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Life cycle cost analysis and prognosis model in the aviation industry

B. Denkenaa, M. Eikttera, P. Blmela, R. Schneiderb, S. Khowwigkaib


Institute of Production Engineering and Machine Tools, Hanover, Germany b MTU Aero Engines GmbH, Munich, Germany

Abstract The Life Cycle Costing (LCC) procedure of the engine manufacturer MTU Aero Engines GmbH (MTU) lends itself well to continue to lower the costs of purchasing and operating engines. This procedure allows MTU to estimate qualified statements to its customers regarding anticipated costs per engine flying hour. Based on this, a life cycle costing procedure was developed for the MTR390-2C jet engine through a collaborative effort between MTU and the Institute of Production Engineering and Machine Tools (IFW). This procedure enables a prognosis of costs associated with operating this engine type during its 30-year utilisation phase in the German Tiger combat helicopter. Since the engine's need for spare parts represents a significant factor in determining life cycle costs and is not known in advance, it was necessary to develop a procedure to forecast spare parts requirements. A sensitivity analysis tool was also developed, which can be used to investigate the effects of prognostic uncertainties associated with the essential influencing factors identified by the collaborative project on the entire life cycle cost prognosis. Keywords: Life Cycle Costing (LCC), Spare part prognosis, Aero engine

1. Introduction Airlines, aircraft manufacturers and their suppliers have been affected in equal measure by the worldwide economic downturn. For this reason, they have been forced to cut costs and to enhance the efficiency of their processes in order to survive on the market [1]. MTU Aero Engines GmbH (MTU), which develops, produces and repairs the MTR-390-2C helicopter jet engine for the Tiger combat helicopter as part of the MTU Turbomeca Rolls-Royce GmbH (MTR) consortium, has also been affected by these developments. The efficient and cost-effective deployment of spare parts throughout an engine's life cycle is a quality feature which differentiates a company from the competition, improving customer loyalty and thereby fortifying the company's market position in the long term [2]. Since repair costs usually constitute the greatest share of life cycle costs on a value basis during the entire life cycle of an investment asset [3], a spare parts prognosis tool (ET Tool) as well as a life cycle costing tool (LCC Tool) have been developed by MTU and IFW within six months in

order to be able to determine all relevant costs for life cycle costing within the utilisation phase (ET is an abbreviation for Ersatzteil which means spare part). The ET Tool and LCC Tool will be used in Program military MTR section (AMMI). Moreover the ET Tool will be adopted by the Tornado section by MTU in the near future.

2. Life Cycle Costing Life Cycle Costing (LCC) is a type of cost calculation that uses a holistic perspective to determine all the costs that will accrue to a product during its life cycle [4]. LCC can be used as part of a cost management mechanism throughout the product life cycle. The basic concept behind life cycle costs (LCC) was initially developed in the 1930s, primarily for large military projects, and was later applied to buildings and then to investment assets in machine and plant engineering. The goal was always to take into account the ever growing share of follow-up costs in addition to

procurement costs. This gives the user the ability to make comparisons among various alternatives with reference to total costs [5]. LCC is based on the knowledge that an investment asset gives rise to costs not only upon procurement, but throughout its entire life cycle, up to the point of divestment [6]. Figure 1 shows the factors that have a significant influence on the emergence of life cycle costs, according to Tnshoff. In particular, these are the input costs during the utilisation phase associated with personnel, material, energy and other resources needed for operation, deployment and repair. In addition, in the reuse phase, costs associated with adaptation, disassembly or disposal arise [7].
Deployment Use Reuse Disposal Logistical support Maintenance

Parts production Testing, acceptance Assembly, belt work Mech. production Work preparation Engineering Method planning Time

Start-up Manufacturer's initial costs Input costs Personnel Material Energy

Shut-down Other operating costs, maintenance, modernisation, disposal, recycling

Fig. 1. Factors that influence life cycle costing.

3. Spare part prognosis The spare part requirements associated with repairing the engine that emerge during the utilisation phase have a significant influence on the life cycle costs of a helicopter jet engine. In order to determine the life cycle costs for the engines, a spare parts prognosis was thus developed in advance, subject to MTU's standardized repair concept presented below, which subdivides potential malfunctions into defined groups. 3.1 Potential engine malfunction Malfunctions that occur can be subdivided into foreseeable and unforeseeable failures (Figure 2). Foreseeable failures The determination of foreseeable failures is dependent on the utilisation period approved by the manufacturer, the reliability of the component and the mean time between confirmed damage (MTBCD), as well as on

primary malfunctions. Primary malfunctions A primary malfunction is damage that leads to the replacement of a component. Unforeseeable failures Unforeseeable failures are failures that are not related to the reliability of the component, but to external influences. These unforeseeable failures are subdivided into the following: Secondary malfunction A secondary malfunction consists of module damage caused by a primary malfunction. Subsequent malfunction A subsequent malfunction (subsequent damage) is module damage that arises in the course of disassembly and is not related to a primary or secondary malfunction. Such a malfunction may arise e.g. due to the carelessness of mechanics during maintenance. FOD malfunction Foreign Object Damage (FOD) consists of damages caused by foreign objects such as birds, rocks or sand. Corrosion malfunction Corrosion is the reaction of a metallic material to its environment causing a measurable change to the material, which may lead to compromised component functionality or compromised functionality of the entire engine.
Primary malfunctions Secondary malfunctions Power unit Corrosion malfunctions Repair


FOD malfunct ions Consequential damages

FOD: Foreign Object Damage

Fig. 2. Distinguishing component malfunctions.

