CFS: Powering the next generation

This is the first of two pre-recorded on-demand sessions at this year’s virtual Cargo Facts Symposium, featuring speakers from Engine Lease Finance, GE, MTU Maintenance, Pratt & Whitney, and Rolls-Royce. See all our previous coverage of this year’s Symposium. A transcript is available below. This transcript has been generated by software and is being presented as is. Some transcription errors may remain. Jeff Lee Hello, and welcome to this cargo fats Symposium on demand session. I'm Jeff Lee, Associate Editor of cargo facts. And I'll be moderating this discussion, which focuses on the power plants enabling free to aircraft to take flight, both now and in the future. This panel will also take a look at how the crisis is impacting the availability of engines and components. I'm joined by executives from a range of engine companies and we basically have, you know, the major jet printer types all covered. And before we get into it, I just asked each of you to very briefly say who you are, what you do, and you know how it relates to free to aircraft, so perhaps we could start with you. Aileen Barton Sure. Thanks, Jeff, for having me. I'm looking forward to the panel discussion today. And my name is Alan Barton. And I am with Ge Ge aviation. And I'm in the services piece of the business as a marketing leader. They're particularly supporting our mature fleets on both the GE and the CFM side. And that directly relates to this industry because many of you know, many of the assets are not only purchases freighters, but also in the packs to freighter conversion. So really looking to speak today about our support of this industry and those assets. Thank you, Jeff Lee les. Les Cronin Hi, Jeff. Thanks for having me today. My name is les Cronin. I'm the Senior Director of Sales and Marketing for inter URL engines here in North America. And so I look after engine maintenance engine leasing, engine auto trading, and with a prime with a strong focus on the cargo markers at the moment and supporting our customers throughout and all the platforms that we maintain, and which have narrow body and wide body aircraft types. And so many thanks for having us and hosting this talk today. Jeff Lee Thank you, Larry. Larry Gray Hi. Thanks, Jeff, for having me. I am Larry gray. I work in Marketing at Pratt and Whitney. I'm Director of Marketing for mature engines. And that's the pw 2000 pW 4000. And now the V 2500. We're kind of putting it in mature it's midlife to mature. And the interest in this is Eileen has stated is there's an interest in passenger freighter conversion. So you know, I've been helping put together marketing material to work with customers, left soars operators on you know, educating them about the pw 2000 4000 and b 2500. fleet and as well as services and we've been working on developing services specifically for particle operator needs. So thanks again. Jeff Lee Right, Justin? Justin Phelan Oh, Jeff, thank you for having me. My name is Justin feeling I'm Vice President of Marketing at Angeles finance. I'm engineers finance is the largest the world's largest independent aircraft engine lessor. And we have more than 300 engines in our portfolio. And we support about 70 customers worldwide. And from time to time we support a cargo freighter America. And also we, of course, all our customers have cargo belly fresh. So I'm delighted to be part of this discussion today. Thank you. Jeff Lee Thanks. And Jamie. Jamie Sismey everyone. My name is Jamie says me regional marketing executive for the Americas region for Rolls Royce. Thanks again, Jeff, for having me on today. It's the first time that I've participated in cargo facts. I'm really looking forward to to a couple of days sessions. It's the first time I think we've participated in a session as well as Rolls Royce. We've got a lot of exposure in the freighter market in the US in particular with Rb 211 powered five, three, rb 207, five sevens. And more recently, we've seen a lot of activity around a 330 PTF with five aircraft now and service, but we forecast that to really pick up in the next few years. So I look forward to the discussion today. Great. Jeff Lee So I'll just start off with, you know, what's happening in the market today in the past. You know, in the past six months we've we've seen we've actually bought now thousands of aircraft, both narrowbodies and widebodies being flown on cargo and the mission And that has given many carriers, much more exposure to the cargo market than ever before. With respect to your organization's How have you adapted to, to this kind of aviation environment that we find ourselves in now, from a business standpoint? quality? Aileen Barton Yeah, sure I can start, I would say our biggest challenges have really been planning for a range of outcomes associated with this event. We've taken steps as you know, within our MRO capacity to align it, as many have done with demand, reducing first soft capacity, and trying to minimize reductions in the heart capacity throughout that open MRO network for engines. So and the other thing we've learned is from past events, such as 911, or SARS, etc, is that demand for services usually comes back faster than the capacity because many of the MRO elements such as LLP, etc, those of that material is a long lead time materials. So if it isn't planned, it's hard to respond to a quick, a quick demand. And so what we're looking for really, in asking all of the attendees and the customers here is a close working relationship, because we don't necessarily, you know, we know green time is being used, we know, they're managing their fleets trying to conserve cash. But really looking at until we get the request for service, we don't really know, know, all of those plans. So working with that, and we've introduced a couple of products, slot assurance and material surance. And that's really trying to get at in this six to 1824 month timeframe as the recovery happens to really look at closer planning on that material and service work to make sure that the that there isn't that lag in the response to the demand. Jeff Lee Jamie? Jamie Sismey That's Sure. So I mean, clearly like like the whole industry, we've we've had to adjust to what has been pretty acute shock to the industry. For Rolls Royce, we're a company that's largely makes us revenue from power by our remains. And so it's been particularly challenging. So the actions we've been we've been taking basically have been kind of focused on like sizing the business and reducing cost and strengthening our liquidity in terms of kind of the free side of things as well. Even