"Power-by-the-Hour"
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The problem with buying engines as part of the airframeis the ancillary cost of maintenance (scheduled, unscheduled, catastrophic events, downtime, spare parts storage etc). You carry the cost & risk.
Instead you buy or lease the airframe & contract with the powerplant supplier to provide a guaranteed source of power for your airframe. They carry the risk for unexpected maintenance etc. and will pay the cost for the maintenance required to ensure a working powerplant(s) is always available on the aircraft.
When you operate a small number of engines the risk of unexpected maintenance requirements (particularly catastrophic ones that require, say, an engine rebuild) is relatively low. The problem is that IF it happens the cost might be unaffordable.
When large numbers of engines is operated then the risk is relatively higher, however the cost of a single event is spread across the relatively larger maintenance organisation. Proportionaly it is less 'costly' eg carrying one spare engine is a small(ish) cost when you operate 500 engines, not so if you only operate 2.
The power-by-the-hour organisations enable you to have similar scaling effects of a large operator.
Of course you are also paying for the profit margin of the power provider so there are some extra expenses in the transaction but depending on circumstance it still be cheaper overall.
Instead you buy or lease the airframe & contract with the powerplant supplier to provide a guaranteed source of power for your airframe. They carry the risk for unexpected maintenance etc. and will pay the cost for the maintenance required to ensure a working powerplant(s) is always available on the aircraft.
When you operate a small number of engines the risk of unexpected maintenance requirements (particularly catastrophic ones that require, say, an engine rebuild) is relatively low. The problem is that IF it happens the cost might be unaffordable.
When large numbers of engines is operated then the risk is relatively higher, however the cost of a single event is spread across the relatively larger maintenance organisation. Proportionaly it is less 'costly' eg carrying one spare engine is a small(ish) cost when you operate 500 engines, not so if you only operate 2.
The power-by-the-hour organisations enable you to have similar scaling effects of a large operator.
Of course you are also paying for the profit margin of the power provider so there are some extra expenses in the transaction but depending on circumstance it still be cheaper overall.
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Two aircraft in my previous compnay have had lightning strikes on the engines in the past month, two aircraft grounded due to u/s engines.
Power by the hour is good, compensated for the downtime of the aircraft and the engine is replaced at the lease companies expense.
Power by the hour is good, compensated for the downtime of the aircraft and the engine is replaced at the lease companies expense.
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Most PBH contract have "Act of God" limitations within them. Thus bird lightning strikes et al are excluded as they can not be reasonably insured against. Insured is of course the key work here...that's all that PBH is. The airline oprates the aircraft and the engine an pay an amount per hour to the owner/lessor. The hourly rate could include on wing maintenace/off wing maintenace and LLPs. The rate is negotiable!! What is key to PBH is that it flat rates the cost of operation of an aircraft engine per hour and or per cycle. For a start up operator it means that he is unlikely to take on a second hand aircraft and then suddenly get hit for a bill for $700KUS because his engine has cooked......the PBH reseves will/should cover the cost.
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PBTH Agreements, originally referred to engine lease/maintenance deals, but now is often used in reference to airframes, engines, components and support functions. Engine deals do not always involve leaseing in engines, quite often the operator will still own the engines, but pay a fixed cost per flying hour to the engine agency in lieu of any shop visit costs.
The principal of PBTH is very sound and is often beneficial to the smaller operators, who wish to reduce financial risks. However the crucial part is the detail of the deal and the organisation that the opertaor chooses to enter into the agreement with.
PBTH deals are often signed over two or more years, to acheive real financial benefit, and over that time the perfomance of the provider could vary. There's nothing worse than an airline with a grounded aircraft and no engine to install. Do you then expend countless resources suing the agency for breach of contract or purchase/lease your own engine. either way your going down finacial routes that you were trying to avoid.
The prinipal of PBTH is a sound one providing the contract is well constructed and the service provider is reputable.
I hope this and the other replies go some way to answering the question.
The principal of PBTH is very sound and is often beneficial to the smaller operators, who wish to reduce financial risks. However the crucial part is the detail of the deal and the organisation that the opertaor chooses to enter into the agreement with.
PBTH deals are often signed over two or more years, to acheive real financial benefit, and over that time the perfomance of the provider could vary. There's nothing worse than an airline with a grounded aircraft and no engine to install. Do you then expend countless resources suing the agency for breach of contract or purchase/lease your own engine. either way your going down finacial routes that you were trying to avoid.
The prinipal of PBTH is a sound one providing the contract is well constructed and the service provider is reputable.
I hope this and the other replies go some way to answering the question.
Cunning Artificer
Join Date: Jun 2001
Location: The spiritual home of DeHavilland
Age: 76
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We negotiated deals for a guaranteed maintenance cost per operating cycle for our engines with the engine manufacturers. We also negotiated guaranteed maintenance cost per flight hour for a number of other major components such as IDGs and hydraulic pumps. We are doing a deal on guaranteed cost per landing for carbon brakes; the deal will go through, we are still arguing about the price.
In these contracts the OEM guarantees a maximum maintenance cost per operating factor. If the cost in service exceeds the guarantee, the manufacturer swallows the excess. If he beats the deal price, he makes more profit. There is an off-balance sheet benefit to the airline - the incentive to beat the guarantee and make more profit induces the manufacturer to strive for higher reliability. Then the airline makes more profit and the pilots can claim a higher salary. See what we engineers do for you?
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Through difficulties to the cinema
In these contracts the OEM guarantees a maximum maintenance cost per operating factor. If the cost in service exceeds the guarantee, the manufacturer swallows the excess. If he beats the deal price, he makes more profit. There is an off-balance sheet benefit to the airline - the incentive to beat the guarantee and make more profit induces the manufacturer to strive for higher reliability. Then the airline makes more profit and the pilots can claim a higher salary. See what we engineers do for you?
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Through difficulties to the cinema
