Guaranteed Maintenance Plans 101

 

I drive my Honda Odyssey about 25,000 miles per year. I’ve done the maintenance on schedule and save for brakes and tires, that is all that it has needed these past few years. No unscheduled maintenance! That’s why I like my Honda. 

Unlike my Honda, aircraft have some very complex systems. Those systems cost far more than my Honda, and an unscheduled event outside of warranty can be costly. Even the scheduled maintenance can be expensive, especially for things such as C-Checks, 12-year inspections and of course, the engine overhaul. 

Turbine airplane manufacturers and one third-party company have tried to take some of the pain away from the maintenance budget and offer some peace of mind with Guaranteed Maintenance Programs (GMP). Here is a primer on these plans.

What are they? As the generic name suggests, these plans are a way to contractually guarantee your maintenance costs. You pay an hourly accrual fee to the plan vendor. That money goes into a reserve account. When maintenance is due, the plan vendor pays for the maintenance. Costs are guaranteed with no major spikes for costly inspections and overhauls. The resale value of the aircraft is enhanced by the dollars accrued in the program, by the guarantee of cost coverage, and by the quality maintenance records these programs require of the operator. 

Along with the financial stability these plans offer, many financial institutions are looking for these programs to secure the value of the aircraft under a loan or lease, especially for the engine coverage.

The history of these plans has its start in the airline industry. When making huge fleet purchases, the deal was sweetened by the engine manufacturers when they offered guarantees on engine costs in order to secure the selection of their engine. Today each major turbine engine manufacturer has some sort of GMP for their engine

In addition to the large turbine engine companies, many of the business airplane manufacturers and Jet Support Services, Inc (JSSI), an independent company, provide these GMP. JSSI is the only major third-party provider of turbine GMP for business aviation.  The engine companies cover their respective engines. The airframe manufacturers cover their airframes and several of the major avionic manufacturers cover their avionics. JSSI covers turbine engines, APUs, and also has programs for many of the newer airplanes’ airframes and avionics.

These companies have an extensive staff of trained maintenance professionals who work with you and the maintenance providers in order to secure both a competitive price and to make sure the vendor does the job in the best possible manner. 

What kinds of maintenance are covered?  These plans tend to cover the scheduled and unscheduled maintenance (except negligence).These plans can cover the engines, the airframe, avionics, or a combination of all three. The most popular seem to be the engine plans (also called power by the hour (C) by Rolls-Royce). Most turbine engines are covered by a GMP for the engine, either by the manufacturer or by JSSI. 

Engine plans typically include parts and labor. Optional coverage can include rental engines.  Airframe plans typically cover the airframe parts. Labor coverage is rare. Part of that may be due to operators having their own in-house maintenance staff. Tracking in-house labor required under a guaranteed plan may not be feasible.  The part coverages are much like the engines covering scheduled and unscheduled part replacement. 

Avionic coverages may or may not be included in the airframe programs. They can get very specific depending on what avionics are installed. 

The GMP can sometimes be tailored to the operator’s specific needs. For example, if the operator is leasing a plane for five years, they may be able to get airframe/avionics coverage for the five year term plus reserves for the engines. 

Best when new! These programs are available on most popular turbine business planes and on some helicopters as well. They are offered at reduced rates to new aircraft buyers. Part of this is to encourage participation, part is due to the warranty coverage of new aircraft, and part is when accruing for maintenance, costs are lower for  younger aircraft. Aircraft buyers are encouraged to sign up early by the reduced rates for new aircraft/engines. Operators of older aircraft/engines can buy into the program, but often at a substantial cost if the aircraft or engines have accumulated many hours. 

Financial professionals love these programs as they offer a stable, predictable cost for maintenance. They’d rather pay $500 per hour for every hour flown than face a half-million dollar maintenance bill every couple years. They also like the insurance against unscheduled maintenance. 

GMP aren’t for everyone. Operators of older aircraft that are not on a program may not be able to afford the buy-in. For them, the engines can be covered if they sign up at engine overhaul, but they still may face a higher expense as they accrue for the higher cost of the second or third overhaul. Fleet operators with significant in-house maintenance may feel they can manage their fleet for a lower average costs. And some operators would rather keep their money until the expense occurs rather than let the GMP provider accrue the money in advance. 

A GMP can add value and provide peace of mind to the aircraft owner. They warrant careful consideration, especially for the new aircraft buyer.