December 10, 2019
Craig Olson Talks BizAv Leadership and Fleet Planning
A question we often get asked at Guardian Jet is, “Should I enroll in a jet engine maintenance program?”
First, let’s briefly explain what an engine program is…
Typically offered by the engine manufacturer, a jet engine maintenance program is an annual service contract.
It enables business jet owners and operators to pay for ongoing overhaul and loaner engine services based on fixed hourly fees.
These contracts are almost always based on aircraft utilization (i.e., annual hours flown), and the biggest benefit is dependable budgets, since maintenance is one of the largest expenses of operating a business aircraft.
So, back to the question about engine programs…
My answer is “It depends.” And “it depends” according to aircraft model.
When we at Guardian Jet get asked the question, it’s often asked in regard to aircraft resale value. Meaning, does it make sense to pay for our client to enroll in a service contract so they’ll reap the reward—or ROI—later?
In terms of resale, we recommend that you consider several these factors:
Current Market Enrollment
What is the rest of the fleet doing? If 90 percent of the fleet is on an engine mainenance program, it’s probably a good idea that you’re on one, too.
How often are you flying the airplane? A number of programs have minimum hourly requirements that need to be considered.
Next, we compare current market enrollment with sales in the past six months and 24 months. If the current market enrollment in an aircraft model is 50 percent, but 75 percent of the aircraft that have recently sold are on a program, we can quickly see that the market’s favoring aircraft on a program.
We do a very similar analysis in cases where an aircraft is selling at a premium or at a discount. Again, we look at the past six and 24 months of aircraft that are both on and off programs. Then we compare their confirmed sales price to our aircraft value calculation at the time of sale.
Days on Market
Another key metric to look at is days on the market and days to sell. Are the aircraft that are currently on the market—that are off programs—taking longer or shorter time to sell?
Planned Aircraft Sell Date
When will you be selling your aircraft? Are you going to be close to an overhaul? Selling an aircraft at or near an overhaul, without a program, is very difficult. Often times the program buy-in at that time is more than the cost of the overhaul, so you don’t necessarily want to buy a program. Thus, if you’re thinking that you’ll be selling near an overhaul, it’s a very good idea to be on an engine program.
When enrolling in a program, be sure to negotiate the ability to transfer the service contract to whomever buys your jet.
GE Aviation OnPoint offers comprehensive program management and line maintenance to complete engine overhauls.
Honeywell Maintenance Service Plan (MSP) is the umbrella of offerings that incorporates Honeywell Avionics Protection Plan (HAPP), Maintenance Service Plan (MSP) and Maintenance Protection Plan (MPP).
Jet Support Services, Inc. (JSSI®) offers a full range of hourly cost maintenance programs for more than 325 makes and models of new and pre-owned business jets. ¥
Pratt & Whitney Eagle Service Plan (ESP) is a simple, cost-effective, pay-per-hour maintenance plan that guarantees long-term engine maintenance costs and ensures a planned and preventative approach to maintenance.
Rolls-Royce CorporateCare Enhanced is a comprehensive, fixed-cost engine maintenance management plan.
In Summary If you’re looking for a predictable budget and “insurance” that your owner and/or operator is safeguarded, engine programs are a good idea. Just be sure to read the fine print and understand your coverage before negotiating your service contract.
The peace of mind may well be worth it, and the benefits can deliver. But they do come at a cost.
Engine program enrollment should come only after thorough analysis of your aircraft utilization, budget, maintenance staff and fleet-planning cycle. (If you’re unsure where to start, our Consulting team can assist you with this analysis.)
All things being equal, as an aircraft broker, I prefer airplanes that are on an engine program. Simply put, they’re easier to sell. Very rarely, if ever, do we hear from a buyer telling us that don’t want their pre-owned jet to be enrolled in a program. It offers them the security of knowing that their future purchase will be well-maintained.
If you have any questions about your aircraft value and whether an engine program is best, or if you’d like assistance looking at a specific market, please call us at +1-203-453-0800 or send us a note. We’d love to talk about it further.
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