though kind of utilization is down we're doing a lot of work with with owners and customers managing the short term crisis, as well as looking at kind of the medium term long term where where fleets are kind of Fleet decisions are coming into it. One example of kind of our agility and trying to respond to this has been the expansion of our service portfolio with to offer a little bit more flexibility. So we now offer a service called select care repair. For those customers that want to manage restoration and overhaul maintenance separately. So this kind of provides unplanned maintenance covering dollar brands and flying our service. So this is just one example of how we've kind of tried to adapt over the last last few months to the changing environment. Jeff Lee And Justin, what about from the lessor side? Justin Phelan Yeah, sure. So look, I suppose First of all, I'd say this pandemic has been, you know, been unprecedented in terms of the effects and the industry and effects are likely to last for some time. But overall, I think in the longer time horizon, we see this, as you know, just this decision has been a short term, temporary situation, and it'll be short run overall. But how we've adapted, I suppose, is really trying to support our customers. And that's it without customers, we don't have a future. And right from the get go back in February and March, we seen the onset of the pandemic starting and traveling from, you know, westwards, we've had about 81% of our customers seeking deferrals or some sort of assistance and support. So internally, we've set up a special COVID team and multidisciplinary team between legal finance technical and commercial people to try and adequately address you know, being extra flexible and trying to be to adapt and give solutions really, really quickly to our customers and help them to survive. And that's a two way street. So some of our customers have the ability to pay and we're asking them to pay and others do need certain flexibility from time to time. But overall, it's worked out really, really well and we believe that we've been extremely flexible with our customers and that is appreciated in the long run. So, I think Yeah, in in adapting to this, we've certainly as an organization become increasingly, you know, ever more flexible in terms of in terms of working with customers. And that's, that's I say how we have adapted. Jeff Lee And less. Les Cronin Yeah. So from our standpoint, at the moment, we've, we've adjusted, let's say, like GE, for example, we just did our induction clothes coming true. And also a project portfolio, where we've seen increased demand, for example, on to fix engine induction, for example, and also prop 2000s. We've also seen an increase on some CFM ns auctions, as well. However, the work scope levels are a little bit different from what we were previously see, they're not coming in for straight performance restoration, and coming in for surgical strikes. And, you know, we're addressing those items concerns when we've we've been nimble enough to adjust the actual flow lines to, to demand that's coming in, where we've seen less demand, for example, on V 2500, induction coming true. And we've seen increased demand on to succeed in 2019. And coming through during the pandemic periods. And we've also been flexible with our customers in terms of listening to what their needs are, and being able to adjust to their needs. And whether that's on premises or whether that's on, you know, the type of art skills that they want, and how long do they want to use engine platforming. And we've been doing basically listening to adjusting accordingly. So we've been pretty flexible in our approach here in the Cova. Period. And it's, it's been very helpful. And so far, we've we've strengthened a lot of customer base wedges over that period, particularly on the Congress side. Jeff Lee Okay, Larry? Larry Gray Yeah, I mean, you know, when this first started, I enabled lock downs. And we've been working with our customers. First we I mean, we're trying to plan is there's going to be a short time of that as a long term. So we are looking at different scenarios, I think, like everyone mentioned here on the panel. And initially, it was customers coming in, you know, seeking revisions to payment terms, and we're getting working with our customers being to adapting be even more flexible, and before to accommodate and try to get through this period. But now is we got, okay, six months into this, we start to see things turning to more of a restructuring, right? We see an airline saying, okay, there's going to be a longer time and you certainly see airlines planning, okay, they'll be much smaller coming out of this. And, you know, they're deferring maintenance, retiring some of the older fleet. And so we have to adapt to that. And in some cases, those airplanes are becoming available for parallel conversions. Right. And so we benefit of building flexible solutions, customized solutions, especially under the 2500 as the H 321. starts to enter into the market here. And then we've seen some recent announcements, right on 767. It's becoming more available. And so we've been working together to develop customized solutions, working on flexibility, flexible arrangements with customers, and really try to accommodate and help them get through this period. Jeff Lee Yeah, speaking of a retirement of passenger friends, what, what kind of positive effects Do you see on greens and engines and use this material? Because of all these passenger friends being retired? And less, perhaps you can start us off? Les Cronin Yeah. So if you're lucky, if you're talking about customer planning to solve on green time on your engine, you're looking to transition into the trader market. That's what our audience is here for today, is basically on the car fixes. And I think the market is pretty tight still, and obviously, of screen time. And I think, particularly on the demand for the 767 airframes has been pretty high and will continue to be high. And if you look at the induction flows into conversion, for example. And I think there's a backlog for 18 months on the sudden six, seven conversion, but the moment and that will continue. And I think it will continue to get longer in the 18 months, I think we're probably looking down to probably 2024 by the time you see a Peter option that's a an induction for 767 conversions on the flavor of the month. It's between six and engine type on the CSE on the seven six aircraft type. And we're also seeing a little bit of an uptick to seven triple sevens and some of those airplanes are being returned from mainline