Malfunction matrices are used to aid in the mathematical differentiation of forecast malfunctions, and can be used to determine the reliability of the engine and the modules. In so doing, the primary malfunction matrix is multiplied by the percentage of the secondary malfunction matrix, yielding a secondary malfunction matrix rate. The subsequent malfunction, FOD and corrosion malfunction matrices are also multiplied by the primary malfunction matrix. All the

malfunction matrix rates are then summed. The value so determined indicates the reliability of the engine and the modules, and thus represents an essential piece of information for the spare part prognosis for the engine and modules. A low value represents high engine and module reliability according to the given flight programme plan. 3.2 Repair concept for the MTR390-2C jet engine at MTU The MTU repair concept divides engines into the three basic modules: the gear unit, compressor and power turbine (Figure 3). The spare parts required for module failures can be grouped into repairable parts and non-repairable parts. The repair concept for the MTR390-2C engine at MTU is subdivided into three Maintenance Levels (ML); see Figure 3.
Engine replacement

Maintenance Level 3 (ML3) is what is referred to as deep maintenance, and is defined by work on the modules at MTU. Performing such maintenance work at MTU presupposes availability of the required materials and spare parts for each module from the participating turbine builders MTU, Turbomeca (TM) and Rolls-Royce (RR). The repair divisions of MTU, TM and RR are responsible for procuring spare parts and tools themselves. All the spare parts that can be ordered for the MTR390-2C engine are saved in a spare parts database (Initial Provisioning List database) at MTU so that their availability can be queried directly.

3.3 Software support for spare part prognosis For efficient processing of existing data, Microsoft Excel and Visual Basic for Applications were used to develop the ET Tool spare part prognosis tool. This allows users to quickly generate a spare parts prognosis for the MTR390-2C engine. The ET Tool imports all spare part information from the spare part database and calculates the probable required order quantities for the MTR390-2C engine according to the various maintenance levels for repair needs over the next 30 years. This data is based on many years of crossdisciplinary experience and knowledge with respect to the durability of the individual MTU engine components. The ET Tool informs users how many engines and modules will likely have to be replaced as a function of the flight programme plan containing the number of flight hours. It also calculates which and how many spare parts for the associated modules will be needed for repair, and within what time frame. This allows the probable order dates to be forecast for the spare parts in the three maintenance levels, and thus provides for prompt procurement. The ET Tool consists of a total of 30 Microsoft Excel tabs on which the necessary information is stored. Based on this data, the calculations can be called up, and automatic analysis can be started. If information needed for the analysis is missing, the ET Tool informs the user and visualises the area of missing information. The ET Tool delivers the spare part prognosis result with the current component variants based on the mount position of the engine components.







Breakdown into modules Module1 Module2 Module3 Gear unit Compressor PT




Spare part

e.g. oil filter

e.g. gasket for intermediate case

e.g. blades, shaft

TM: Turbomeca, MTU: MTU Aero Engines, RR: Rolls-Royce, PT: Power Turbine, ML: Maintenance Level

Fig. 3. Repair concept for the MTR390-2C engine.

Maintenance Level 1 (ML1) refers to the maintenance of the assembled helicopter engine at the customer site without disassembly into its three modules. Typical spare parts for this maintenance level include gaskets and filters for the accessories. Maintenance Level 2 (ML2) refers to maintenance performed on the disassembled engine at the customer's repair shop. In so doing the modules are separated from each other, but are not disassembled in themselves. Typical spare parts within this maintenance level are e.g. gaskets and screws for the modules' intermediate cases.

machine, calculated from the start of development to decommissioning. They are based on the costs associated with the development, procurement and utilisation phases. 4.1 Calculating life cycle costs The significant influence factors identified in the collaborative project by MTU and IFW and used in the LCC Tool, as well as their general meanings, are explained below: Engine development Developing the engine. In-service development Engine development, and the verification and set-up of logistical support for the service life. Fuel, oil and lubrication Fuel, oil and lubrication for the engine. Maintenance Maintenance requirements are divided into work and materials for maintenance levels 1, 2 and 3. Sustained support investment Continuous logistical support including safety stocks for spare parts in order to be able to handle unforeseeable spare part demand, as well as special tools for repair at the customer site. Sustained in-service support Ongoing logistical support for the duration of the service life. Inventory management Inventory management is subdivided into warehouse management for components, warehouse maintenance and component distribution. Sustained transport, packing and insurance Sustained transport (incl. packaging and insurance) from MTU to the customer or vice-versa, as well as between industrial repair companies. Life limit The approved service life of a component. 4.2 Software support for life cycle cost prognosis The Life Cycle Costing Tool (LCC Tool), like the spare part prognosis tool, was programmed using Microsoft Excel and Visual Basic for Applications. Users can use the LCC Tool to quickly calculate costs per engine flying hour for the MTR390-2C engine

Fig. 4. Overview of the spare part prognosis tool.

