Leeham News and Analysis
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Leeham News and Analysis
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Aging Boeing 757 engines skew operating expenses
Jan. 8, 2015: Engines on the aging fleet of Boeing 757s are a key reason operating costs of this rather unique airplane are between 20% and 30% more than a Boeing 737-9 or an Airbus A321neo.
“The thing to worry about most for the 757 engines is the cost to overhaul,” says an industry official who trades in 757s. “The cost of producing life limited parts is crippling the marketplace.”
Total costs and the direct operating costs are being directly affect by the engine costs, the person says, who doesn’t want to be identified because of the sensitivity of the topic.
Overhaul costs by Pratt & Whitney and Rolls-Royce, whose engines power the 757, are considered very high because the two companies control the MRO market and parts.
“When we see $4.5m, $5m engine overhauls, something is wrong with this market place. It’s unsustainable,” the industry trader says. “Airlines don’t want to invest too much money on their wings in the form of high value engines.”
The maintenance programs by PW and RR are considered quite pricey, but third party MRO companies don’t have access to the parts inventory necessary to provide complete overhauls.
The 757 is predominately used by US carriers and a few in Europe. American, Delta, United airlines and US Airways use winglet-equipped 757s on long, thin trans-Atlantic routes. The field performance and range makes the airplane unique for some operations. Finding a “true” replacement for the 757 has been vexing Airbus and Boeing; the market is limited and doesn’t justify an entirely new airplane. The 737-9 and its predecessor, the 737-900ER, and the A321ceo and A321neo can’t match the range. The A321neoLR comes closest to becoming a true replacement, but it carries between 5-15 fewer passengers, depending on the airline’s configuration.
Airlines are retiring the 757s that don’t require the long range in favor of the less capable 737-900ER, MAX 9, A321ceo and A321neo which are nonetheless sufficient for most 757 operations. UBS, the investment bank, lists 163 757s with an average age of 23 years as stored last month, 15.5% of the total production run. A few have been lost in accidents.
It’s a background fight mainly between operators and mainly RR, that has a tight grip on the aftermarket.
757’s moved to longer flights reduces cycles. Cycles create MRO. High cycle /short range 757s are the first to be replaced.
Operators make it clear to RR that if costs become to high, they’ll park the aircraft & future business will go away.
A321s are taking over in the US (AA, DL, HA, B6, Republic) and UA (90 757s) is being discusses as we speak.
TRue but I hardly believe that RR is losing sleep or worried if operators park the aircraft that it’ll hurt their business. They sell engines and market parts, if the operators park the planes they’ll have to fill in the void with another aircraft type. It’s just business. Take it or leave it.
I wasn’t aware that UA was in talk with A for their 757’s? Where did you get this data from?
The article says 163 757s are stored. How many are still flying?
1,050 sold. A few lost to accidents. A few scrapped. Somewhere around 700-800.
It would be interesting for a NEO 757.
downside of course is high costs and a suitable engine.
It seems (very little research) that there is not any engines in this mid class betyween the single aisles and smaller twins.
Maybe convert to P&W as RR seems to have the worst reputation for predatory pricing.
And not I don’t think its a good idea. A decent return yes but don’t kill the market.
Keep in mind RR has ZERO presence on single aisles, anything that replaces the 757 is not going to be an RR product (PW, GE, IAE)
And with operators who want to or need to (FedEx-UPS) its not a good way to have a warm fuzzy relationship for future engine selections.
A third party proposed a GTF 757 and neither PW nor Boeing were interested.
I am suspect P&W is interested in supply engines, though caveat is they would large enough numbers, it would still bump them up a thrust class they don’t have currently for the GTF. Also I can seen them needing Boeing full efforts behind it not a third party.
Why BCA would not support it is????? All you can see is the gross result, not the reasoning or lack there of. I could see it simply being a logical decision as not being worth the effort (not large enough numbers) as well as the Chicago mafia simply maximizing short term profits vs long term health (let get ours now and the heck with the company long term).
My memory tells me there is only one really successful out of production re-engine program and that was the KC135s (and some of the variants) getting the CFM (note the AWACs has issues with the blade reflections and not a candidates though I think an updated engine in a P&W was proposed)
Oddly Boeing went with P&W engines on the 767 (and curious about that as I never saw the reasoning as to why not the GE?)
Oddly what low fuel prices do is extend the 757 and remove the need to come out with its replacement depending on the engines and who asks what for them for parts.
Are your sure RR is involved in predatory pricing TransWorld? I know they recognised years ago that offering a service and being able to help smooth cashflows for airlines rather than simply selling chunks of metal was the way forward and, by virtue of a more suitable cost allocation method, were then able to rear load earnings (ie charge less for engines up front, with more earnings coming from service contracts downstream) compared with GE & P&W. But I’ve never seen, or heard of, any complaints against them for predatory pricing and no prosecutions for it. Would be interested to hear about any cases you know of.
