When Maintenance and Retrofit Costs Exceed Value…

Typically, the higher the value of the asset the more willing an owner is to make a major capital expenditure (i.e., G550 EVS to SVS). However, as aircraft age and approach 20/30 year maintenance requirements, values diminish and owners begin to weigh their options. After all, an aircraft is built with a life cycle and time limited components, or in other words ‘a piece of metal with an expiration date stamped on it’. Avionics and equipment, on the other hand, will typically reach a point of economic obsolescence.

By way of example, when we consider an early Challenger 601 with an airframe inspection interval every 60 months (GIV – 72 months; Falcons – 6 years), the average cost of the first [5 year] inspection was $75,000. When factoring the average utility of 450 hours per year and considering the engines have a 3000 hour [major] inspection interval, the first [midlife] inspection would come due in the 6th year at an average cost of $700,000. Further, considering an acquisition cost of $13M, the maintenance costs pale in comparison. However, as we increase time in service, scheduled inspection costs rise proportionately. The second 60 month/120 month airframe, including gear overhaul, averages $650,000. As well, downtime increases with each [major] subsequent event. Whereas the first 60 month may incur 10 days downtime, the 4th may require 8–12 weeks.

The 2nd engine midlife inspection would occur at 9000 hours and average $1,200,000 +/-. Overhauls, which are a scheduled event every 6000 hours, would cost [on average] $2,000,000 for the first run and $2,500,000+ for the 2nd overhaul.

Note: Regardless of the aircraft make/model (Gulfstream, Falcon, Lear, et al), similar cost and downtime scenarios apply.

There exist various avionics retrofits for most older aircraft and certainly just as many looming on the horizon in an R&D or certification phase. For example, there is a retrofit [coming] available for the GV that would replace the SPZ 8500 series Cathode Ray Tube (CRT) displays with LCDs, the final cost of which is yet to be determined. However, the question becomes what are the benefits (lighter weight, less power requirements, greater capability, et al) vs. cost, as opposed to the return on capital expenditure.

The Falcon 2000 (Pro Line 4) CRT displays can be replaced with Pro Line 21, which offers 4 LCDs and includes the Integrated Flight Information System (IFIS) with electronic charts, XM weather (including lightning data, satellite images and winds aloft) and enhanced navigation maps. The open source design of the system allows accommodating the upcoming ADS-B and data link mandates. The retrofit can also upgrade the FMS, enabling Wide Area Augmentation System (WAAS) GPS Localizer Performance. The Collins Pro Line 21 retrofit for the Falcon 2000 starts at approximately $1M, whereas a full upgrade, including autopilot, radar, radios and IFIS can run $2.3 million +/-.

Although there are benefits for incorporating the latest avionics, the return on expenditure can be elusive. There are older aircraft where retrofits seem to make sense due to the older cockpits becoming costly to support (economic obsolescence), but maintenance and corrosion issues can make it even more difficult for ongoing support (i.e., difficultly in procuring parts, increased downtime and costs for inspections…).

As aging aircraft and avionics issues (ability to add WAAS, ADS-B…) become more prevalent, owners can experience increased costs for airframe and engine maintenance; greater market time at resale, increased downtime and higher pre-purchase inspection costs. All of this occurs while the debate lingers, what is the return on capital expenditure?