Evolving Dynamics of Engine Programs with Delray Dobbins – EP.268

Inzo Technologies – https://inzotechnologies.com/

(00:00:00) – Intro

(00:01:22) – Sponsor – Inzo Technologies

(00:03:50) – Delray’s early career & and pivoting into engine assurance

(00:09:17) – What is an engine program?

(00:11:53) – How does the engine program save the customer money?

(00:14:04) – Where does a customer’s money go in an EAP?

(00:17:48) – How do you price an EAP?

(00:19:01) – How does an EAP make money?

(00:20:25) – The Customer Journey

(00:23:54) – Engine evaluations

(00:25:20) – Risk pricing

(00:27:03) – Tracking inventory

00:35:15) – Parts consistency

(00:36:22) – Who is doing engine overhauls?

(00:40:27) – Platform consolidations

(00:41:34) – Customer mixes

(00:43:23) – The industry technician shortage

(00:55:06) – What are you excited about over the next decade?

(00:56:48) – Electric Aircraft

Alex Bridgeman: Well Delray, thanks for coming on Think Like an Owner. This is a podcast all about ambitious CEOs and building interesting companies, and engine assurance is one of the most interesting I’ve come across in aviation. I don’t know why, but I find jet engine programs just really interesting as a business model. It’s kind of an intersection of insurance and maintenance and a whole bunch of other stuff. And before this, we were talking about weddings. How’d you go from weddings to engines? This is, engine assurance is a newer role for you as of last year. And so going from that to engines is something… 

Delray Dobbins: I fell into the DJ/wedding market when I was in college. And it just turned out to be a lucrative thing, and I was a pretty poor college kid. And I found that I had a knack for it. People told me I was good at it. And so I kept doing it. But I went to Purdue. I graduated with my A&P powerplant license and my commercial instrument pilot’s license. And so I wasn’t sure which way my career was going to go coming out of college. And as it turned out, the maintenance side of the business is kind of how I got my first job at Allison Engine Company, which was bought by Rolls about two years later. And so I’ve had some amazing positions with Rolls and Pratt & Whitney over the years that let me do a lot of different things. I was embedded at NetJets for about five years. I tried brokering for about three years. So, back to the engine program side of the business, I’ve represented engine programs for two of the four engine manufacturers, but then when I was brokering for three years, I’ve actually been a customer of all four engine programs, OnPoint, MSP for Honeywell, ESP for Pratt & Whitney, and GE’s, Rolls Royce Corporate Care, there we go. So, when I was brokering, one of my main jobs was to really understand all the engine programs in the business and then make recommendations to clients. Should you do the program? Should you continue the program? Should you abort the program? And so, one of the interesting things is it seems like over the last 10 or 15 years, there’s always about 10 or 15%, actually, I’ll take that back, more like 30% of the business of owners, that’s just an insurance plan, I’m just going to, I’ll just self-insure. And prior to 2020 and COVID, for the people that self-insured, they knew when they had a need, whether it be an overhaul or an AOG, they would just write a check and the problem would be solved. Post-COVID, post-supply chain issues, I think owners and operators of aircraft are living in a world that they’re not- they’re living in a world where a blank check does not solve their problems the way it did prior to 2020. And so, I think that’s caused everybody that manages aircraft or operates aircraft or owns aircraft a bit of a bit of consternation where like, what do you mean I just can’t write a check and get a lease engine? And so, for the people that have been advocates and participants in engine programs all along, I think they’re finding now, five years after COVID started, there’s actually more value than ever before in engine programs. And I’ll take that and draw that back to a bit of the hyperinflation that occurred on a lot of the program rates as well as parts rates from the engine manufacturers. So a lot of the engine manufacturers raised their program rates probably 30, 35% in the last four years, maybe 40%. And the industry kind of had a- there was a harsh reaction to that. But what’s not realized is if your program rates went up, I’ll just pick 33% over the last four years, the parts prices from that same OEM went up more. So, if you’re on a program and your rates went up 33%, but your parts prices in the same four-year period went up 40 or 45%, that’s worse. The other thing that a lot of operators and owners haven’t realized is that, when you look at the cost of rentals, there is one engine OEM that will charge you over $200,000 a month to rent one of their engines. So when you look at what’s going on in the shops, engines aren’t getting overhauled at six months anymore, it’s 12 months. Now when you look at the cost of renting your own engine for the guy who’s self-insured, instead of needing a rental for six months, I need it for 12 months now, in some cases, you’re talking an extra couple of million dollars just to rent the engine for the longer duration of the overhaul. If you’ve been on an engine program for 10 years, all that’s covered. And so, I honestly think there’s more value than there’s ever been before in engine programs. 

Alex Bridgeman: And so, you mentioned parts, if parts increase more than the engine program, that’s a challenge. Does the engine program typically cover parts? 