fleet, one carrier in the US Not the triple seven tree, for example. And we've already seen so many transcript regards the triple seven conversions. And then continuing on with those airplanes once are converted into traitors. So we've already started discussions on leatherworkers, g 19. And one 110s, on the 115, for the 300, and also for the 200 by four and and then on the seven, five, the plateau. And we're not seeing much in the way of any much entrance with regard to additional time on us. And we're seeing some 757 traders actually being grounded, and I think it was three or four grounded during tecovas. outbreak. And and we've we've approached those airframes themselves and actually leaves those engines by counter supporting owner operators. And in terms of those, prop 2000, Darwin sold onto them. And then on the 777 800 plus one, for example is the FM and also if you look into trade 21, which is increasing in interest as well at the moment, and which I believe is the game changer for the future. And we'll be going back to the 737 800 for example. And again, there's a lot of them in converters, and what I'm what we're seeing in the marketplace those moments later and or question and say where it was 2000 to 2000 pole vintage airplanes, and but we're coming into conversion now that their bodies have decreased by 15 to 20% on the values of those airplanes, now the cargo operators, and they're looking at more younger airframes cored out which maybe you know, 2016 inches 2000 make sense which Conan's conversion was kind of a trade off because the economics work. So again, we're adjusting to that. And at the moment and then on the tree 21. Again, the evaluation on airframes, there's been a lot more feedstock is going to be available on them for FY 2500 on finding cars, and which is interesting as well. And we've been watching those markets very, very closely on opportunities are coming up from them. And building and tailoring build specs to suit as well. And don't market in particular. Jeff Lee Okay. Justin, what are your thoughts? You know, from, from your perspective? Justin Phelan Yeah, look, largely I agree with a lot of lessons said I mean, they're supposed to be on the wide body engine type. We were not in the short term space in terms of the engines that we leased the the platform thousand to six hours around pretty much long term lease. So we don't have any, so we're not really active there. But what I would say I think, overall, the overall effect that we would see is we would see younger feeds coming into that mat into the narrowbody. Market circulators, 737, and enji and 321. We certainly see price points are being viable now for freighters. When in the past, they might not have been so you'll see younger feedstock feeding in there. And likewise, the same we've had discussions in the past about typical traditional freighter operators are looking for, you know, maybe legacy engines and older type engines with maybe shorter build or stubby build engines. And we see that changing now. So they'll be able to engage and come to more modern equipment. And so that's the key piece, I would see what I would have to believe given the unprecedented nature of what's happening in the past year market across the board for all aircraft and engine types that we've certainly seen more feedstock in terms of service material feeding into the market, across the board, and that'll certainly have a downward pressure on pricing. I think we see some staffing and use of materials, right across the board. Jeff Lee Okay. And Jamie, you know, particularly with the state 330s and 757, we've actually still we're still seeing interest in 757 conversions. And, you know, a whole batch of them were acquired recently, and you know, at least some of them will be converted into phrases. So, what are your thoughts? Jamie Sismey Yeah, I mean, clearly, COVID-19 has accelerated some some kind of trends that we're already seeing with retirement of some aircraft, and a change in aircraft values as well. And like you mentioned, we've seen, we've recognized for some time that we're approaching this kind of ECOSOC, economic sweet spot for the 330s. And as I mentioned before, we've got Rolls Royce powers into essence service already with DHL. And you do have to think in terms of kind of agreement time availability question, we think that will also have an effect. These engines won't provide the full time on window, so they may need to kind of overhaul themselves in the future. And then just to comment on usable service or material. Generally, we've got quite a young fleet from a Rolls Royce perspective. So overall, if you look across a wide body fleet, it's it's just nine years old, on average. And so we haven't yet seen kind of widespread interest for a couple of reasons. Firstly, the age As I mentioned, some, some aircraft are kind of not at that age yet, but in terms of Fleet size as well on some of the other airport. So I turned 520 to kind of new to leadership moment to generate widespread, usable service material. But we do we do start to see the trend, particularly on the trend 700 powering the ac 30s. We've got to TNM shop visits sanitary tech, we expect expect this to kind of develop further. Jeff Lee Okay, Larry? Yeah, what's your thoughts? Larry Gray Yeah, I mean, I think going into this year, we thought we might see a small uptick in a 330 conversions. But with the advent of COVID, making more aircraft available for conversion rate to 767 centers or supply of Seven, six sevens entering the market for conversions, probably pushing the 330 L. I got a year, maybe two years, there's been like three a 330 300 converted with power with DHL. So you're starting to see on the narrowbody side, the a 321. Right, the first flight first introduction to service going to be with the quanis air freight, Australian Air post coming up here next week. So yeah, you're starting to see an uptick there. But yeah, I guess the availability of the Seven, six sevens is changing. And on a seven foot 757 side, our fleet there's one major fleet with Delta, and that they were going to be probably waiting originally waiting for an AMA from Boeing, which may not happen, looks like it probably is not going to happen. So they'll probably continue to operate the seventh serve and for a while and insanely united, right? They they bought the 321 XLR. So I don't see too many more power. So if I service maybe one z two Z's coming out here, you know, maybe middle of the decade when the Delta fleet, if it starts to come out, then will they still be of a vintage that you want convert to free? There might be a gay 321 is