mo Rate: (320,000/ 96) = $ 3,333

III. Auxiliary Power Unit (APU) Restoration
 Cost Factors
• Material driven – 70% - 80% of cost is material,
• Minor variance between first & mature-run costs.
• Scope of work : Rework of the power section, load impeller & gearbox
modules according to OEM’s performance restoration and full gas path
overhaul criteria.
 Time On-Wing Factors
• If new generation APU :
 Use of empirical Mean-Time Between Unscheduled Removal
(MTBUR) from similar in-production APU model.
• If mature APU :
 OEM Published Mean-Time Between Unscheduled Removal
(MTBUR) Metrics.

Mean-Time
BetweenRemovals
5,945 FH - MTBUR
5,495 FH - MTBR
6,450 FH - MTBCR
12-Mo Rolling Averages
III. Auxiliary Power Unit (APU) Restoration
 Time On-Wing Factors – OEM MTBUR Metrics
 Example : 737-800 APU (GTCP 131-9B)
• MTBUR = 6,500 APU FH
• Average Cost = $235,000
• APU Reserve Rate = $36 / APU FH

15
IV. Engine Performance Restoration
 Cost Factors
I. Engine Build Goals - Tend be influenced by business decisions,
and based on:
a) Maximizing usage of LLP hardware, which often leads to lower
shop visit costs but higher DMC ($ / FH), or
b) Building for minimum number of shop visits, which allows one
to achieve lower shop DMC ($ / FH) but higher shop visit costs.
Notes
• Many lessors are now imposing “minimum build goals” in their
leases to prevent short building.

16
 Cost Factors
Restoration $ 1,650,000
LLP Removed $ 0
---------------------------------------------------------
Total Shop Visit $ 1,650,000
Restoration $/FH 117.85 $/FH
Restoration $ 1,800,000
LLP $ Removed $ 1,000,000
---------------------------------------------------------
Total Shop Visit $ 2,800,000
Restoration $/FH 90.00 $/FH
Replace No LLPs
Build to 7,000 FC
Replace Core LLPs
Build to 10,000 FC
17 7 7 12 17 20 20 12
I. Engine Build Goals – Example
First Run TOW = 13,000 FC / 26,000 FH 30 20 20 25
At Shop Visit :
Maximizing usage of LLP hardware Minimize Number of Shop Visits
Engine LLP Status @ EIS

17
 Cost Influencing Factors – continued
II. Age – rates reflective of first & mature-run status
As Engine Ages
Hardware Deterioration
Rate Increases
Higher Maintenance
Costs
1st SV
2nd SV
3rd SV
20,000 FH 16,000 FH 15,000 FH

EGT
Margin
Loss
(˚C )
2,000 4,000 6,000 8,000 10,000
Flight Cycles
2,000 4,000 6,000 8,000 10,000
Flight Cycles
Same Engine Goes Into Shop
EGT Limit
EGT Limit
Time On-Wing – High Thrust Rating Time On-Wing – Low Thrust Rating
Flight Cycles Flight Cycles
Same Engine Goes Into Shop
Time On-Wing High Thrust Time On-Wing Low Thrust
EGT Limit
EGT Limit
10,000 FC
EGT
Margin
Loss
8,000 FC
 Time On-Wing Factors
I. Engine Thrust Rating - Increasing Thrust > Higher EGT
Deterioration > Lower Time On-Wing

 Time On-Wing Factors - continued
II. Engine Flight Leg
Cruise
1 FH
Cruise
3 FH
Flight Profile = 1.0 Flight Hour per Flight Cycle
Flight Profile = 3.0 Flight Hours per Flight Cycle
1 FH 1 FH

Flight Leg (Hours)
Cost$/FH
Greater Flight Leg
Lower
DMC
Increasing Flight Leg
Lowers EGT
Deterioration
Higher Time On-Wing
II. Engine Flight Leg
Increasing Flight Leg
Lowers EGT Deterioration
Greater Flight Leg
Lower
DMC
Cost$/FH
Flight Leg (Hours)
Higher Time On-Wing
and Lower Cost $ / FH

1.0 2.0 3.0 4.0
Flight Leg (Hours)
0%
10%
20%
Increasing Derate = Lower Thrust
1.5 2.5 3.5
Cost$/FH
Increasing
Derate
Lowers Thrust &
EGT Deterioration
Higher Time On-Wing
Increasing Derate
Lowers Thrust and
EGT Deterioration
Higher Time On-Wing
and Lower Cost $ / FH
Cost$/FH
Flight Leg (Hours)
5% Derate
10% Derate
Increasing Derate = Lower Thrust
15% Derate
III. Engine Derate

IV. Environment - Engines operated in dusty, sandy and/or
erosive-corrosive environments are exposed to higher blade
distress and thus greater performance deterioration.
Notes:
• Lessors are now adjusting their reserve rates to account for
region of operation.
• Generally applies to narrow-body aircraft operating within
distressed environments.