Delray Dobbins: Absolutely. Almost all your engine programs will cover parts and most will cover parts and labor. There’s kind of three or four fundamental pillars that an engine program should cover. It should cover all your scheduled and unscheduled maintenance, all your shop visits, it should cover rental engines, and it should give you AOG support with parts and labor and mobile technicians. A comprehensive program should cover those basic things. 

Alex Bridgeman: So, in taking a step back and maybe diving into that description you just laid out a little bit more, can you describe an engine program? It sounds very similar to a maintenance program on your car, for instance. Can you dive into what an engine program looks like? And then you talked about there’s a lot more value today in an engine program than previously, and part of that is access to rental engines. Maybe what are the pros and cons of using or not using an engine program? 

Delray Dobbins: So, I mean, I’ve done a lot of analysis over the years on most of the engine programs out there, but there’s generally a common theme. Like I said, the engine program should cover your midlife or your overhaul, your MPI-CCI if it’s a Honeywell product. If you do an analysis on an engine program and you look at it in this year’s dollars, let’s say the overhaul costs two million dollars. Let’s say the hot section costs a half million. So, in this year’s dollars, let’s say your totals cost over one overhaul cycle is 2.5, your engine program should save you anywhere from 20 to 30% in this year’s dollars. So, if you’re looking at an overhaul this year, a hot section this year, total cost is 2.5, if you divide that by whatever the TBO is for the engine, 6, 7, 8,000 hours, whatever it is. 

Alex Bridgeman: TBO? 

Delray Dobbins: Time before overhaul. So that’s typically the overhaul threshold. A lot of the engines out there built in the last 15, 20 years have an overhaul anywhere from 5 to 8 or 9,000 hours. So, if you divide the $2.5 million by that number, you’re going to come up with X. X might be 500 bucks an hour. But if you’re saving 30%, which any engine program should save you, you’re not paying 500 bucks an hour. 500 bucks an hour is what you would self-reserve at dollar for dollar. Instead of $500 an hour, maybe the engine program charges you $375. So dollar for dollar, you’re actually paying less than what you would self-reserve for. You’re saving money over the events that you know will happen. You will have an overhaul. You will have a hot section. So you’re already ahead of the game there, but then as a benefit, you get AOG support. This is almost like AAA for your roadside when your car breaks down. They send out the technician, they send out the parts, they cover the labor to replace whatever goes bad. Maybe it’s a fuel control. So not only does an engine program save you a good 20, 30% over the major events that will happen, you get the added benefit of AOG support. 

Alex Bridgeman: And how does the savings portion occur? So, how is the engine program able to save you that 20, 30%? Do I take your cash and invest it like an insurance company and get a return towards that eventual cost, or where does that come from? 

Delray Dobbins: Different manufacturers and different engine programs do it different ways. Some engine programs will say we put your money in a trust. Some engine program providers will say, well, we take your money and we invest it in infrastructure, we invest it in lease engines, we invest it in parts. And part of me says it doesn’t matter what you do with the money. Because I’ve seen both sides. I’ve seen where it goes into a trust, and I’ve seen it where it goes into infrastructure. 

Alex Bridgeman: Trust being just cash? 

Delray Dobbins: Yeah, just a trust dedicated to that airframe. So part of me says it doesn’t matter what they do with the money, because you have a contract that says, I will provide these services. And as long as the provider provides those services when needed, it doesn’t matter what they do with the money. Because the engine program is recognized in history as adding value to the asset. And so whether it’s an OEM or whether it’s a third party, as long as it’s 100% coverage, you put millions of dollars in an engine program, you’re going to realize that benefit two different ways. You’re going to realize the benefit of the engine program when you go to market, because your aircraft will appraise for more, it will sell for more, or you’re going to realize the benefit of that engine program when you go in for overhaul and your hot section. And so a lot of people, I’ve heard conversations over the years, they get told, well, what do you do with the money? I don’t think it matters. As long as they have a contract and the contract says for this money that I paid, I get these services, and as long as those services are provided, then I don’t care whether you put the money in the bank or you invest it in rental engines, as long as when I need a service that you’ve promised me, it’s provided in a timely manner. 

Alex Bridgeman: What does EAP do with that money? 

Delray Dobbins: In an engine assurance program, we put a customer’s money into a trust. And so it’s always there for that customer when they have an event, whether that event be a scheduled event or an unscheduled event. We’ve patterned EAP after several of the engine OEMs programs, but in cases where our focus is only on older aircraft. So I use the phrase out of production aircraft. And so, your older Excels or your older Lears, G200s, Lear 60s, those aircraft owners, in many cases, have not been getting the support that they’ve needed over the years. We all know supply chain, older components may not be available, as readily available. And so the OEMs make an effort to support their out-of-production aircraft. But the OEMs also have a major obligation to their airframe partners to deliver engines for the production line. So, in EAP’s case, our sole focus every day, that’s all we do, is we focus on the niche of the industry that’s out of production aircraft. We saw a void there about eight years ago when the company was started. And we’re like, you know what, here’s a segment of the industry that is not getting the service they want or expect. And EAP is the only engine program provider in the business that solely focuses on the older aircraft. 

