What Does Power-By-The-Hour and engine maintenance programs Mean In Aviation?
Engine maintenance programs or Power by The Hour were invented due to the low dispatch reliability of classic turbine fan jet engines. The Rolls Royce Viper, Lycoming ALF-502, Garrett 731 series of engines had massive catastrophic losses and low dispatch reliability. These programs were the manufacturer's way of offering a quasi-warranty. While not truly a warranty that most consumers are accustomed to but probably closer in relationship to a term life insurance policy. The reason being the programs all rely on the same methodology. The owner pays an agreed-to hourly rate for each hour flown for a period, most likely five years. The owner essentially writes a check every month for hours flown. This concept has basically stayed the same for the last 40 years. There are several companies today that offer coverage for older engines, and of course, every manufacturer has their own as well. Programs are now available for piston aircraft, and several helicopter manufacturers offer a PBH (Power by The Hour) program as well.
The major difference between the programs of the ’80s and today is that, for the most part, there are no bad engines. The hot starts, over temping, and catastrophic events that coined the nickname Garrett “Grenade” are a thing of the past. That is not to say engines don’t suffer from unscheduled events. If or when it occurs, the cost of repairs from a self-insurance standpoint is mind-boggling. While there are a number of programs for every type of engine, there are also programs for avionics and airframes. These airframe programs integrate the engine coverage into a much more sophisticated approach to managing the aircraft's future maintenance expenses.
So, what are the major advantages that programs offer over self-insuring? Keep reading to find out.
7 Benefits Of Power-By-The-Hour Aircraft Maintenance Programs
Before you get hung up on the costs of enrolling in a program, it’s essential to know that aircraft maintenance and repairs are unavoidable. A program would help mitigate certain routine inspections to ensure your aircraft is airworthy. So while you may be placing money upfront and shelling out a portion of your expenses directly to the PBH company itself, it’s worth it in the long run. As anyone who has owned an aircraft will tell you, "It's pay now or pay later."
1. Minimize Financial Risk
Lenders love programs and may require them on your aircraft loan. It makes sense if there is a repossession or default; the lender knows the money for the engines or airframe was set aside to pay for future events. While most owners will never experience an expensive unscheduled event, should it happen and your aircraft is not enrolled in a program, you may be facing dire straits. I have seen aircraft liquidated due to the lack of funding to repair them.
2. Lower The Need For Surprise Fixes & Fees
If you operate a corporate aircraft, then you will appreciate the fact that you won't be begging forgiveness from your comptroller due to unexpected aircraft expenses. In fact, a major advantage to enrolling in a program is a simple fact you know exactly what your annual budget will be, and this should make sleeping at night much easier. Flight schools, fractional companies, management companies, and many other operators rely on this one key advantage every day.
3. Service Bulletins and Airworthiness Directives
Have you ever been the recipient of a mandatory AD notice?
Did you know that most programs provide this coverage? Many owners and operators are unaware of how big an impact a surprise mandated directive can have on your operating budget and financial strength. While it's not very common, it does still happen, and you can lean on the PBH company to absorb the costs, as well as help get the aircraft scheduled for the repairs.
4. Add Value To Your Aircraft
With a PBH program, repairs and maintenance are pre-paid because any money you place into the program is set aside specifically for your aircraft. Prepaying maintenance increases the value substantially; in fact, an aircraft enrolled on a 100% program with no deferrals and no pro-rated future expenses will be valued as if the aircraft has ZERO time on its engines. The longer the aircraft is enrolled, the more value the program adds.
Furthermore, an aircraft enrolled in a PBH program is more valuable than the same year, make, and model of one that isn’t. So whenever you’re ready to sell, you’re more likely to receive the most for your money when listing it in the competitive market of aircraft sales.
5. Have An Advocate On Your Side
Owning an aging aircraft can be challenging, as the costs to repair will continue to increase as they are subject to inflation, cost of goods and labor, as well as the size of your aircraft fleet. Aircraft will depreciate over time, making the relationship to repairs and maintenance inverted. In other words, many older business jets' maintenance costs will exceed the value of the aircraft or its parts. I like to think of a program as a director of maintenance, a person commonly used in corporate flight departments to oversee the management of the aircraft. But did you know most programs today not only offer to troubleshoot but all sorts of help when it comes to sourcing parts or a mechanic?
7. Just-In-Case May Be Covered
Joining a PBH program won’t guarantee that everything will be covered, such as FOD. However, for the most part, programs today are a no-brainer approach to guaranteeing your aircraft has the highest value and a pedigree to match when it comes time to resell it. Some surprises are better left out of aircraft ownership, and maintenance programs truly make the ownership experience better.
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