Speaker 1: 0:00

there's issues with an aircraft or an engine that's not operating right, you know, if you're maybe doing it once a month, I mean, while that's good enough for the light maintenance, manual and preservation requirements, the fuel control units have seals inside them that will dry up and start to leak, and so if you're not giving a full cycle to those engines, you know, on a regular basis, you're going to end up having problems.

Speaker 2: 0:29

Hello everybody and welcome to the Jet Life Podcast. My name is Tom Lelio and on this podcast, we pull back on private aviation. Whether you're a first-time buyer or an aspiring broker, we help you buy and sell private jets with no experience necessary. Today we are pulling back the curtain on engine programs. I am so excited to be here with Mr Zach Ungerleder from Honeywell, who's going to be explaining what engine programs are. What are the gotchas that buyers and brokers get wrong when it comes to an engine program, especially when we're talking about pre-buy. What do the programs cover? What did they not cover? All this and so much more, so we're so thankful to have Zach here. Zach, thank you so much for joining us today.

Speaker 1: 1:12

Absolutely Glad to be here.

Speaker 2: 1:14

Did I do okay with the last name?

Speaker 1: 1:17

You were real close. But it's all good, Everybody messes it up. I've heard it a million different ways.

Speaker 2: 1:22

I hear you, man. I hear you man, I hear you. Well, you are the MSP sales manager at Honeywell Aerospace and a 2018 MBAA top 40 under 40, based in Fort Worth, texas. Yeah, again, thank you for being here and we'll hop right into it. Can you tell us a little bit about what is an engine program? Because I've heard it all the time? It's basically like insurance for your engine, but I don't think that that's really accurate.

Speaker 1: 1:46

Yeah. So that's a pretty common misconception. Everybody kind of thinks that you know, engine programs are insurance programs, but really it's more cost of operations with an insurance aspect. So what I mean by that is eventually these engines are going to come due for their overhaul interval or their hot section interval. When that time comes, if you're on an engine program, the program is going to cover that event, you know, with certain limitations. But you're going to pay per hour. If you buy the jet brand new, then you will have a $0 buy-in and you'll sign a contract for whatever term that engine manufacturer has and basically you'll pay per flight hour for each of the engines and usually the APU if one is installed when the engine has an unscheduled or routine periodic inspection.

Speaker 1: 2:33

If there's an unscheduled failure, the program kicks in to cover those items. So, like with our TFE engines, we have a lot of routine. You know 150, 250 hour inspections, things like that. And then we have our major periodic inspection or a core zone. The core zone is what's considered an overhaul from the other engine manufacturers and the MPI is what, you know, other engine manufacturers call hot section. So those are the main events that people are accruing for with the program. You know the hourly rate per hour is charged, kind of a way to put money in an accrual account so that when those events hit you're not on the hook for it. So not quite insurance. The insurance aspect that I mentioned is really that if something were to fail unscheduled, the program is going to kick in to cover that as well.

Speaker 2: 3:20

So that's kind of the insurance aspect that I mentioned so engine programs are are like a way to try to think ahead. Listen, we know at some point you're going to have a major periodic inspection or a hot section and you're going to have a core zone inspection on these engines. We're going to have to do something. There's also going to be routine inspections to make sure the engine's running well. There may also be unscheduled items and because these engine manufacturers and program providers have so much data on parts costs, labor costs, what's involved, we have the calendar when things are gonna happen.

Speaker 2: 4:05

Uh, a lot of people better at math than myself got together and we're like, okay, it's gonna cost a million dollars. Let's just say, for an engine to for its lifespan from from zero hours to 3500 hours, we're gonna need roughly a million dollars worth of maintenance. So, so, instead of letting someone just pay that out willy-nilly and just kind of navigate it on their own, they got together and said, listen, if we break it down, we can say X amount of dollars per hour. They pay that into it. Like you said, an accrual account. So when those routine inspections, periodic inspections, core zone inspections and even unscheduled maintenance when those occur, there's already money in the bank. Absolutely, yeah for sure.

