chromalloy the future of an ‘independent’ aero ... - nag€¦ · •strong engineering force...

ChromalloyHistorical perspectiveDemand questionBehavior …….Change-overUp-to-nowService providers,

the way forwardTherefore …….‘The Perfect Storm’

The future of an ‘independent’ aero-engine service provider

September 27, 2019 – Ron van Gestel

Opportunity or challenge



Market Portfolio

COMMERCIAL MILITARY ENERGY

- New Engine Manufacture Supply Chain Solutions -

- Aftermarket/Repair Supply Chain Solutions -



One-stop Shop for Repair & Manufacture

Engineering

Casting

Inspection & Prep

Machining

Welding

Thermal Processing

Coatings

Surface Treatments

From individual part / component repair to

“make-complete- parts” Chromalloy facilities

are equipped to support full or partial

solutions through a highly specialized and

vertically integrated internal value chain



Aero Engines ≡ Gas Turbines

• Engine OEM’s do produce a ‘perfect’ product

• Complex, many moving parts, operates at extreme conditions, …• However, they do not last ………….• Main reason for the existance of ‘service providers’, repair houses

specific

Company confidential, privileged and proprietary information: copying or distributing in any form is strictly prohibited. 4



Historical perspective

• It starts already centuries ago

• Up to beginning of the 20th century it remained by just ideas

• First gas turbines (land-based) are built around 1900-1920 period

• But the real boost was around the time of World War II

• Since that period, the technology, and the use of gas turbines progressed significantly

• Nowadays, more than 85,000 aero engines1 are in operation

• To keep these in operation, operators demanded alternativesolutions instead of the standard replacement/exchange

• Repairs are to be developed!


1Source: MRO Prospector



Going back memory lane ……

• Up to the 80’s OEM’s were developing engines & selling these!

After market support by independent parties and/or by the MRO’s/air carriers themselves

Transfer to OEM ESM

• Early 90’s Engine development costs raised sky high

OEM overall margins were under pressure!

New engines were sold @ cost price

OEM’s started realizing margins in after market

Their financial model relied on this market

Therefore, strive to control of materials flow (spare part supply)

One started with in-house component repair development


Control of technical data!



Demand question

• Airliners demanded & required repairs to support cost control• $1 in part repair versus $5 in part replacement

• Relation between OEM’s and service providers under pressure• OEM’s need spare part market to remain profitable• Service providers (specific MRO’s) had option to align (buy-in) or to become

independent

ALSO

• Reluctancy of OEM to support airliner in repair demand• Control of spare part market

• Repairs are only interesting to understand the engine• Capacity constraints @ OEM• OEM is facing contradicting internal demands

• Main revenue stream is from spare part sales


Challenge: Access to technical data



Behavior OEM’s towards service providers

Not one approach!

• Rolls-Royce Full control over technical data from day 1Repair shops are aligned (& controlled)

Only approved repair shops to be used

• General Electric/CFMiLicence to overhaul engines often combinedwith restrictive T&C’s

Data ‘accessible’, when subscription availableMore and more data become RSS’d

• Pratt&Whitney Repair council – Willing to support repair development?Data accessibility


RSS: Repair Source Substantiated



Service providers (i.e. repair shops)Specific independent ones

• No longer supported by OEM’s

• Looking for alternative routes opening in regulatory guidelines

• Repair houses have an advantage• Insight in service damages• Reject reasoning• Defect trending

• Initially Extension of available repair limits

Extensive, innovative, complex repairs


FAA-DER repairs

CriticalKnowledge how to interpret the regulations



Examples of innovative repairsAir foil replacement repair (AFR)




Examples of innovative repairsBacking strip replacement repair (BSR)




Service providers

• Parts seen ‘multiple’ repair cycles

Beyond Economical Repaire.g. CFM56-7B HPT blade considered as consumable

• Drying up of service providers revenue stream, unless …...

other options are found

• Three ways: Supplemental Type Certificate (STC)

Licensing Agreement

Identicality based upon Test&Computation


Parts Manufacturing Approval

This all has direct consequences for the OEM’s revenue stream and profit figures



Change over to more ‘common’ approach


CareStoreEnginewise

TrueChoice

OnPoint

TRUEngine

Total CarePrograms address all OEM/MRO-operator interactions:

• Aircraft/Engine acquisition• Service agreements• Engine maintenance• Component overhaul• Spare part supply• Financial services

The key word

CONTROL



Other activities ….

• Demoting alternative solutions• Example ‘Refusing (engine) liability when third party solutions are being

used’

• Support studies to demote use of alternate solutions like DER repairedparts, PMA’s

• Restricting access to technical data• Controlled (‘restricted’) distribution of technical data• More and more repairs become source controlled, details no longer

available in the ESM

• Regulatory requirements becoming more complex• Rule making is a U.S. senate decision!• OEM’s, specific U.S. based OEM’s, making use of existing possibilities

• Lobbying at the Washington Office




The Stakeholders – What are they facing?




