Engine Overhaul: Plan, Manage

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Engine Overhaul Plan, Manage Control your
Cost Independent Specialists view on Engine
Management
March 20, 2007 Neil C. Henderson, Executive VP,
Marketing Sales
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CURRENT FUTURE SITUATION
225M
34M
2007
400M
60M
2010
3
CONTENTS

• Issue
• A major industry problem
• Overview CGTC
• Solution
• Plan
• Manage
• Control the cost
• Benefit
• Chromalloy value proposition

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Constant Decline of Airline Yields
THE ISSUE
Yield (US-Cent, 1990) / RPK
reducing unit cost is vital
Source ICAO Civil Aviation Statistics of the
World, expert estimation
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THE ISSUE
Increasing Engine Maintenance Cost
Cumulative Increase
Engine Spare Parts Price Escalation
Cost Driver
Engine Maintenance
Tickets
Source Bureau of Labor Statistics, ATA, OEM
Catalog list price, expert estimation
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THE ISSUE
Changing market with high MRO costs

• Fierce Competition Classic Airlines vs Low Cost
  Carriers
• Airline Market Increasingly cost
  driven
• Maintenance Major pressure to
  reduce costs

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CONTENTS

• Issue
• A major industry problem
• Overview -Chromalloy Gas Turbine Corp.
  (CGTC)
• Solution
• Plan
• Manage
• Control the cost
• Benefits
• Chromalloy value proposition

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CHROMALLOY GAS TURBINE CORPORATION

• 75 Years on the NYSE as Sequa Corporation
• Sequa 2.2B Sales in 2006
• Chromalloy is 1 growth business _at_ 50 of Sales
• Experience with Large Maintenance Programs-
  Parts Engines
• Highest Technology Capability Standards
• Total Engine Service Provider- All Large
  Commercial Engines APU types

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OVERVIEW CHROMALLOY
Chromalloy. . A Safety Conscious
Company Our record speaks for itself.
Safety is our Standard Operating Procedure
No Aircraft accident ever attributed to a
Chromalloy developed Repair No AD ever issued
against a Chromalloy Repair or Part in more than
50 years
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OVERVIEW CHROMALLOY
Chromalloy. . A Technology
Company Chromalloy has developed patented
technologies to enhance OEM manufacturing and
repair processes
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OVERVIEW CHROMALLOY
CGTC/OEM Joint Venture Companies

• Turbine Repair Technologies CGTC/RR
• repairs for RB211 and Trent turbine components
• Turbine Surface Technologies Limited CGTC/RR
  advanced coating facility for RR HPT turbine
  components
• Advanced Coating Technologies CGTC/PW
  advanced coating facility for PW HPT turbine
  components
• Turbine Airfoil Coating and Repair
  CGTC/Siemens repairs and coatings for advanced
  industrial turbine components

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OVERVIEW CGTC
Chromalloy Gas Turbine Corporation Areas of
Specialization
R-R
Stators,
Small
Burners, Cases,
Military
Services
OEM
GE CFMI
PW and IAE
Turbine
Turbine
Turbine
Compressors,
Engines
Castings,
and
Operations
Airfoils
Airfoils
Airfoils,

Frames,
Heavy
Airfoils
Composites
APU
Industrials
Seals, Shrouds
Chromalloy
Chromalloy
Chromalloy
Chromalloy
Chromalloy
Malichaud
Los Angeles
United
Power Services
Kelly
Engines
Chromalloy
Kingdom
Chromalloy
Chromalloy
Services
Chromalloy
Chromalloy
Chromalloy
Nevada
France
Oklahoma
Division
Israel
Connecticut
Casting
Chromalloy
Chromalloy
Heavy
Precision
Chromalloy
Chromalloy
Chromalloy
Thailand
Arizona
Industrial
Component
New York
Dallas
Florida
Chromalloy
Turbines
Technologies
Chromalloy
Chromalloy
Chromalloy
Southwest
Southwest
Georgia
Holland
Chromalloy
Chromalloy
Thailand
San Diego
Chromalloy
Thailand
Back to the presentation
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OVERVIEW CHROMALLOY
TST England TRT England Chromalloy United Kingdom
Chromalloy Locations
Chromalloy Tilburg Chromalloy Engine Management
(CEMS) Holland
Chromalloy Beijing
Chromalloy Engine Management (CEMS) Moscow
Chromalloy MSP (NWA)
Chromalloy Arizona Chromalloy Nevada
Chromalloy San Francisco (UAL) Chromalloy Los
Angeles Chromalloy San Diego Chromalloy
Southwest CGTC HQ San Antonio Chromalloy Engine
Management (CEMS) San Antonio Chromalloy
Component Services Chromalloy Power
Services Chromalloy Dallas Chromalloy Heavy Ind
Turbine TACR Dallas Chromalloy
Oklahoma Chromalloy Tulsa (AA)
Chromalloy Connecticut
TACR Berlin Chromalloy France
Malichaud
International Coating Services, Japan
Chromalloy Italy
Chromalloy New York TACR Middletown
Chromalloy Israel
Masaood John Brown U.A.E.
Chromalloy Castings
Chromalloy Thailand
Chromalloy Florida
CESG Singapore