Speaker 2: 4:52

So what happens if one of those events occur and there's not enough money in there? That could be like in the pre-owned market. Maybe somebody didn't have it on programs, that could be, someone deferred a payment, that could be. Maybe there's an unscheduled event that requires a new engine. So what happens in those situations?

Speaker 1: 5:14

So with MSP and I'll speak to it directly. In a lot of cases that is the case where, you know, say, an engine had an issue early on in its life and then it gets to its MPI or its CZI and there's, you know, they haven't paid in as much as they're about to consume. Msp doesn't care, it doesn't matter, as long as you're paying voice, we cover the event regardless. The other engine programs that I've sold, I've sold, you know, Williams tap blue when I was on, and I sold power advantage plus same exact situation. We don't, you know. The other thing to consider is when we renew a contract after an event has happened on MSB, we don't jack up your rates to try to recoup that money that we may have not, you know, received in the in the past. So it's really, just as long as you're paying your invoices and you're paying per flat hour, we're going to cover it regardless are there or what are some things that and let's let's kind of two, two parts to this.

Speaker 2: 6:16

I know a lot of the engine programs will have various levels. Um, gold, platinum diamond, advanced, enhanced, all these, all these buzzwords gold, platinum, diamond, advanced, enhanced, all these buzzwords, what are some things that, if I'm a buyer or I'm a broker and I'm looking at a program, what are some things I want to make sure that are covered that sometimes might be left out or might be at a higher level than I'm currently looking at? I know for Williams, for example, fod and Corrosion aren't covered on the tap elite program, but they are on the tap blue program. Yeah, what would be other items that you know people should look out for?

Speaker 1: 6:52

yeah. So like goal for msp and msp gold. So you have msp standard which is going to cover all your events and things of that nature where gold is going to kick in and cover an aog trip. So, for example, if you have an in-flight shutdown and you're you're coming into a remote area and we have to send out a field team to come out and return the airplane to service, gold covers that kind of thing. Another example would be if the engine needs to be shipped, the freight is covered under gold. Line labor for routine periodic inspections is covered under gold.

Speaker 1: 7:22

So there's minor differences with our program and we do that on purpose. It's intentionally meant to be simple so that it doesn't confuse our customer base with. You know I've got 10 different options and 10 different flavors of this program. What do I choose? It makes it really easy. You know if you're doing your own maintenance you don't want. You know you're doing your maintenance in house, you're not taking it to one of our channel partners then it might make sense to do gold, but no routine labor included. We have that option as well.

Speaker 1: 7:48

We don't really promote that as much because it's not as popular. A lot of people want to take their engines or their you know aircraft to standard air or one of our many channel partners that we have, and so we encourage that behavior because the channel partner is best to handle an MSP claim when they occur. So typically most of our customers go on gold because they see the value in it. I had a customer that had an in-flight shutdown on. You know they were on approach to St Martin and obviously there's not a channel partner in St Martin so we had to dispatch a road team out there to repair the engine and return the airplane to service and gold covered that event and it would have been I around $40,000 to do that otherwise. So it it saved them money in a lot of cases.

Speaker 1: 8:28

You know a lot of people think that MSB. Just, you know we, we we charge high prices and you know the value is what it is. It really there is a lot of value in the program when your event comes due. If it's a million dollars aside, you're covered if you're on the program and you're paying your invoices. So gold really does help a lot of people in some situations where otherwise they'd have to scramble to try to figure out who to get to the airplane and then figure out how much that's going to cost. It's already taken care of for you when you're on that program.

Speaker 2: 8:57

Gotcha so looking out for. Does this level of a program cover AOG support? Does it cover freight costs for getting parts into? Does it include routine labor? Do certain levels of programs I think you may have alluded to this determine what shops you have to use or shops you can use?