looked promising. It's gonna be the next closest airplane and capacity to the 7.7. Jeff Lee Can you give us an idea as to you know, how much the prices of parts and materials have actually fallen in the past six months? Aileen Barton I mean, oh, sorry, I, I didn't hear it it cut out. I apologize. I didn't know you were asking me sorry for that. So I would say really, pricing follows supply and demand dynamics as always. So there's always competition from USM and green time. With with or without the pandemic, what we have seen is, of course, there's some some models of engines where we've seen some part outs, and some additional supplies of us material. But I would say for the freighters, particularly the ADC, we've seen demand. And we've also seen even though some say seven, four sevens with the one F's have been retired, those assets were maybe upgraded to be six F to go into supporting 767 freighter service. So we haven't necessarily seen a huge increase in the assets available. So that's really kind of balanced itself. But what what we have seen is a little bit in pricing violence, of volatility and misalignment between some sellers and buyers in terms of asset value. So if the asset value is still fairly high, but the market might not really there, we're kind of waiting for those two things to match up and align. So I, I would say there's always an appetite for a low cost of ownership. And that's tied from the engine performance to the whole service servicing of that asset. And I think, again, it's really dependent on the supply and demand factors and the event and having that material available is critical to support Yeah. Jeff Lee Justin, just a person can speak to the prices as well and lease rates for you know, the various types that produce our freighters. Justin Phelan Yeah, sure. So, obviously, we have an oversupply in the market now certainly in our bread and butter, which is the narrow body you know, These and five E's and V 20 $500. Obviously, be relevant for the Fred American, the narrowbody Fred America. So I would say we probably seen least read adoptions in line with the aircraft, I think that's probably on the order of 2% or so something like that. And then as more and more aircraft or you know, on some storage to actually be retired and those accelerated retirements, receive donating number of engines so there's definitely a softening in the market in that piece. And it's probably in line with the aircraft lease rates are right now. Les Cronin With Can I add one thing just on the materials, I agree with Jamie and what she said And with regard to the CF 680s in particular is that But what we also have is a unique unique situation at the moment where people were buying on the high priced pre COVID and as a result are holding back on the asset now because the values are too low for multi purchase. So the availability of turned on engine has actually become less and during COVID until the value start recovering because I think what a lot of people are doing Angel fund maybe your markets are down for holding that back on so they know the market recovers if they can afford the home and there are some engines are getting out there for teardown but there's very few So COVID has been washed the market for the supply users and material gsts and I think people are trying to be patient and wait wait this is a little bit longer to see if they can get get at least similar returns to what they got pre COVID back on the Africa but they have and I'm going to fix it in particular is one acid where conversions have been one so I've been retired. But they've been converted into the 6am which Jamie have already said. And in addition to that, anything that that there is moans in terms of material we haven't seen any reduction in material prices and on users material that's moment Have you actually seen some items increase in users and material because of shortage of supply and because of new inspection and come out on them for example which supply greater Justin Phelan sorry, Jeff just just another another item that we wish we would have concerned about in terms of us service material is that we're probably starting to see some inventory now coming to America for some operators as well as maybe distressed or maybe looking for extra liquidity and I guess this actually impacts both the new parents and potentially somebody who's serviceable. So it remains to be seen as we go through the winter how much of that inventory comes to market in search of liquidity, but it will be a concern that we will be keeping an eye on as well as we go forward. But I agree with Liz we haven't really looked at price points for for for ages going for paradigms or even for big material sales and in the use of material. There's a lot of being held back we just don't have the data or the price points right now to see Is there enough trading going on right now? Jeff Lee Yeah, Jeff. There's Yeah, I was gonna say there's kind of an interesting balance between you know, releasing material and engines you know, to get some liquidity like Justin said or you know, operators actually holding on to these two I've swapped them in for you know, onto other aircraft or just holding them back for when when they believe that the market will recover. Larry Gray Yeah, Jeff, I just like to agree with what lesson Justin said because we haven't seen it either. I mean, looking at the these operators, they don't want to take a loss right they don't want to scrap all value for the meantime engine and so they're just holding on which we haven't seen any movement in that market and and the only Indigo advanced indicator I could see is okay, if you go back six months, you haven't seen a whole lot of sale leaseback on airplanes and also in the last month you're starting to see a pickup on sale leaseback so you just wonder Okay, now things are starting to move in the market. What will happen in the next six months? Is airlines tried to weather out the Kobe crisis here? Justin Phelan And that's the million dollar question. Right? I think, you know, we need a backstop here, whether it's a vaccine or an improved therapeutic or whatever, the the virus will somehow burn itself out, need to see improved flying hours to stabilize the fleet and get, you know, get the passenger side back up and running. Otherwise, we, you know, I've seen a different dynamic play out in terms of retirements and accelerated, you know, Jeff Lee I mean, did you want to add anything to that? Aileen Barton No, I mean, that's what we we've seen my original example with the seven four sevens coming out of passenger service. And those engines