Lowest
Medium / Low
Medium
High
Highest
Colors highlight severity
and rate of occurrence of
distress
Engine - Environmental
Distress Chart

1.0 1.5 2.0 2.5 3.0
1.0
10% Derate
SeverityFactor
2.2
1.7
Flight Leg
$72$122$158 $70 $6815% Matrix =
5% Derate
15% Derate
$80$136$176 $78 $76
5% Matrix =
10% Matrix =
Base Flight Leg (2.0)
Base Rate = $80 / FH
$88$150$194 $86 $84
 Example – Severity Curve

25
 Example – CFM56-7B26 Restoration Calculation
Base Operation : 2.0 Flight Leg / 10% Derate / Temperate Region
Base Rate : $80 / FH
IATA Maintenance Cost Conference, Abu Dhabi, UAE October 20th, 2010
Operating Scenario 1:
1.5 FL / 10% Derate / Temperate
FL Factor = 1.7
Derate Factor = 1.0
Region Factor = 1.0
Composite Factor = 1.7*1.0*1.0
Composite Factor = 1.70
Adjusted Rate = 80 *1.70
Adjusted Rate = $136 / FH
Operating Scenario 2:
2.5 FL / 5% Derate / Hot-Dry
FL Factor = 0.98
Derate Factor = 1.1
Region Factor = 1.2
Composite Factor = 0.98*1.1*1.2
Composite Factor = 1.30
Adjusted Rate = 80 *1.30
Adjusted Rate = $104 / FH
Jackson Square Aviation

V. Engine Life Limited Parts (LLP) Replacement
 Cost Factors
• OEM piece part escalation – currently averaging over 5% per year.
• Inclusion of Static LLPs - Although these parts are not classified to
be critical they do fall under the category of parts whose failure
could create a hazard to the aircraft i.e. shrouds and frames.

27
 Piece Part Life-Limit Factors
 Life limits tend to range between 15,000 – 30,000 flight cycles, however
 LLPs can have shorter lives imposed on them by airworthiness
directives (ADs).
 Lessor imposed stub factor on life limits – typically:
 10% for narrowbody engines
 5% for widebody engines
 Some manufacturers certify ultimate lives of LLPs at the time they certify
an engine model. Other manufacturers certify the lives as experience is
accumulated. In these scenarios, ultimate lives are reached after one or
several life extensions.

28
 Stack Cost
1 30,000 180,000 6.00 6.67
2 27,600 120,000 4.35 4.83
3 30,000 100,000 3.33 3.70
4 20,000 50,000 2.50 2.78
5 20,000 80,000 4.00 4.44
6 20,000 110,000 5.50 6.11
7 20,000 30,000 1.50 1.67
8 20,000 240,000 12.00 13.33
9 20,000 200,000 10.00 11.11
19 20,000 180,000 9.00 10.00
11 20,000 90,000 4.50 5.00
12 20,000 60,000 3.00 3.33
13 25,000 100,000 4.00 4.44
14 25,000 150,000 6.00 6.67
15 25,000 70,000 2.80 3.11
16 25,000 90,000 3.60 4.00
17 25,000 80,000 3.20 3.56
18 25,000 70,000 2.80 3.11
LLP FC Limit Cost $ $ / FC 10% Stub
2,000,000 88.00 98.00
10% Stub =
Cost $ /
(90% * FC Limit)
Lessors often
assume that
each LLP will
retain 5% - 10%
of its stub life
before being
replaced.

VI. Lessor’s Perspective:
 Many lessors base their costs to be reflective of
costs negotiated from either a U.S. or European based
MRO facility.
Consequently, their reserves rates are normally ranked
as “market-based to above market-based”.
Ultimately, reserves are heavily negotiated and are
often “marketing” driven.