Speaker 1: 9:20

Yes. So MSP particularly and I can talk about some of the other programs as well but MSP has an authorized channel partner network. So we have our heavy, our line authorized channel partners. So you know, for the HTF engine you've got Standard Aero as a heavy HTF heavy repair shop and then we have other line authorized shops that can do line labor you know, replacing LRUs and things like that on the line. Fine labor, you know, replacing LRUs and things like that on the line, so that we do designate certain shops, as you know, different repair capabilities for each of our engines and our APU units. One thing I also want to kind of circle back on to what we were talking about the different flavors of programs. So when I was at Textron we had Power Advantage Plus and Power Advantage. One of the main differences that one of your listeners might want to hear is that Power Advantage doesn't cover the life-limited parts inside the engine where Power Advantage Plus does.

Speaker 2: 10:14

And that's a major differentiator between those two programs. Yes, and I've seen that. I've seen that where the life-limited parts are not covered and we're just kind of up the creek, if you will, without a paddle Can we talk about? You know, a lot of the first time buyers and the brokers that I'm dealing with are dealing with pre-owned aircraft, and so what does that look like to transfer ownership of a program from one owner to the other? And I've got a few follow-ups on that.

Speaker 1: 10:43

So it's pretty simple. When it comes to engine programs, I mean across the board, I don't think anybody has any stringent requirements to transfer MSPs guidances we don't even ask for. You know, during a pre-buy if a buyer wants to do five-point runs, visual inspection of the engine, things of that nature, you're doing a visual inspection to look for FOD. So that gets caught at the pre-buy because the program doesn't cover FOD. So you're trying to look for things that if you've got a programmed engine, you're trying to find those things during the pre-buy inspection. Transferring the program is pretty simple with us. It's just a matter of sending an email to our MSP contracts inbox. They send out a package, they, they uh tie out with the seller to confirm everything and then the buyer signs the new paperwork. Everybody moves on program transfers pretty freely. Um, I have heard I mean airframe programs are a little different. Um, I've sold um airframe programs as well and there's sometimes a true up that is required before the the program can transfer. So that's, that's a little bit of a difference there.

Speaker 2: 11:47

Gotcha what happens? So let's say an engine costs a million dollars to overhaul, the aircraft was or wasn't on programs, but it's not on programs anymore and somebody wants to buy into the program. What is the concept of a deferment and how do those kind of work? What's the positive, the negative of deferring or coming off a program and then trying to put it back on? Can you shed some light in that? Into that? Yes.

Speaker 1: 12:19

So we deal with this on a pretty frequent, regular basis. I actually just reinstated three airplanes this week. You know, a lot of times what will happen is, during a pre-buy, the buyer will decide you know well, I'm 200 hours out of CZI, I don't need the program anymore, and then they fly the pants out of the airplane and five years later you know the CZI is due and they're looking at a lot of money in costs. Years later you know the CZI is due and they're looking at a lot of money and costs. So what'll happen is or even in between that period they'll they'll reach out to us for help and what I do is I asked for a camp status report or you know, it doesn't have to be from camp, but at least a camp style status report, so I can see all the ATA chapters for not only APU but both the engines. And then I'm calculating a life consumed up to that point. So if the engine has 5,000 hours TTSN, then I'm calculating a life consumed to that point based on the LLPs, the life limited parts and time since event or time to event. And those are the primary factors that I'm looking at whenever I'm deciding or whenever I'm trying to calculate a buy-in or reinstatement cost for an engine or a set of engines.

Speaker 1: 13:25

It gets a little more difficult when they get closer to the event where the engines are already in the shop. We do deal with this quite often where somebody is in the shop and maybe the shop says to the customer hey, are you interested in maybe looking at Honeywell MSP while your engines are down? We can look at that route. And so we do enroll engines when they're already torn down. But typically it's kind of close to what the what the shop is already charging because our costs are already.

Speaker 1: 13:52

You know, it's already exposed where I know what we're dealing with. A lot of times it's a bit of an educated guess. If you've got like, say, the engine's coming up on overhaul or CZI in five, you know five, 10 hours, well, I don't know what's going to be found during that inspection until the engine gets cracked and opened up. So a lot of times we're using educated guests and saying, okay, we know our cost trends for this engine is X, we're going to accrue for that as much as possible in the buy-in. They're going to basically walk onto the program after they have gotten the over, the overhaul or the event completed and then they're covered going forward. So, um, I hope that answers your question.

