Insuring a smooth flight

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 Anthony Harrington talks to Neil Book, President and CEO, Jet Support Services Inc, (JSSI)

Turbojet engines, taken as a whole, are incredibly reliable pieces of machinery, as well as being an amazing assembly of precisely engineered solutions to a variety of very complicated problems. However, from time to time yellow lights do come on, necessitating an unanticipated and generally very pricey visit to the owner’s favourite MRO shop. This is where JSSI comes in very strongly, though it is also there for all those regular, scheduled events.

As the world’s largest independent provider of hourly cost maintenance programmes for engines and airframes, JSSI is the alternative to the traditional OEM warranty programme.

Q: What was the inspiration for JSSI getting off the ground in the first place and how was it funded in those early days?

A: The company was founded by four people back in 1989, and of those four, Louis Seno, our Chairman Emeritus and special advisor, is still very much a part of JSSI. These founders were real visionaries. At the time there had never been an alternative to the manufacturer’s engine programme. In 1989 JSSI launched a product that was competitive to the manufacturer’s programme on what is, today, the 731 engine; at the time it was called the Garratt. For the first time the consumer in the aviation market had an alternative to the manufacturer’s offering.

Q: How was that even possible to do?

A: The founders literally started with a very small amount of capital, but what they did was very innovative, and their solution is still one that we use today. They created a trust fund to house the reserves. At a stroke this meant that the customer could be confident that even if JSSI went out of business, the trust fund would remain in place to pay out any claims they might have.

As a start-up, competing with Honeywell, this provided a level of safety and comfort. Today, we still keep all our scheduled maintenance reserves in the trust fund, even though our company has become immeasurably stronger and continues to grow. This approach provides a level of certainty that you actually do not get from a manufacturer. For example, just ask the former enrolees in the Beechcraft or Hawker lines about their experiences with their engine maintenance programmes when Hawker Beechcraft ran into difficulties. They were pushed to the end of the creditors’ line as unsecured creditors.

So we do not comingle our funds. We segregate them.

Q: You started with the one engine. How did you go on from there?

A: For the next five years JSSI rolled out a programme that focused on developing an appropriate maintenance package for every business aviation engine on the market. In those days there was not a whole lot of pricing sophistication when it came to costing these programmes. The basic philosophy was to see what the manufacturers were charging and then to charge a little less. It wasn’t sophisticated but it worked!

In those early days we enrolled virtually no new aircraft. They were all pre-owned coming onto the market or already flying. We distinguished ourselves by not requiring customers to pay a buy-in fee. We offered a buy-in option, which would give the customer 100% coverage when they came to a maintenance moment. But we also provided a pro rata option, which meant that they could enter the programme and when the maintenance event took place, we would each pay our relevant share.

What this means is that if you have an overhaul interval at 5,000 hours, say, and you brought your engine into the programme with 2,500 hours on the clock, then when the overhaul happened, we would each pay 50%. This enabled clients to avoid having to make a major capital investment upfront in order to enter the programme, and it worked extremely well in helping us to generate business.

It is important to realise that customers can enrol their engine any point in their lifecycle. However, enrolling on day one means if you have an unscheduled event we meet 100% of that bill. They pay us monthly, retrospectively, based on the actual number of hours flown during the course of the month.

Q: So the main benefit of this is budget stability?

A: Exactly. If you are a CFO in a corporation or in an operator, you love us, because you know that you are not going to have nasty shocks hitting your balance sheet. We offer predictability. There are inevitable costs to running an aircraft, and engine and airframe maintenance can be a big part of this. Coming in with JSSI gives you a very smooth, very predictable, pay-by-the-hour approach. At the same time, because of our buying power, you are also lowering the overall cost of your maintenance, since we get excellent rates from suppliers – better than a lone owner could expect to negotiate for themselves.

Q: How do you grow the business? It looks as if you are totally reliant on sales of new and pre-owned aircraft to grow, so a flat patch in the industry might be uncomfortable for you?

A: Actually, to this point in 2016 we have had our strongest year in the company’s history. We have enrolled 250 aircraft into our programme. There are two areas, new and pre-owned, that we can go for. This year I would say that 15% of all new jets delivered have come with JSSI power-by-the-hour programmes. This might sound uncomfortable for the manufacturing OEMs, but ultimately they still benefit. They have happy clients who aren’t getting financially jolted if something goes wrong. And of course we are still buying the OEMs’ parts and sending the aircraft to their authorised MROs.

However, the real winner is the consumer. If we were not in this space, the cost the consumer would bear would be far higher. There would be no competition. The manufacturer could charge what they wanted and provide any level of service that suited them. Competition among manufacturers would exert some discipline – but once you’ve bought a certain model, that choice vanishes and you would be wholly reliant on the manufacturer. No matter how well you get on with the manufacturer, that is not an entirely comfortable position to be in.

Our philosophy is: we don’t build them, but we make them better. We have a team of 70 dedicated professionals strategically placed around the world. These folk are ready to fly out and examine your aircraft, whatever the situation. We should be one of the first calls you make in an AOG situation, and we will coordinate getting you back flying again. We cover everything, including the cost of the OEM’s mobile response team coming out to your aircraft to get it airworthy again.

Q: What about regional growth and growth in new market areas?

A: This is where we are seeing tremendous opportunities. We have really committed to Asia, China and Africa, and we are seeing great growth in these areas. And we are also signing large fleet deals with helicopter owners as well as with regional airline operators. Sun Air, a BA regional airline, has placed its whole fleet with us, and we signed two other regional airline deals this year, so we are really getting some traction and the future looks bright.