Ownership cutback
Today, 85% of people in the USA travel to work by car, but ownership of cars peaked in 2001 and has been declining ever since. In the past decade, US cities have seen the rise of an alternative way of accessing cars: car-sharing services. Zipcar, one of the pioneers in car sharing, has successfully monetized the trend away from ownership.
There is a similar trend away from ownership of aircraft spare engines. Airlines are increasingly reluctant to tie up large sums of capital in what is a low utilization asset. Also modern engines, thanks to new monitoring and diagnostic technologies, quickly mature to follow a predictable maintenance pattern. In this context, the engine leasing industry is ripe for innovation. Is the future Zip-aero-engines?
Match capacity, reduce cost
Ideally, airlines only want spare engines on a just-in-time basis to cover engine maintenance events. However, the providers of spare engines need to have predictable and high asset utilization in order to earn a return from their investment. The optimal solution generally adopted is for airlines to secure a base load of engines on a long term dedicated basis, either owned or on long-term lease, and then to source incremental needs through short term leases.
If airlines and service providers worked closer together by sharing data on coverage requirements and were able to more efficiently match available capacity to the underlying need, then costs could be reduced. Also, other industry transition costs related to the preparation and transmission of manual technical documents need to be addressed through greater digitisation. Finally, for a new Zip-aero-engine business model to work, airlines will need to complete lease returns so that the next user is not affected. Zipcar has created a community feel among its users, to the extent that users go to great efforts to ensure other users are not inconvenienced.
Partnership is crucial
It is likely that we will first see Zip-aero-engine innovation on narrow-body engine types, such as the V2500-A5 and CFM56, due to the large number of potential users, the lower cost of assets and ease of transportation between users.
It will be the spare engine providers that can work in close partnership with customers that will be in the best position to introduce innovations to the market as they can better understand needs and work closely with customers to refine new services. The Zip-aero-engine business is not here yet but customers will benefit from this model in the future.