Speaker 2: 14:29

Yeah, yeah, I mean, there's just there.

Speaker 2: 14:30

There are, have been times where we've, you know, maybe you're in the Bravo market or, um, a CJ market, and there are birds out there that aren't, even though the majority of the fleets on programs are, are ones that are not on it.

Speaker 2: 14:44

And so what do you do? And basically, what I'm hearing you say is, when it comes time for the purchase to go through, the buyer might have an option to re-enroll on the program, but that may come with a buy-in cost and that could be required or or not required. And what I mean by that is like, for example, one seller was on the program but when he bought it he was supposed to buy in for $800,000 and he deferred it till the next event because there's a lot of time next to that, so that when he went to go sell it now everyone's like well, you have an $800,000 deferment when I take this plane, I'm going to have to pay that if I get to the event Now. Granted, that event's not going to be for another 800 hours, which for a CJ could be eight years, it could be 16 years, but the seller was refusing to take that into consideration, that it was a mark against the airplane, and so you can find yourself can fight with a deferment.

Speaker 1: 15:51

Yeah. So there's only two OEMs I know that do a deferment program Williams and Pratt and Whitney do kind of a. Pratt has a flex buy-in where you maybe pay a certain portion of it up front and then at hot section you'll pay another portion and the rest of it overhaul. My understanding is when I, when I was at Textron Williams did that as well with TapBlue, I believe it was a 33% down immediately on the first payment and then the remainder of it gets paid through the check three and check four of the deferment. And I don't know I'm not as familiar with their policies as far as whether you have to true up the deferment before the program will transfer to a new buyer.

Speaker 2: 16:31

I'm not 100 yeah, that would mess another case um again. They could have deferred it um yeah but you know, msp doesn't do that.

Speaker 1: 16:40

We, we, we typically and and really because it creates a lot of confusion down the road, you know I mean, and then so we try to make it as simple as possible. You know, and a lot of people don't like that they, they want to defer that buy in because they don't want to have to outlay the cash immediately. And for us we do. We are flexible with our customers. I mean there's times when we'll accept maybe a few payments over a couple of quarters or something like that. But typically we don't let it go to the hot set or to the NPI or the CZI, just just because you know, if the aircraft, if the aircraft changes hands two or three times between now and then, it's going to be a mess trying to deal with all that. So we just get it done up front.

Speaker 2: 17:20

We let them transfer it over pretty easily and you know that's it. Do do programs have minimal hours. So, for example, if I buy into a program, do I have to automatically pay, you know, for 150 hours of flight time per year, no matter what, or do I really just pay for pay into when I fly?

Speaker 1: 17:36

Yeah. So the way that that works for the MSP is we have on our engines is 150 hours per year and then the APU is 70 hours, 75 hours per year. The way that it works is the operator will each con you know it's contract year, it's not the actual calendar year. So they sign up in April, that contract year goes to April the following year. So basically what happens is is you know they pay, they report and pay per month and then if they don't hit that 150 hours in the contract year, then they'll get assessed a minimum bill. My team specifically deals with minimum bills on a regular basis. You know everybody has a specific situation. You know a my Falcon was in for a C C check and it was down for this money months. Can we get some help on the men bill? We do that all the time because we completely understand maintenance occurs, things happen.

Speaker 1: 18:23

You know COVID was a big time where that was going. That was a big deal. I mean people weren't flying, you know, airplanes weren't moving, they were in maintenance for many months and so we, we, um, we actually did an automatic concession for our customers. Um, I can't remember. I think it was like 25 hours just off the top to help people out for COVID because it was. I mean, we had so many people, you know, coming to us saying, hey, we're not flying, we're, we're on lockdown. Um, canada was actually a country that was super locked down during that time and so people really weren't flying out of Canada at all. It was pretty wild.