Also don’t understand why you believe “anything that replaces the 757 is not going to be an RR product (PW, GE, IAE)”. Clearly GE is very tight with Boeing and, I would guess, has significant leverage to gain sole source again on any 737/757 replacement there, but I don’t see any reason for RR not to be on the 320 replacement. What is your reasoning?
If you park a 757 now/ soon, no RR products on its replacements.
So a loss to RR.
Although it is no longer a shareholder, my understanding from RR/IAE/P&W statements at the time of the sale is that anything RR did before they would continue to do. So, I assume that RR is still very significantly on any IAE ceo sold/built (manufacturing parts and assembling half of engines produced), simply not as a shareholder of the company.
I did though read (perhaps incorrectly) TransWorld’s original comment as referring to the NSA/NST.
The reports says the RR is being predatory, I accept they are not lying. I don’t know if its all RR or PW and GE are as bad or something in between.
I know that AF/KLM combo had a major problem negotiating the maint on the A350 with RR as RR wanted to keep all the work in house.
And I am referring to current aircraft not future for the replacement options. Even with someone lighting a fire there will be no true 757 replacement even started until 2020 and it looks like 2025 at the earliest (and that assumes the first replacement is not the 737RS).
And if RR is as predatory as they appear, why would you select them and get all the grief when others are a lot more open to dealing reasonably ?
I am not saying they need to discount, but gouging leaves long bitter memories.
I haven’t seen any report of RR (or any engine OEM) engaging in predatory pricing and/or gouging. Maybe pricing the original chunks as loss leaders, but not the rest.
Even if they wanted to RR aren’t capable of using very low (ie predatory) pricing to drive GE or P&W out of the commercial aero engine business and there aren’t going to be any new engine design/manufacturing competitors starting up so no reason to consider very low prices against any such hypotheticals either. The issue I guessed you might be referring to is seeking sole source on the 330neo, but then GE leads the pack in this and I’m not aware of any cases raised since they started the practice many years ago. Downstream in MRO the issue is surely quite high, rather than very low predatory, prices for RR consumables, isn’t it? An outcome of their heavy bias to ‘product as a service’.
As for gouging, have there even been any supply shocks that have limited the supply of engine spare parts, let alone RR (or any other OEM) taking advantage of this by gouging? Again, I haven’t seen any report of this.
Everyone, except the airlines that use them for mid/long range flights, has an interest in seeing the 757’s disappear. P&W certainly doesn’t make much throwing out a hundred engines in an unsupported by Boeing re-engine program.
How many new Boeings rolled out the factory last year with new PW engines under the wings? Yeah, they don’t want to further jeopardize their prospects long term to improve on that. RR seems to not care too much, and GE sure won’t do anything on a Ba product without Ba’s blessing.
I was not referring to NSA and I don’t know if RR continues to make parts for the IAE program (you would think they would transfer that to internal partners once RR left, maybe someone can weight in that knows)
And yes P&W has to weigh how many 757s that would really be candidates for a new engine as well as the support of Boeing. Any program has to have guaranteed support and a third party without the staying power that Boeing would bring could leave P&W dangling with a very expensive engine with nothing to hang it on (i.e. total loss unless a 757RSA comes into being and then is it the right thrust levels for that?)
As PW, GE and RR all hung engines on the 757s, it would require 3 conversion packages.
Prime candidates you would think would be UPS and FedEx as they have 189 of the 200s.
Ironically, an NEO could leave you in the same boat without a competition engine being offered.
It makes for an interesting mix of issues that in the end no new engine for the 757s, A320 and 737s continue to take away the segments they can pick off and the rest live with what they are stuck with.
Fine aircraft with a diminishing future.
Transworld, as you conclude the 757 will not be reengined. The aircraft as a whole is date (OEW, systems, cabin, cockpit).
Your comment made me consider something else. What is the re-engine portential of current generation NB’s. E.g. 4000 A320s were delivered since 2004.
The NEO is optimized for the bigger heavier GTF and LEAP engines. What if the industry is asked to come up with a new engine/pylon optimized for retrofitting the 4000 A320s younger then 10 yrs?
Lighter/ smaller / less efficient engines then the NEO’s, but still say 10-12% better then the current CFM & AIE engines. Put on winglets, new interiors, spaceflex/more seats, maybe it is a good idea. And, the scale is there / remaining lifetime is there. Maybe RR can have a look , Advance technology with carbon fan, EIS 2020? PW, CFM would hate it. Maybe Airbus too..
“As PW, GE and RR all hung engines on the 757s, it would require 3 conversion packages.”
Nope. No GE’s on 757s.
RR participaton in IAE
From a RR press release when RR finalised the sale for their IAE stake to P&W.
“Rolls-Royce remains committed to IAE and its customers and continues to be an essential supplier, retaining responsibility for the manufacture of high-pressure compressors, fan blades and discs as well as the provision of engineering support and final assembly of 50 per cent of V2500 engines. ”
http://www.rolls-royce.com/news/press_releases/2012/120629_restructuring_iae.jsp
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