Appendix A – Sources of Maintenance Reserve Metrics
1. Maintenance Reserve Claims – Example Performance Restoration

Appendix A – Sources of Maintenance Reserve Metrics
2. OEM Conferences & Publications
3. Commercial Publications

Aircraft Check Phase Interval Costs - 2010 $ Rates ($ / Mo)
A320-200 4C / 6Y SI First-Run 72 Months $750K - $850K $10,400 - $11,800
A320-200 8C / 12Y SI First-Run 144 Months $850K - $900K $5,500 - $5,900
A330-300 4C / 6Y SI First-Run 72 Months $1.4M - $1.6M $19,500 - $22,200
A330-300 8C / 12 Y SI First-Run 144 Months $1.5M - $1.7M $10,400 - $11,800
B737-800 C6-C8 Equivalent First-Run 120 / 144 Mo $1.3M - $1.5M $9,000 - $12,500
B747-400 C4 / D-Check Ageing 72 Months $4.0M - $4.5M $55,500 - $62,500
B757-200 S4C Ageing 72 Months $1.5M - $1.7M $22,200 - $23,600
B767-300ER S4C Ageing 72 Months $2.0M - $2.3M $27,800 - $31,900
B777-300ER C4 / SI First-Run 96 Months $2.5M - $2.8M $26,000 - $29,100
E190 C4 / SI First-Run 96 Months $475K - $575K $4,900 - $5,900
CRJ-700 HSI First-Run 96 Months $425K - $525K $4,400 - $5,400
Appendix B - Maintenance Costs & Reserve Rates
1.0 Airframe Heavy Structural Inspection Costs & Reserve Rates
 Assumes full workscope (systems, structures & zonal & material)

2.0 Engine Performance Restoration Costs & Reserve Rates
Engine Thrust Phase Fl Leg Time On-Wing (FC) Costs 2010 $ Rate ($ / FH)
CFM56-5B6/P 23,500 First-Run 1.7 15,500 -16,500 $1.8M - $2.2M $68- $78
CFM56-5B4/P 27,000 First-Run 2.0 11,000 -12,000 $1.8M - $2.2M $86 - $96
CFM56-5B3/P 33,000 First-Run 2.0 7,500 – 8,500 $1.8M - $2.2M $124 - $134
CFM56-7B24/P 24,000 First-Run 1.7 15,500 – 16,500 $1.8M - $2.2M $68- $78
CFM56-7B26/P 26,300 First-Run 2.0 12,500 – 13,500 $1.8M - $2.2M $78- $88
CFM56-7B27/P 27,300 First-Run 2.0 11,000 – 12,000 $1.8M - $2.2M $84 - $94
V2524-A5 24,000 First-Run 1.7 15,000 – 16,000 $1.8M - $2.2M $72 - $82
V2527-A5 27,000 First-Run 2.0 10,000-11,000 $1.8M - $2.2M $92 - $102
V2533-A5 33,000 First-Run 2.0 6,500 – 7,500 $1.8M - $2.2M $135 - $145
Trent 772 71,200 First-Run 6.0 3,500 – 4,000 $3.6M - $4.0M $175 - $185
PW4068 68,000 First-Run 6.0 3,000 – 3,500 $3.2M - $3.6M $180 -$190
CF6-80E1A4 70,000 First-Run 6.0 3,000 – 3,500 $3.0M - $3.4M $165 - $175
GE90-115B 115,000 First-Run 8.0 2,250 – 2,750 $4.4 - $4.8M $250 - $260

Aircraft Interval Costs - 2010 $ Rates ($ / Mo)
A320 Family 10 YR / 20,000 FC $380K - $420K $3,160 - $3,500
A330 Family 10 YR $875K - $925K $7,300 – $7,700
B737NG Family 10 YR / 18,000 FC $320K - $380K $2,650 - $3,166
B757 Family 10 YR / 18,000 FC $425K - $475K $3,540 - $3,950
B767 Family 10 YR $550K - $600K $4,580 - $5,000
B747 Family 10 YR / 6,000 FC $750K - $800K $6,250 - $6,660
B777 Family 10 YR $1.0M - $1.2M $8,333 - $10,000
E190 Family 10 YR / 20,000 FC $325K - $350K $2,700 - $2,900
CRJ 700 Family 10 YR / 20,000 FC $180K - $220K $1,500 - $1,800
3.0 Landing Gear Overhaul Costs & Reserve Rates
 Assumes cost for exchange unit plus removal/installation labor

Aircraft Interval - APU FH Costs - 2010 $ Rates ($ / APU FH)
A320 Family 6,000 – 7,000 $210K - $240K $33 - $38
A330 Family 6,000 – 7,000 $350K - $375K $40 - $45
B737NG Family 6,000 – 7,000 $210K - $240K $33 - $38
B757 Family 5,000 – 6,000 $200K - $225K $37 - $42
B767 Family 5,000 – 6,000 $200K - $225K $37 - $42
B747 Family 8,000 – 9,000 $425K - $475K $48 - $53
B777 Family 7,500 – 8,500 $425K - $475K $50 - $55
E190 Family 5,000 – 6,000 $160K - $180K $31 - $36
CRJ 700 Family 4,000 – 5,000 $130K - $160K $30 - $35
4.0 APU Performance Restoration Costs & Reserve Rates

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