Chromalloy Georgia
Chromalloy Australia
Chromalloy ATL (NWA)
Go to CGTC divisions
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OVERVIEW CHROMALLOY
Global Customer Partner OH Base
Finnair Volvo
GEAES LAI RRAES
AFI SRT KLM MTU LH Technik Transaero S7
Airlines Aerosvit JAT THY Avio SSB
All Nippon Airways Japan Airlines IHI JAL
Air Canada
Korean Airlines
American Airlines American International
Airways Continental Delta Air Lines Evergreen Fede
ral Express Northwest Airlines United
Airlines Honeywell General Electric
Alitalia Iberia Tap Air Portugal
AMECO China Airlines
EGAT Cathay Pacific MTU-Z GMF Asiana GE-Malaysia
PIA Air India China Northern Indian Airlines
Saudi Arabian Airlines
El Al IAI
Thai Airways St Aero
Transbrasil Varig Log GOL
Qantas
South African Airways
JTS
Aerolineas Argentinas
Air New Zealand
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CONTENTS

• Issue
• A major industry problem
• Overview CGTC
• Solution
• Plan
• Manage
• Control the cost
• Benefit
• Chromalloy value proposition

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CGTC Solution
How to Plan, Manage Control Engine Costs?
Chromalloy Engine Management Services
Traditional
C.E.M.S.

C-Engine Management Division
Engineering Management
Assembly, Disassembly, Test
C-Units PMA Repairs
Material Repair Management
Insourced OH Shop
Outsourced CGTC Units
Outsourced CGTC
Engine Shop Expertise/Capabilities
CGTC Expertise/Capabilities
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SOLUTION PLAN

• How many SVs will we have?
• - This month
• - This year
• - For each engine during the Lease
  Term
• How many Spares do we need?
• - Lease or Own
• What is our removal schedule?
• How much will the engine SV cost?
• - Do we have enough reserves?

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SOLUTION PLAN

• How many Spares do we need? (probability
  analysis)
• - 16 aircraft / 32 engines
• - Annual aircraft utilization 2500 hours
• - Shop Visit Rate 0.1 events/1000 flight
  hours
• - TAT 60 days
• - Forecasted shop visits per year
  0.1X32X2500/1000 8 SV
• - Average in process 8X60/3651.32
• - Recommended number of spares 4

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SOLUTION PLAN AND MANAGE
Having 4 engines available provides insurance,
but low
utilization of spare engines
low return of assets Is it possible
to have less than 4 spares
and to be covered? The right
Management will give you the positive answer
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SOLUTION What is the right MANAGEMENT?

• Engines removal forecasting and staggering
• Optimize your spare engines need over time
• On-Wing Monitoring
• Pick up the right time to remove the engine
• TAT
• Choose the right place to remove the engine
• Get the best TAT from your provider
• Workscoping
• Match your workscope with On-Wing goal
  expectation

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SOLUTION MANAGE
On-Wing Management
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SOLUTION MANAGE AND CONTROL THE COST
PBH or Time and Material?
TM Cost / FH
PBH Rate
Maintenance provider risk margin
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SOLUTION CONTROL THE COST

• Shops OEM, Airline, Independents
• Cost Variables
• Labor rates and mark-ups
• OHC parts inventories
• Engine work-scopes
• In-House capability
• Advanced repairs (DER)
• PMA parts
• Invoice system transparency and accuracy

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SOLUTION CONTROL THE COST
Traditional Shopvisit Cost Structure
Revised Shopvisit Cost Structure
Addition of DER Repairs And PMA Parts
Reduce Engine Parts Costs
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SOLUTION CONTROL THE COST

• Which savings are possible?

100
SV Cost
75
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CONTENTS

• Issue
• A major industry problem
• Overview CGTC
• Solution
• Plan
• Manage
• Control the cost
• Benefit
• Chromalloy Value Proposition

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CGTC VALUE PROPOSITION
6x Strategy
6x Strategy
Aftermarket Costs
Engine Costs
Engine Costs
years
Engine Purchases
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BENEFIT CHROMALLOY VALUE PROPOSITION

• Chromalloy Engine Management Services
• Engine Overhaul in the variety of partner shops
• Share the Engineering Services Resoponsibility
• Removal planning
• Cost Forecasting
• Workscope development to match the budget and
  on-wing expectations
• Technical consulting
• On-wing Condition monitoring
• Reliability guarantees
• Time Material -gt Not To Exceed -gt Fixed Price
  -gt PBH
• All risks included

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BENEFIT CHROMALLOY VALUE PROPOSITION
The money is in the Hot section. CFM and CF6
examples
All solutions above are FAA and EASA approved.
Reliability data available.
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BENEFIT CHROMALLOY VALUE PROPOSITION

• Chromalloy Russia
• Commercial, technical, engineering support
• Program management by customer for all engine
  types
• 24 / 7 / 365 availability

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CHROMALLOY - YOUR STRATEGIC PARTNER

• Total Engineering
• Engine Work-scoping
• Condition monitoring
• Advanced DERs PMAs
• Reliability guarantees

• Low Cost per Flight Hour
• Operational excellence / Performance Improvement
• Fleet Management Programs
• Risk coverage solutions

OPTIMUM COST MANAGEMENT

• Spare support
• Full time spare engines
• Short term leases
• Availability guarantees

• Customer Intimacy
• Individual Account Executive
• Chromalloy Moscow
• Extension of your Engineering Dept.

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VISIT US AT BOOTH 3
Thank You!
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HOW TO MANAGE
Removal staggering
Basic LLP run-out removal plan
Optimized removal plan