just is less said we're seeing the B one F's, some of them parted out, but others are really being converted into the B six F, the higher thrust To support the 767. So and so we also across all of the engines, we haven't seen what you would say a glut of engines being sold for part out, it's all gets back to the residual value in the book value for those assets. So completely agree. Jeff Lee Jamie wants to ask about your Do you have a new, a strengthened partnership with EF? w often the ASP 30s? What? What does that actually mean? And you know, what is what will be the effect of that on them? Will that entice some sort of the ap 30 operators to either release the Rolls Royce engines or that actually entice new operators to, to maybe think more seriously about? ap 30? conversions? Jamie Sismey Yeah, I mean, so like I said, Before, I think we we see there's a, there's a big opportunity with a 332 F's over the next 1020 years. And given kind of market share position of the Rolls Royce 700 engines, roughly about two thirds of the market share on the 1500 or so, a 30s that are out there just makes sense for us to collaborate with a conversion house, whether that sales, whether that's marketing, all the way through to kind of in service support. So it's kind of a proactive approach to the support potential and existing customers all the way through that kind of value stream. And we're kind of at the start of the journey there. So we're still we're still working on exactly what the details look like. But really, we're kind of aiming to get kind of an enhanced customer experience, in a similar fashion to what we have with with the airframe operators of Boeing and Airbus, for example. So we hope to share a bit more information on that on that and a case study perhaps sometime soon. Jeff Lee Because the the trends powers and many of the younger age be 30 frames, whereas on the would be slightly older friends, that either G or crap, Howard barrier 19. Perhaps, you know, is there room for some kind of partnership then at 30? specifically? Particularly as you know, the older frames might seem more attractive for certain version of says, Larry Gray I really want to go first. Aileen Barton Yeah, I can't go. I was just gonna say that. We're always looking for those type of partnerships. I mean, currently, our understanding from some conversations we've had is that, you know, the asset price is still about, I think, in the 10 ish 10 plus million dollars, higher than what the economics are for the conversion business case. And of course, that you know, that value can vary some But until that gets gets to the, where the business case can close. We don't see a big switch from the 767. And there's I think over over 200 plus airframes still in conversion, so but as we continue out in time, it the focus will most likely shift to the a 330. So we do work with the conversion houses and try to make evident our assets and and introduce them to our engines on those airframes, so that when these conversion opportunities come, they really understand the life cycle. And the engine performance as it would shift from say passenger service integrates. Larry Gray Yeah, in a similar fashion, we've reached out to conversion houses to talk about, you know, whether it's 767 or a 330 or even a 321. Just to talk to them, educate them about Pratt Nighy engine, let them know, the product benefits are where maybe some of the feedstock might be in and we do have set a regular dialogue with them and also work with less horse because you know, high percentage of the fleet is leased. So when it gets returned to the less horses less horses are going to be looking for Okay, what do I do with this asset? When I get it back? Do I replace a passenger? Do I look at cargo conversion. So as they start to away through that investment and looking economics, an engine engine is a big piece of that at the time of conversion, you know, doesn't need maintenance or not and you know, likely Green time has been managed down. So we want to be able to work with those parties. The coverage analysis analyst soars. Now, we haven't necessarily tied up with any of them, but we keep the working relationship with them. And we're always open to opportunities there. Jeff Lee I'm Justin, what do you think? Your as the lessor in the picture? Do you need more partnerships like that? Either between less laws and engine manufacturers or less laws and the conversion companies? Justin Phelan Yeah, absolutely, I actually think there's an opportunity here for that soars in the mean to actually partner with some of the conversion houses, because in the past, we've seen the price point for certain engines. Now respect, man has been quite high, you know, cargo operators, freighters have been very price sensitive. Whereas now we maybe have an oversupply of a lot at certain amount of engines, then price points have come down quite a bit bought terms and outright purchases, and also in terms of lease rates. So it presents itself as a perfect opportunity for more or less chores to team up at some of these conversion houses. And we've had discussion certainly in the past, and I think it's, it's not necessarily about looking for the right vintage now for the right cycle life and an engineer, it potentially opens itself up because the price point is potentially changed in the current market, right, so that we could actually, you could look at commercial, you could actually make an offer a compelling offer, maybe to weed operators to to do a tournament barn type program, whereby you replace the engine after your life has been run out. So you could do that on a lease basis or obviously, on sale basis, as well. So, yeah, look, I think that economics has changed right now. And I think that there's lots of it's quite compelling are could be quite compelling for a lot of players, and certainly for conversion houses to look at this and for to team up with lessors. Jeff Lee As well, your thoughts on this? Les Cronin Yeah, so we were actually in the process of developing a product or moment where we provide power, and we only rent power to, or we will finance the actual conversion of the aircraft, and treat the acquisition with the power and then provide the power back once the aircraft comes out of conversion. And that's the product we've developed most recently, and we're talking to all the conversion about us. And, and it's an interesting product, and were basically to conversion become some timelines trading engines. And and make the whole economics even better for the for the airline who's taking the aircraft or the last or, for that matter who takes