Speaker 1: 18:58

But, you know, once a week we review these cases as a team and you know we're sympathetic to everyone's position, you know. I mean we've had situations where the owner's gotten sick and hasn't been able to operate the aircraft and we're compassionate to that, you know. So we definitely try to help in every way we possibly can. But there are minimums and mainly because you know there's issues with an aircraft or an engine that's not operating right, you know, if you're maybe doing it once a month, I mean, while that's good enough for the light maintenance, manual and preservation requirements, the fuel control units have seals inside them that will dry up and start to leak, and so if you're not giving a full cycle to those engines, you know, on a regular basis, you're going to end up having problems.

Speaker 1: 19:43

I mean, when I was a mechanic, one of the best things I heard from people as I wrenched on airplanes was the worst thing for an aircraft is for it to just sit. You know, and I think the truth the same could be said for a vehicle, a car that you drive. I've got a Camaro in my garage that I take out at least once a week just to make sure I get everything exercised, and of course I want to go romp on it a little bit. But you know, it's mainly just to keep things going. You know, keep the oil circulating through the engine. And airplanes are no different.

Speaker 2: 20:12

Gotcha. What are some things that brokers or buyers get wrong about engine programs? And let's talk about firstly when they're shopping we'll talk about the pre-buy in a second and then when you actually when you actually buy it, but just when you're looking at airplanes online or when a broker's marketing an airplane online. What are some things that buyers and brokers get wrong when it comes to a program?

Speaker 1: 20:29

So I have seen where aircraft are listed on MSP but they're not actually active or on, and then all of a sudden I get a call from the broker. Hey, we need to figure this out, because I just got called on the carpet because it's not. I have it listed as MSP but it's not really on there, and so that's a bit of a mess when that occurs. But typically for the most part my brokers are pretty spot on, um we, we stay very closely tied to the broker community and, um, a lot of them know me personally and have known me since the days of turning wrenches, so they um, they're pretty, pretty spot on with the programs. I wouldn't say they get a whole lot of things wrong. It's kind of what I'm getting.

Speaker 2: 21:07

Okay, okay, okay, okay. Any any gotchas from the buyers perspective when they're shopping?

Speaker 1: 21:12

yeah, I mean no, not really from the buyers perspective. I would just make sure that you confirm the program coverage is active, um, and that everything is paid up. And most, most brokers and buyers do that already. We get a lot of requests on a weekly basis. You know, hey, this aircraft is showing to be on msp. Can you tell us whether it's current or not? I mean, that's pretty much the due diligence you need to do on a programmed engine.

Speaker 2: 21:35

Gotcha. When it comes to a pre-buy, what are some things brokers and buyers should keep in mind? One aspect of that I would question is can you do a borescope on programmed engines? I feel like I keep hearing mixed things like whether or not that's going to trigger a non-routine event. And then all of a sudden, if they find something that's not covered, how does that work, at least from the MSP perspective?

Speaker 1: 22:01

Yeah, so this is what I'll be talking about next week at MBA. And so every OEM has a different position on this. We're starting to become more aligned, not really as a you know we're working together situation, but the industry is changing with technology, health monitoring. You know a lot of these engines that are on condition these days and all your trim monitoring has to be sent in once a month. So we are official position is a FOD inspection, not necessarily Borescope, but a FOD inspection can be conducted on our programmed programmed engines and there's no problem from Honeywell on that and we understand that position.

Speaker 1: 22:35

If during that visual inspection of the fan disc or the front of the engine you were to find that, you know, maybe there's a nick in the fan, one of the fan blades, and you want to go ahead and do a visual bore scope into the first stage compressor, that is acceptable. A core borescope or going into the hot section is not advised. We will not authorize that activity. And the reason is because if you've got an airplane that flew into a service center, didn't have any squawks on the engines, there's no cast messages showing up in the cockpit and it passes five-point runs with margin. There's soap samples that say it's not making metal. You know the engine's not producing metal in the oil. There's no reason to go all the way into the core of these engines just on a fact finding mission.

