ANALYSIS: JetBlue takes longer term view on planning maintenance costs

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After combating climbing engine maintenance costs last year, JetBlue has started taking a long-term view of budgeting maintenance costs beyond a fiscal year.

“You’ve got to take the longer term view so that you’re making the right decisions,” says Dave Ramage, senior advisor at JetBlue and its former vice-president technical operations during the sidelines of the MRO Americas conference in Phoenix last week.

The New York-based low-cost carrier is working to make its maintenance costs more predictable, says Ramage, which entails planning maintenance costs over several years. For example, while the airline could put in great efforts to drive down maintenance costs for a given year, just focusing on that annual plan could mean issues down the line with higher costs at a later date, says Ramage.

A greater number of overhauls for the GE CF34-10E engines powering JetBlue’s Embraer 190 fleet drove up maintenance costs by $20 million for JetBlue in the first quarter of 2013, the carrier said in an April 2013 earnings call. In 2013, costs for maintenance, materials and repairs increased by $94 million, regulatory filings show.

To mitigate the issue, JetBlue signed a fixed cost-per-flight-hour maintenance agreement with GE Engine Services to do the engine maintenance, which replaced time and material arrangements with several different maintenance providers including the OEM, says Ramage.

In late 2012, the airline came up with an 18-month plan with GE to perform certain modifications for the engines, including both quick-turn checks called “hospital visits” and full restorations that required more complex modifications.

As a result of the planning changes, the carrier is “well-ahead” of that 18-month timeline today and the engines are running as expected, says Ramage.

“We are in much better shape than we were, let’s say a couple of years ago,” he says.

The airline’s maintenance cost per available seat mile (CASM) grew about 14% in the fourth quarter of 2012, or a slower rate than the 20% or more seen in the first three quarters of 2013. JetBlue said during a January earnings call that it expects maintenance cost pressures to ease in 2014. The carrier plans to announce its results for the first quarter of 2014 on 24 April.

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Now that the maintenance issues are resolved, the carrier’s next big project will be to complete the installation of sharklets on its older A320 fleet, which will start in the second quarter of 2015, says Ramage.

JetBlue also plans to start retrofits of wi-fi on its Embraer 190 fleet as soon as the fourth quarter of this year pending a service bulletin from Embraer, says Boris Rogoff, JetBlue’s director of heavy maintenance and modifications.

Ramage, who has overseen maintenance operations at JetBlue for more than a decade, will retire in July. Until then he is advising the carrier's new head of technical operations, David Campbell.