the airplane. The only issue is the securitization of the assets. And at the end, and we're working through those issues at the moment. But it's an interesting concept at the moment that we're developing. And I think there's, there's a lot of merit to that going forward. And where we were, we have been serving cargo operators for many, many, many years, and large and small and so we have an appetite to continue with that. And we've seen even the benefits of serving these cargo operators during times like is where a husband and a welcome relief that we have a diverse portfolio where we have partners we have business and we also have cargo business and we have lots of business as well. And so having a diverse portfolio on her MRO side has allowed us to keep keep all shops functioning at full capacity during this period which is fantastic for us. So you know, we see from a cargo perspective, strategically It is important for us to continue with it and to continue partnering with Chicago industry in providing solutions which are unique Jeff Lee Eileen, I just wanted to touch on the 767 actually Eileen and Mary with as the number of CF sixes with you know reasonable green time decreases is there an opportunity for operators with the Pratt powered seven six sevens? Larry perhaps you can start Larry Gray Yeah, so so there's three big fleets of prep power you got you got the Delta flee united flee and Air Canada rouge flee. Right. And I think there's been announcements where the Air Canada rouge please is being marketed. Delta has made the announcement that they're over the next five years. They're gonna retire the 767 both the brat energy power. So I think there's opportunities there for those airplanes to enter the market now. Most of the 767 fleet and cargo service is G powered, I think Nine, I think a count of two this morning. There's 976 sevens have been converted with the 4000. And we often get the question why why is there not more 1460 power in the marketplace, I think it's just how the fleet is come out. I think the passenger operators, the United adult has been very happy with the reliability of the 94 inch engine. And over time, I think you'll see it in I think Atlas air as three of the airplanes and, and a StG as another two or three. And from what I heard from those operators, they're very happy with the performance of the 4000. So I think over time, you'll see more opportunities and plus, the production freighter is GE exclusive. So you know, maybe that has some influence on operators out there that want to have commonality. So Margie, but yeah, look at the prep power, when it comes out is is very comparable to the CF six, make a very good prayer Jeff Lee on the tanker is powered, Larry Gray and the tanker is prep power. We're gonna be supporting the 4000 for a long time. Right, and so the tanker. So the military, I mean, they've made a choice. So, you know, we convinced them. That's a very good, reliable product. And so the production goes up through 2027, I think and they're gonna be flying that for probably 40 years or more. And so we'll be there supporting the fleet for a long time. Jeff Lee Yeah, so there's, I guess that kind of plays into, you know, the overall support for for that engine, even for potential freighter operators. I mean, yeah. Aileen Barton Yeah, I was just gonna say I mean, both both airframes have, or the airframe has both engines on it. But the 767 with the ADC engines have been the predominant ones either in because of the exclusivity for the freighter or in the conversions. And right now, there's over 200 airplanes in a sweet spot for conversion. And our customers have been very satisfied with the ATC with its performance, again, having the right thrust for this mission and operation, as well as time on wing and the overall lifecycle costs for the engine and availability to get that serviced on a not to you know, so that there's no that the engine is not hampering or interfering with either either the conversion process or the in service operations. So we see this as a very optimistic and vital market going. Larry Gray Jeff, one thing I forgot to mention is, you know, the 94 inch, like you call 94 inches Peters and 94 inch fan on under 4000. Just a nickname that I have, we all have for the engine. It's even though it looks like it's new to the cargo industry, cargo free operators on the 767 is in the marketplace, on a 300 m d 11. It's the exact same engine, a 310 roll, there's not that many three times out there, and 747. So if you look at the our 94 inch fleet 55% of it is serving of the of the 94 inch fleet is in cargo service. So So serving the cargo markets, not new to us, it's just hasn't been a proportionate on the 767 or see if six islands fleet is much bigger. But we do have a substantial representation with that engine on other platforms. Jeff Lee Let's get we're gonna say something. Les Cronin Yeah, Jeff, I think one of the attractions on if we're talking about 767, in particular with the ABC on us, and the ABC two is that it's got an open network. And so you have plenty of choice with regard to serviceability of that network, or serviceability of that engine type out there. And and it leads to a competitive environment. And which leads to a lower cost of ownership for the operators themselves. And I think, you know, where the 40,000 smolder network on this, and the cost of ownership is higher than the result because you don't have as much aftermarket competition for us, whether its users and materials or whether it's even the the MRO side of the business as well. So I think that's what really attract some of the cargo operators who thought, particularly when they select in any airframe is how open is the network to them. And what is the competitive play out there in the network Am I single source, and you can use the example and maybe some of the roads, engines for example. There's also with images in terms of where you can get some service. So the more open the network, the more competitors the network, the lower the cost of ownership is for the operators. And particularly as these projects mature in age, and you're looking for a lower cost of ownership, because cargo operators calculate on a cost per cycle basis, not on the cost per hour basis, in terms of calculation, and that's what we consider all the time. And then it goes down to Calvin's. So it's an interesting play. Yeah. Jeff Lee I mean, overall, how have you all adjusted your your expectations and, and your forecasts of, of freight operations? You know, in terms of overhauls, shop visits and parts, etc. Is it going to be easier or harder to find llps