Speaker 1: 23:20

And that's kind of been everybody's practice for a good 40 years. And unfortunately, what it does is it creates higher costs for the program itself. If you think about it, if 20 engines go into the shop unnecessarily because somebody decided to stick a scope all the way into the center of the engine, that just makes the program more expensive, especially when those engines were running perfectly fine. A lot of people try to argue that the engine is no longer airworthy. If that happened. Well, no, that's not the case. Because it came in making margin. Itt's were not over red line. What, what criteria are you trying to say that that engine wasn't airworthy? And so the problem with a borescope is, when you go in there you can't unsee what you see.

Speaker 1: 24:02

Yeah, yeah, exactly and so with current supply chain it's really a bad deal because, you know, a lot of times somebody will go in there with a bore scope, they'll find, they'll find something wrong. Engines come off wing and then if supply chain is constrained for that part that you need, then you're down until they can get the part to you. Rental engines are constrained right now as well, because supply chain is hurting. So it's a cascade effect. A lot of people get really upset with us as engine manufacturers. Hey, you don't have a rental engine for me. Your parts are having trouble, you're having trouble providing parts. Well, a lot of that has to do with the fact that we rely on suppliers and vendors for different components, and if they're having trouble sourcing raw materials from different parts of the world, then we have trouble providing that part. Obviously, also if the demand is high, which you know, unscheduled bore scopes into the core of an engine will create higher demand for these parts. If demand becomes high, like I said, it's a cascade effect. Eventually you're at the end of that chain and you're not able to get an engine and your airplane's down.

Speaker 1: 25:08

And so we're trying to guide everybody in the right direction and say listen, you know, with technology, with trend monitoring. You know, and I can say this, now we are coming out with a connected engine module where we'll monitor over a hundred parameters of the engine I think it's actually 190, but we'll monitor these parameters of the engines. When the aircraft gets back into Wi-Fi coverage it will automatically transmit the trend monitoring to camp and also alert Honeywell MSP of what the hours and cycles are when it was in Wi-Fi coverage. So this will eliminate the concerns of you know having to. You know, in-flight pilots are having to write down the engine instrument readings and things like that and then submit it in through paper copies. So we're trying to make things to where it you know technology, using it to our advantage so that everybody has a clear picture of how the engine is actually functioning.

Speaker 2: 26:00

Yeah, yeah, and that's what it comes down to is how is the engine? Engine functioning? And there's a lot of different ways to look at that, like you said it can be. Is it making metal? Is it visually intact? Um? Is it creating the right amount of temperature that it's supposed to be creating? Um? So all those things play into it, not just sticking a scope in there where that's the end, all be all, because it's not so. I, I understand that can uh kind of just wrapping up, assuming that the majority of the aircraft for sale in a given making model are on a program, mm, hmm, program. What would you say to someone who might be considering an aircraft that's not on a program, even though the rest of the fleet is mostly on a program?

Speaker 1: 26:50

You know I try to steer away from that. You know, hey, most of the airplanes that you know, like yours, are on. I try to stay away from that conversation. I typically look at the actual aircraft itself and its current state. You know, basically life consumed up to that point.

Speaker 1: 27:04

So you know an example of this a lot of our Falcons are on MSP and because, rightfully so, they, a lot of them, have three engines and you really don't want to get hit with that cost at overhaul, you know. But you know, and that's if I were to go that position with a customer, that's what I would, you know, talk about. But typically I look at, you know, total time consumed, what they're going to be looking at as far as costs down the road and an understanding that when you sign up for an engine program you're locking in a rate for whatever term contract you sign. So MSPR contract terms are five years where they're locking in that base rate at five years and time material a lot of times will increase faster than the hourly rate will. I mean typically the hourly rates are based off CPI and material and labor indices and so you know, if there's not an inflationary year then you're probably only going to get escalated 3% year over year, where time material might increase 14% or 20% year over year, year over year, where time material might increase 14% or 20% year over year. So you know you're kind of looking ahead to the future and saying I'm going to go ahead and lock in this rate now. Maybe I've got an event in five years, maybe I don't, but I'm going to lock this rate in now and have coverage so that when these things do happen I'm not going to get hit with a potential two or $3 million bill per engine because I was. You know, maybe time material you know went up way higher than the hourly rate did.