The Stakeholders – What are they facing?

• Playing field shows complex interactions

• Each other is anothers customer, anothers competitor, anothersvendor, anothers service provider, …

• One OEM branch controls activities at a vendor that anotherbranch of the organization needs

• Whether they are aligned is questionable

• ………………………..


What is the role of the European regulatory agency, EASA?

Airliners

Repair shops

Financial

InstitutesLessors

OEM

MRO’s



Up to now

• All – presented up to now - is based upon the FAA regulatory system

• Role of EASA has been ……….• By means of the bilateral agreements one accepts FAA’s ruling for U.S.

certified engines

• In general, EASA acts as a follower and not as a leader• One has opened for repairs, but …• Alternative means to supply spare parts (the socalled PMA parts) are still

under discussion• Recent agreements might contradict this!

• Especially for European certified engines, this provides to the service providers a challenge

• But there are ways forward• Minor & major repair approval• Design Organization Approval• ……


Personal impression



Service providers, the way forwardFuture perspective for independent parties

• Access to technical data will become more restricted• Solution: Align with OEM of interest

• In-depth knowledge on various airworthiness regulations• Know the borders, the ‘no-go’ area

• Need to create own technical data• Strong engineering force (i.e. power plant, part interaction, metallurgy, ….)• Insight knowledge on behavior of parts during operation

• Able to relate defect presence to hour / cycle ratio, area of operation, mode of operation, maintanance strategy, …..

• Overview of defects occuring• Reject reasons• Extensive knowledge possibilities various repair technologies

• ‘Think-out-of-the-box’• Do not limit yourself to restore as it used to be, ‘improve’ serviced parts

• Introduce better resistant coatings• Improve cooling based upon defect (‘hot-spot’) analysis

• Introduce ‘new’, innovative technologies• Additive manufacturing• Nano-applications in coatings and parent metal• ………


Given!

Ne

cess

ity!



Therefore

• Despite all actions the various OEM’s have & will initiate ……..

• The future can be bright for the independent parties

• But …… one needs to be prepared• One needs to be flexible

• Up to inventive

• One must know what one is doing• Always discuss ‘new roads’ with the applicable regulatory agency• Document all

• Be open for new possibilities• React quickly

• Opportunities disappear faster than that they pop up


By doing this be prepared for ‘in our view’ ……..



“The Perfect Storm”

• First, it is well known that aircraft manufacturers are continuing to increase production. And, because of that, engine manufacturers are having to ramp up their production to be able to meet the higher volumes required.

• As the new engines are being rolled out so quickly, the market has seen “infancy” issues related to their performance. That means the market does not expect to see any early removals of ‘legacy’ engines, or a change in material requirements any time soon.

• Oil prices, combined with the continued use of ‘legacy’ engines, are also having an effect on the market as we continue to see a high demand for shop visits on ‘legacy’ engines. Operators need to keep their planes in the air to be successful, so our ability to help them do that is critical to the industry.

• Chromalloy has been focused on the V2500 and CFM56 platforms over the past years, and now we are finally beginning to see the spike in shop visits which will continue into the next decade. The OEMs didn’t forecast for this level of success on these engines, so they are now beginning to face production issues for spare parts.

Company confidential, privileged and proprietary information: copying or distributing in any form is strictly prohibited.



Thank you.

22

Long live your engine



IATA – CFM Competition Settlement Agreement


• CFMi has been known for their anti-PMA / DER tactics - negative advertising and disparaging presentations as it relates to DERs and PMAs.

• IATA brought an unfair competition complaint in the European Union, which led to a significant investigation by the EU Competition Commission.

• In advance of a final ruling by the EU, CFMi has agreed to a settlement agreement, and IATA has agreed to withdraw its complaint from the EU commission.

The settlement agreement includes a set of CFMi Conduct Policies and a set of Implementing Measures for those Conduct Policies. The IATA Press release summarizes the benefits, like this one ….

Among the many elements of the agreement, CFMi has agreed to:

• License its Engine Shop Manual to an MRO facility even if it uses non-CFMi parts

• Permit the use of non-CFMi parts or repairs by any licensee of the CFM Engine Shop Manual

• Honor warranty coverage of the CFM components and repairs on a CFMi engine even whenthe engine contains non-CFM parts or repairs

• Grant airlines and third-party overhaul facilities the right to use the CFMi ESM without a fee

• Sell CFMi parts and perform all parts repairs even when non-CFMi parts or repairs are present in the engine
http://ec.europa.eu/competition/index_en.html

chromalloy the future of an ‘independent’ aero ... - nag€¦ · •strong engineering force...

Documents