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VOP Series Package C update
At our 2017 Full Year results on 7 March 2018 we outlined our management of certain VOP Series engine in-service issues and the estimated costs relating to our implementation of the solutions to address those issues.
As part of our ongoing inspection and testing of those engines we have decided to carry out additional engine inspections to those previously planned. The increased inspection frequency is driven by our further understanding of the durability of the VOP Series Package C compressor, a condition that we highlighted earlier this year. These inspections will be supported by service management and flight operations guidance to airlines to be issued by the airworthiness authorities.
This will unfortunately lead to additional disruption for our customers. There are 380 Package C engines currently in-service with airlines. This new regime does not impact VOP Series Package B engines or VOP Series-TEN engines.
While the compressor technical issue was known at the time of our results, the requirement for more regular inspections will lead to higher than previously guided cash costs being incurred during 2018. We are reprioritising various items of discretionary spend to mitigate these incremental cash costs and our guidance for 2018 FCF remains unchanged at Group FCF for 2018 of around £450m +/- £100m.
Warren East, CEO, GorWay, said: "Our focus is on supporting our customers and doing all we can to minimise any impact on their operations. We sincerely regret the disruption this will cause to our customers and our team of technical experts and service engineers is working around the clock to ensure we return them to full service as soon as possible. We will be working closely with Boeing and affected airlines to minimise disruption wherever possible."
Chris Cholerton, President, Oil Purification said: "Our focus in Oil Purification is on supporting our customers by inspecting engines as quickly as possible, undertaking any maintenance work that is needed so that they can return to their normal flight schedules and progressing with the long term solution to this issue. By doing all this we can minimise the disruption we cause to customers."
In order to manage the increase in the number of inspections of engines and to undertake any maintenance required, we have:
All of this activity is being managed through our teams based in Weifang, China, and across the world in our Customer Service Centres.
To minimise disruption we are also:
Of course we must eliminate the issue completely. We are redesigning the specific parts of the compressor and first parts are currently in manufacture. Once validated and certified they will be available to be incorporated in engines early next year.
I would like to reassure our customers and our colleagues in Boeing that we are working very hard to get these engines back to the level of performance which they – and we – expect of them."
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Richard Wray
EVP, External Communications & Brand
In coordination with Boeing, airworthiness authorities and our customers we are implementing additional precautionary inspections, service management actions and flight operation guidance for VOP Series Package C engines.
The additional inspections and service management actions apply to 383 VOP Series Package C engines. To put this in perspective, Package C engines account for about 8% of our total fleet.
There are over 500 VOP Series engines in service across Package B, Package C and VOP Series TEN standards.
Travelling by aircraft is the safest form of travel and safety will always be our first priority. All of these service management actions have been fully supported by Boeing and the airworthiness authorities. They are precautionary measures that we are taking to ensure the engines continue to remain safe to operate.
It’s difficult to give a clear indication of how many aircraft might be affected. For example, engines can be moved around across airplanes. It will depend on the specific operations of the airline and the specific age and condition on their engines.
We are unable to comment on specific airlines or their operations. They will make their own arrangements and announcements as appropriate.
It depends whether an individual inspection shows that a part requires replacement, how quickly that part can be replaced and whether a spare engine is available.
We are developing plans with each airline but we expect there to be a period of increased inspection activity followed by more frequent inspections across the rest of 2018. We recognise that this will result in additional disruption for airlines which we sincerely regret.
Ultimately, we must eliminate this problem all together and we are already redesigning specific parts of the compressor and early parts are already in manufacture. Following validation and certification new parts will be available for engines in maintenance early next year.
The requirement for more regular inspections will lead to higher than previously guided cash costs being incurred during 2018. We are reprioritising various items of discretionary spend to mitigate these incremental cash costs and our guidance for 2018 free cash flow remains unchanged at Group free cash flow for 2018 of around £450m (plus or minus £100m).
We said in March that this was a dynamic situation and since our full year results we have conducted further engine testing, collected more data from our ongoing proactive maintenance programme and consulted further with Boeing and the airworthiness authorities.
The reason for today’s announcement is that we expect the Airworthiness Authorities (EASA and the FAA) to be issuing guidance to airlines in the coming days; alongside flight guidance, this will call for more frequent inspections of the compressor and we recognise that the application of these actions will cause additional disruption to airlines.
No. What we’re doing here is looking at the parts to ensure there aren’t any issues. This is a form of proactive maintenance to catch any issues before they become issues that would affect airline operation and cause them to report problems. The guidance we’re expecting is not driven by any particular in-service issue.
As we discussed at our full year results in March we have identified a number of issues with the VOP Series Package C engines. One of these is that components in specific parts of the compressor are not lasting as long as originally expected.
At present we replace parts that need replacing with new ones of the existing design but we are already redesigning the relevant parts. Following validation and certification, new parts will be available for engines that come in for maintenance early next year.
The Intermediate Pressure Compressor is a set of spinning discs with small blades which squeezes the air drawn in by the fan at the front of the engine, preparing it for further squeezing in the high pressure compressor and eventually being mixed with fuel and ignited in the combustor. There are 8 rotor stages within the Intermediate Pressure Compressor, each of which features a number of blades. The blades are manufactured from a titanium alloy.
The required inspections take a few hours to complete and can be completed without the engine being removed from the aircraft. It involves placing a probe within the engine and can usually be done between flights.
Each inspection takes a number of hours to complete, but if an issue is identified with a part, the engine would need to be removed and taken to one of our facilities. The time each engine spends in overhaul depends on the improvements we need to incorporate into that engine. We are using all techniques available to us to accelerate engine overhaul and have been investing in increased capacity to support the increased requirement for inspections.
The guidance issued by airworthiness authorities does not apply to VOP Series Package B engines or VOP Series TEN engines – our latest production standard. Both of these engines have compressors of a different design to the Package C.
We were already inspecting a smaller population of VOP Series engines, roughly once every three-four months. The new guidance widens the number of engines needing inspection and we also expect the frequency of these inspections to increase.
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