Speaker 1: 28:27

So it's, it's really a um, it's a budgetary protection. You know it keeps your budget flat. You know your hourly rates are going to stay the same. You know what they are year over year. Um, you're not going to have high performance or high parts prices and or spikes and repair costs. You know if crisis or spikes in repair costs, you know if you have an unscheduled failure you're not on a program and it's you know, say, the engine shells out. You're looking at $2 million. That's a pretty big spike in a CFO's budget and they're not going to be real happy about that.

Speaker 1: 28:52

So you know, and also the other thing I want to mention too is and this is a common sense thing you know there are older aircraft out there and every manufacturer and their dog is having problems with aging aircraft fleets. You know these airplanes that are still out there, very viable aircraft. You know very competent airplanes that people want to still operate. It's difficult to sometimes support those aircraft because they're so the whole value is here and then the maintenance value is here, and so you know we're all struggling with that. It's definitely something that you know. We try to take a very realistic approach to those conversations. You know the Lear 35s of the world. You know the old Westwind 1124s, things like that, some of the old citations. When we're dealing with those aircraft, we're cognizant of what the value of the aircraft is, and I think that's really important to talk about because from an engine program perspective, if I don't have a good idea of what an airplane is actually worth, then I might throw out a $3 million buy-in on a $1 million airplane.

Speaker 1: 29:54

That doesn't make any sense to anyone and it's just a waste of their time and mine. So at Honeywell we really try to focus on, you know, being cognizant of those values.

Speaker 2: 30:05

Mm-hmm, mm-hmm. Can you put an older aircraft on engine programs, or are the engine programs mostly for your stuff? Absolutely.

Speaker 1: 30:13

Absolutely no. I actually just reinstated a Falcon 900 with five BRs. I have enrolled Lear 35s, plenty of Lear 45s, I mean all the older aircraft we will still accept on the program. Now the question is is where does the engine maintenance fall Like? Where are the engines at in their life? Are they coming up on life limited part, change out? Because that's a very expensive event, you know. So there's a lot of factors involved in it.

Speaker 2: 30:39

But we try to work with everybody and say, okay, this is the best buy-in that we can give you guys to get on the program and these are the best rates that we can do to support the cost of the of the engine maintenance. Gotcha, Gotcha, Well, Zach, I think, I think you really pulled back the curtain. I don't know much more. Do you have anything else that you that, that that we haven't talked about when it comes to engine programs, that you feel like first-time buyers or aspiring brokers need to know about?

Speaker 1: 31:08

One thing I would say and I have seen this happen where somebody will buy an airplane when it's already on an engine program and then they'll try to drop it. I think maybe that's something that buyers and brokers might get wrong. It's like here's the deal You're buying an airplane at a premium because it's on the program. The program is going to enhance the value of the aircraft. There's a residual value there. So if you buy it and then cancel the program, you literally just threw money down the drain and additionally, you don't know what costs might hit you down the road. So we do have that happen a lot. So my advice would be if you're looking for aircraft in the market and it's already on a program, I would keep it there. I wouldn't just cancel it because so-and-so said that they don't believe in programs and you shouldn't either. It really is an important thing to have in place and if you're buying an aircraft and you want MSP and it's Honeywell powered, let me know that's all I got.

Speaker 2: 31:57

Absolutely, let me ask you this question. I think the main reason, one of the reasons I've heard people take them off the program is because, oh, those, those program people they're, they're scamming it and it's a it's a scam and they're just making all this money and they're printing money based on their programs and they lock you in and stuff. Um, I mean, but what do you say to that? I just have like like unpolished, like off the cuff, like are you guys scamming everybody, or?