The spare part prognosis tool (ET Tool) has the following functions (Figure 4): Info Point Querying all basic data in the ET Tool Analyse function Checking the basic data for completeness and consistency Component viewpoint Sorting of components by module and the various maintenance levels PCD viewpoint Sorting of components by manufacturer and the various maintenance levels EFH calculation Calculation of engine flying hours, module and engine failures Spare part quantity prognosis function Prediction of the number of defective or worn components Spare part cost prognosis function Prediction of the costs associated with defective or worn components

4. Life cycle cost prognosis Depending on the application (military or civilian), different methods are used to determine aircraft costs [8]: Direct Operating Cost (DOC) for civilian airliner (euros/kilometre) Total Operating Cost (TOC) or cost of ownership for civilian aircraft (euros/flying hours) Life Cycle Cost (LCC) for military aircraft (euros/flying hours) With reference to Weissbacher, the LCC concept as used by MTU is defined as follows [8]: All costs for a

during its service life. There is also a sensitivity analysis for determining the effects of uncertainties in the individual components of the LCC factors on the total cost per flying hour. Users can use this tool to determine the sensitivity of the significant influencing variables of the LCC Tool. Figure 5 shows the costs per engine flying hour as well as the sensitivity analysis and its influencing variables. The data which forms the basis of this representation was modified by the authors based on existing confidentiality agreements. The Flying Hours Costs bar graph shows the absolute costs of each LCC factor. The pie chart below it represents the LCC factor costs as percentages. Since the costs of maintenance factors usually represent the largest share of life cycle costs throughout the life cycle of an investment asset on a value basis, special attention is paid to the maintenance costs. The LCC Tool's sensitivity analysis functions have two modes: In Standard mode the result of the forecast costs is represented without the user being able to influence the result (without sensitivity analysis). In Variable mode the result of the forecast costs is represented and the user is able to influence the result (with sensitivity analysis). This integrated sensitivity analysis can be used to take into account the effects of changes to individual influencing factors, such that, for instance, the fuel, oil and lubrication factor can be modified to reflect rising or sinking oil prices when generating a quotation. The user can use scroll bars to change the percentages of the individual factors directly and observe their how they are influenced. The various graphs for Variable and Standard mode can be used to compare settings made in Variable mode with those in the Standard mode. This provides an overview of absolute changes to the costs of the various factors. In addition, portfolio analysis is integrated into the LCC Tool, which differentiates between indirect and direct costs and classifies them according to significance. The indirect costs correspond to the fixed costs that are incurred independently of air traffic, and the direct costs correspond to the variable costs incurred exclusively by air traffic (e.g. kerosene costs).

Flying Hours Costs

Sensitivity analysis

Influence factors

0% 10% 20% 30% 40% 50%



Influence factors

ML 1-3




In service Development Sustained Support Investment Maintenance ML1/2 Labour Maintenance ML1/2 Material


Fuel, Oil and Lubrication Sustained In-Service Support Maintenance ML3 Labour Maintenance ML3 Material

Fig. 5. Cost and sensitivity analysis (data modified)

5. Summary The procedure developed as well as the tool allow the costs per engine flying hour to be calculated at MTU for the MTR390-2C engine for the military MTR repair programme, and for spare parts requirements to be forecast. In order to be able to determine uncertainties within the cost calculation, the life cycle cost tool enables a sensitivity analysis to be performed. In so doing, the life cycle costing database generates a spare part prognosis system that has also been developed and integrated, which exports current information regarding material costs and their durability from existing databases, calculates them, and prepares them for analysis. This allows for a transparent and traceable spare parts prognosis with little expenditure of money and time, as well as a greater degree of precision. The result delivered by the LCC Tool is the cost per flying hour during the utilisation phase of the MTR390-2C engine; at the same time, the tool provides an overview of the percentage influence exerted by the various LCC factors on the result. In order to be able to calculate the costs per engine flying hour dynamically, a sensitivity analysis was integrated, available in two variants in the LCC Tool. The LCC Tool contains extensive analytical functions allowing copious information to be processed securely and efficiently.

Acknowledgments The results presented here were arrived at in the course of the project Integrative Factory, Technology and Product Roadmapping based on a Holistic Influence and Evaluation Model (DE 447/43-1) sponsored by the DFG (German Research Association), and in the course of the project Machine State-Based Availability Services for High-Capacity Manufacturing Facilities (Make-it) (02PG2040) sponsored by the BMBF (Federal Ministry for Education and Research). IFW is a member of the Network of Excellence for Innovative Production Machines and Systems (I*PROMS).

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