for for potential deals with free to operators in the future? I'm Justin. Justin Phelan So I think again, it's probably going to see it for free for operators. On the narrowbody piece, I think there's going to be no issue with supply. I think certainly, those engines are coming onto the market. In terms of accelerated retirements, I think they will feed up they will find our way and eventually there will be once shelf is a start going I think we're looking at if you look at the narrowbody America right now looking at 50 to 60% reduction in a narrow body sight and sharp Is this what we're predicting this year? And that'll play out for for a while. Yeah, the next year, and thereafter, it'll start to pick up again. So I think in terms of materials apply for that, and llps on on that piece of this. I think that should do you should see no issue in terms of material on the wide body side. I think, you know, we I wouldn't have great visibility on that night, certainly open it up to my colleagues here would have a better idea in terms of the wide body, we wouldn't be as involved in the wide body type. Jeff Lee Jamie indistinctly with the a 330. And you know, on continued retirements of seven, five sevens. Jamie Sismey Yeah, so I guess walls is kind of adjusted its planning in a couple of ways. So as we've kind of been talking about we've, we've seen a 30 kind of moving starting to make some moves from from passenger operators into into the freight sector. And COVID, we think we'll we'll kind of accelerate that move. It may not be that visible yet. But it will be over the next year or so. I think one thing that's very different for us as cargo tends to have a lower annual hours of utilization. So we need to kind of adapt to that. We're kind of closely managing our forecasting activity, to make sure that our spare parts and our MRO capacity is there to support support customers. And that includes obviously the freighter customers, in terms of kind of the NLP availability we're working with, with our carrier customers to address that concerns, we're having a lot of discussions, we're listening a lot to those to that perspective. And we're trying to give him some certainty that they can get the best deal. Jeff Lee I mean, have the the requirements from the free topics has changed? In light of, you know, compared to last year, utilization has been, you know, substantially higher? And how does that affect the requirements that they're putting on, on you? Jamie Sismey I'm so sorry, I guess from from our perspective, we kind of take a longer term view, but we do see that there will be kind of a push for more sustainable, sustainable cargo, aviation, and an environmental aspect to that, which I think will will, over time gonna push out the older fleet types that we've been talking about. And that's kind of where fleets like the 330 and the 321, that we've been talking about what kind of come in another aspect to that is kind of capability. So, so additional capability and capacity of the 321 and the 330. Well, it should should be able to fit fit those capability requirements. Our focus is clearly on the HP 30 in the trunk 700. As I said, we are working with the Fw on that, listening to to the requirements of the operators. Jeff Lee I mean, just speak about some, you know, the forecast for the future for retail operations and, you know, the how you're supporting them in the future. Aileen Barton Yeah, and I would say for our assets, I mean, we have our GE Aviation materials business that's been in place for many years and they are actively looking For us, as as we mentioned before, there have been some 747 retirements and because that business, you know, actively acquires the assets, we're also prioritizing some that support freight operators directly because they have, you know, the highest utilization. And so really prioritizing those shoppers is prioritizing that whole repair cycle, to ensure that, you know, there's green time assets available to support their needs, as well as if if it's a happens to be a heavier shop visit that that slot is available with the material needed for it. So that's how, you know, before it was alignment between all operators, and there's still a mix, but we're seeing, you know, predominantly a, you know, what a more steady flow for for freight, and we're really prioritizing the material associated with that. Jeff Lee I did want to ask you was about the 747 debates, you know, with that ending in two years time, what's, what's the was fate of the the GE annex to be engine? Yeah. Aileen Barton Well, I mean, GE Aviation, of course, is aligned with Boeing on its 747 dash eight production schedule. And then, you know, just like Boeing, we would support the G nx to be engine operators well into the future. I mean, we've demonstrated that with many other engine programs, the CF six, for example, in all its variants, that's 50 years since first, or sorry, 49 years since his first introduction, so and those assets are still being supported. So we would do the same with the G NX and the G annex one B and two B share a lot of commonality. And so those those engines will be continued to be supported well into the future. Jeff Lee Let's, perhaps you can talk about the, as we look ahead to the triple seven 300 era conversion program. I know you're working with that in mind. Very much in mind, actually. Les Cronin Yeah, so we're, we're actively involved both in the 200. I'm also in the 300, your program at the moment. So we've been active in teardown of engines at the moment, I think we've turned them six engines, so far, g 90, and one 110 115, and four spares in order to give a lower cost of ownership to operators, and our contractor customers, both existing and new. And we're also looking with the freighter operation to sales or decider Ops, and where we're tailoring packages specifically to meet our needs. And because you know, the trade offs on those airplanes, we're seeing operation somewhere ranging between six to one up to 10, to one. And for the photo ops ops moments on those airplanes were consuming 50 cycles a month is typical at the moment. And what we're actually seeing during COVID is that utilization on those airplanes, is running at about somewhere in the region, about 500 hours per month, which is incredible, when you think that there's only 720 hours and a whole month. So these airplanes are hardly on the ground at any moment in time. And I'm on the air on the ground or quickly back in here. And so we've been supporting our customers both in the field and supporting them. And, you know, surgical strikes, let's say in the field and keeping