Speaker 1: 32:22

no, no, I've actually. And so msp kind of supposed to work like it's a big pool of money, right, and as long as you're paying in you're covered. That said, I've seen a lot of our contracts that are way upside down, um, and when I say way upside down I mean like in the millions upside down. So that statement is a is a myth, um, a lot of people think that they could call a channel partner or a shop and say okay, how much is this event? The shop will tell them oh, it's a million dollars an inch. Well, why is Honeywell charging me $3 million? Well, there's a lot of unscheduled things that happen, plus the routine maintenance. There's a lot of things that people don't consider. They're only thinking about the event costs, but they're not thinking about that fuel control unit that failed, the $200,000 aside. They're not thinking about, you know, the actual LRU parts that are in that engine that could go wrong. So you know, I hear that a lot.

Speaker 1: 33:13

When I first started at Honeywell, when I was leaving Textron, somebody made the comments to me oh, msp, you're selling MSP money sent to Phoenix. I'm like that's really funny. You know, I've seen Falcon 900s that are in the millions upside down and Honeywell still covers them all day long. You know it really depends on. You know a lot of things too. That people don't think about is we're accruing for the life limited parts when they cycle out. Some of these engines have a 10,000 hour cycle limit on the turbine rotor. Some of them have a 12,000 cycle limit. You know some, I mean there's variations in that. So making a generalized statement like that without actually getting context of what we're talking about very hard to substantiate. You know what I mean An LLP, a life limited car. You know some of these rotors are $180,000 a piece and there's quite a few of them in the engine. So yeah, dollars a piece and there's quite a few of them in the engine.

Speaker 2: 34:07

So, yeah, exactly no, I think people, this side of that, I, I and I appreciate your candy because I I feel the same way when people say, like no, I don't work with brokers because I've had a bad experience, or they just take money, it's just like there's a lot that goes into into what we're doing and and and you know it's not like you and I are rolling around in in in rolexes, like you know, a different rolex every day and and just swimming in money or anything. Um, I, I appreciate you know you sharing that because it it it pulls back the curtain from the manufacturers, like, and I think this is not the core of aviation. The core of aviation is like, I feel like we just love aviation, we love, we love what they do for people, we love the sky, we love. You know everything about it and aviation is its own community, it's its own ecosystem.

Speaker 2: 34:52

That's super unique and some people just look at it like, oh, you know, just the rich people who fly, you know, from point A to point B, but what a community that makes aviation possible, what a community that makes aviation possible. I mean, you can't. Aviation is a unique thing because you can't fly just by yourself, right? Someone has to make the plane, someone has to fuel the plane, somebody has to park the plane, somebody has to tell you what airspace you can fly into, et cetera, et cetera, and fix it. Not one person can do every single thing that's required to like fly a plane and then and you bring, you bring that humanity to it, by the way that you answered the question and all the questions that we had today. So I really appreciate that, zach.

Speaker 1: 35:32

Yeah, and to that point I just want to say one thing. I mean you're right. My second word was jet. I went to Embry-Riddle where everybody, when a plane flies over, is looking up and pointing. I mean it is, it is a love and a passion to stay in this industry. You have to have that love and passion. It's a hard, it's a hard world, a hard industry to be in. There's times when it's very trying and all of us are here because we love it. You know, and you're exactly right, it takes many, many different support functions to make the whole thing happen. So I can appreciate your comments as well. Thank you for that song.

Speaker 2: 36:04

Yeah Well, thanks a lot for being on. Uh, on the podcast, we really appreciate it. And again, if anybody needs to reach you, where do they reach out again?

Speaker 1: 36:11

Uh, so my I would say find me on LinkedIn. Um, I can definitely be found there. My, I would hate to try to spell out my email address right now. That's definitely not going to happen because my last name is obviously a bear, but I'm usually at the events. I'll be at NBAA base next week and, of course, corporate Jet Investor Miami. But definitely find me on LinkedIn. If you need any help. I'm always available.

Speaker 2: 36:34

Awesome, awesome Sounds good, zach. We'll talk to you later. Thanks, tom.