CFA: Steeper engine costs are the reality for 737 NG conversions [VIDEO]

During a roundtable panel discussion at the 8th annual Cargo Facts Asia symposium held last month in Shanghai, executives from AEI and Boeing discussed some of the factors contributing to steeper conversion costs for 737 NG conversions, compared to 737-300s and -400s.

According to panelists, the main contributor to steeper costs is engines. “The NG engines are three-times more expensive on a complete overhaul basis compared to a Classic Engine CFM56-3C1s,” said Bob Convey, SVP Sales & Marketing, AEI. “I’m not sure it’s justified either,” added Convey.

Alvey Pratt, Director, Boeing Converted Freighters & Complex Modifications, Boeing, agreed that engine cost was an issue with NG conversions. Pratt said Boeing is working with CFMI, the manufacturer of the CM56-7Bs that outfit the 737-700 and -800 NG variants, to bring “ total operating cost of that engine 15% lower than the Classics.”

Regardless of any potential cost reductions, Convey argued that the cost of a CFM56-7B will never fall to a level comparable to the -3C1s, mostly because of how passenger airlines are managing engines on the 737 NGs. “Airlines are running engines all the way down to no-time, which drives the engines into a complete shop overhaul.” With the previous generation of Classics, it was possible to find second-market engines with green-time left. Overhauls, however, will add an estimated US$5-6 million to the on-ramp cost. “That’s a big change, and a big amount of money for these guys – either a lessor, or an operator – to have to invest in that aircraft, and have to then carry on the books,” said Convey.

Check out highlights from the discussion below, which is part of a special video series sponsored by ATR.