those airplanes operational. And we've also extended in some instances, particularly we're coming into peak season with thanksgiving, and also a Christmas around the corner. And those airplanes themselves. We've also agreed that, you know, some engines are coming out of the shop, for example. And we'll pack them up onto the peak season's over. And, and what we'll do is we'll let you continue with our elite power plants on wing. So we don't disrupt the operations during those peak periods, or to ramp up to peak. And so we've been completely flexible with the operators themselves and finding solutions to keep them operating as efficiently and effectively as possible. And also minimizing any any downtime for the airplanes currently. And and then we're also forward looking and given them for securing materials even today for tomorrow. And we're looking ahead probably about eight years for the for the market homes and securing an LP material in particular. And it's important to see it come forward Jeff Lee says Does anyone have anything They want to add, we are coming down to the end of the time that we have for this. But does anyone have anything to add? Larry Gray Yeah, I just like to add, you know, so me, I think everyone's said this on the panel, we're all working closely with our cargo operators, understanding their needs, listening to what they need going forward. You know, they don't want to have a engine LIFE OF 20,000 CYCLES, right? So you kind of customize it to their needs to fit their needs, keep manage the economics, and we've been working on developing programs, especially with the a 321, starting to enter market. So we've been really focusing on the solutions for that freighter, and then we're going to apply them across the board to others. And so again, it's really customized service solutions really focus in each one can be customized. The operator will choose from a menu of options in really understanding the economics at time of conversion to try to help them manage manage out and make an affordable solution for the free upper industry going forward. Jeff Lee What do you think will be the, you know, the rough proportion of 8321 conversions between the two different engine types? Larry Gray Yes, give me I mean, I don't have my crystal balls any better than anyone else on this panel. But if I just look at the passenger market, right, if you look there on the a 321, the has the larger share. So the passenger airlines had slept, I think it's on the order of 60%. So if it comes out in that type of fashion, to what the past, if it simulates what the passenger market is, you might be on that water. Again, it's going to depend on operator specifics, looking at the economics and everything, everything's going to be kind of unique. But if you wanted a starting point, you know, look to the passenger market. Aileen Barton And, and, Jeff, the only thing I would add to that is I think, you know, it's still a few years in the future. But I think it'll be driven by which engine better serves the operators in the freight markets. So with the CFM engine, obviously, we we try to make sure that the performance balanced with the total cost of ownership and an open MRO network, again, all those things figure into the total equation for the choice. And we've worked to position the CFM engine to you know, to serve that market. Justin Phelan So if I could just. Yeah, just in terms, I think on the RV, unjustifiably in the tree 21 I think that we've seen in the past year side at least is one is a lower fuel burn on stays on wing longer than the other but overall in terms of cost, I think pretty much balanced themselves out. And Larry is right, of course to divvy has been the preferred choice in the tree 21 passenger space. And I think that's probably because a hot air force in terms of payload. And the tree, the 25 turkey tree has certainly been the one that they've chosen mostly, what when you look at the that narrowbody space and tree 21 is it going to serve the e commerce parts of America or is it going to be more high density, I would suggest that unless for certain operators, certain freight operators where they have a bespoke operation where the reach max payload, it may be just a balance split between the five V and V 2500 to V 2500 advantage may not be deployed fully. If it's for truly ecommerce. Now, then again, if it's for high density cargo, and you happen to be operating out of a hot and high airport, potentially the V offers more advantage. But I would suggest that's one of the few and far between i saw i would predict with my crystal ball that is the 5050 split. Les Cronin That he wants to be one to one a different perspective on the two and just basically another consideration for the V over to CFM. For example, it's time to stage four engine where the CFM is only a stage tree and engine. So for night operations, except for the newer generation being the be or the tech insertion engines, which are the chevron, Chevron them, exalt nobles on them. But they're the later versions and they're not coming to the cargo market. Yes. But the V 2500. If you're looking at night operations and the V 2500 sukhwinder. airplane, and for that mission, and in addition to that, and dependent quite likely. So depending on whether it goes into e commerce or you're talking about the general phrase, and certainly you'll see a time that's probably a more favorable engine for the e commerce and both the V 2500 has better power and better range of power too. And there's a lot more successful at the higher end Trust levels when you need and can operate up to 33 k, where the modified B is only 30. k. So it's going to be an interesting play, but the majority of the feedstock that came into the tree 21, please, is the power and probably will be the chosen one port. Jeff Lee Yeah, well, there's also a couple of 8020 conversion programs in the pipeline. So that will be interesting to watch, too. Um, well, I, we, we could sit here and talk for least half an animal, but unfortunately, we can't. So thank you, all of you for your time and your insight, and I look forward to catching up with with all of you in person sooner rather than later. And thank you to our attendees for watching. Don't forget that you can rewatch all the recordings of all of this is sessions, whether live or on demand in the schedule section of the event platform. And you're also encouraged to network with your fellow attendees through the platform. So I hope you enjoy our content at cago facts symposium, and I hope you find this a fruitful event. Thank you.

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