Alex Bridgeman: And it sounds like, correct me if I’m wrong, but it’s the only engine program not tied to an OEM? 

Delray Dobbins: No, there are a couple of other third party programs out there. I think the other third party programs, they try to compete across the board, whether it’s a brand new G500 or a 30-year-old Lear60. And so, I think the OEMs, anytime a new engine comes onto the market, there is- and I’ve been on four or five brand new aircraft engine programs over the years, every one of those engines has, I’ll call it, teething pains. Most engines don’t become a mature platform until they’re about 10 years old. And so EAP is pretty happy to step back and let the OEMs, through their warranty and through their own programs, take care of addressing the needs of the customer for those first 10 years. Once engines become mature and around that 10 or 15 year threshold, the first couple of aircraft get parted out. And there’s a lot more maneuvering space in the, I’ll call it the 15 to 25 year old aircraft space. There’s more maneuvering room for a company like EAP to acquire engines, to acquire fuel controls. And that’s our niche. That’s how we can make a good business model out of it while providing a better service to our customers, to that customer base, arguably better than what the OEMs are doing. 

Alex Bridgeman: And I imagine, too, that because those engines are more mature platforms now, they’re more predictable in maintenance cycles and common repairs and cost. So, I imagine that it’s probably easier to price those programs more accurately. 

Delray Dobbins: It is. Once the first engines start going through overhaul, it is easier to price. A lot of the unknowns fall away after about the engine is 10 or 15 years old as a program. 

Alex Bridgeman: That certainly helps. What goes into pricing? It seems like a giant data problem on predictability of maintenance and what those costs will be in the future and how you price that now. What are all the factors that go into a pricing program? 

Delray Dobbins: The major factors are what it costs to do an overhaul and what it costs to do a hot section, or a midlife if it’s Rolls, or an MPI if it’s a Honeywell product. We look at the two major events and we do a cost analysis. And we throw in a little bit of extra into the rate for some AOG support. But really, when you’re looking at an hourly rate for a program, probably 95% of that rate is going towards those two big events, the hot section and the overhaul. There’s a little, like I said, I call it the 3 or 4% rule that goes into a what-if, an unscheduled, I had a carbon seal break at Martha’s Vineyard over Thanksgiving. That was an expensive recovery. But most of the engine program providers look at the two major events and then start working backwards from that. 

Alex Bridgeman: And how does EAP make money? Where does the margin come from? Do you just charge a little bit above what you think it’s going to cost and that’s your margin, or there are separate ways that that happens?

Delray Dobbins: I won’t give away the secret sauce. But we do manage to make money. I think our business model is, we are comfortable making less margin than what the OEMs are making while giving a better service support structure, better AOG support, better planning for your scheduled events. We’ll actually get with our customers six or 12 months out, and because of the supply chain problems that are still lingering, if you’ve got an overhaul coming up, sometimes some of the parts required, sometimes those are a six or 12-month lead time. We actually reach out to our customers, and we actually start buying those parts with those long lead times 12 months before the overhaul occurs. And so, I don’t necessarily see that happening in the OEM space, that level of proactive communication. I almost call it like just a very hands-on, almost a white glove service where you gave us your money to help you, we’re going to be there every step of the way. 

Alex Bridgeman: Yeah, like an advisor more than just a service provider. So you’re already kind of diving into that, but could you share more about what goes into creating a good customer experience for an engine program, that responsiveness and depth of knowledge?

Delray Dobbins: I think responsiveness and depth of knowledge are probably two key components that is an absolute requirement to give a customer a good customer experience. Most of the people on the EAP team have already had 20, 30 years experience at other big companies, most of them OEMs. We have a lot of Honeywell experience on our team. And so one is technical knowledge, one is just years of experience in the industry. But two is that I find some people in this business are just wired to just do whatever it takes to service the customer. And almost everybody on our team is that way. We are wired to deliver that customer experience that they paid for, and we don’t go to bed at night until that’s been done. 

Alex Bridgeman: For a new customer, how does a customer go from first call or email to you or just through the contact form on your site to they’re now paying into an engine program? What kind of happens between those two steps? 

Delray Dobbins: Generally, we’ll meet a customer at a trade show or sometimes they’ll come in to us. Actually, our existing customers are our best advocates, our best word-of-mouth advertising for us. Almost every customer that we’ve engaged with says that our AOG support is superior to almost everybody else out there, which is a wonderful thing to hear. And that’s not an accident. It comes back to the things you just mentioned – depth of knowledge, responsiveness, answering the phone 24/7. We’ve got a couple of case stories we’ve put up on LinkedIn where we’ve had amazing AOG recovery times. And none of that is an accident, planning, having the right parts in stock. Sometimes I find customers over the years, they just appreciate you actually answering the phone. I’ve actually heard several people in the industry say, I can’t reach a person. I get caught in a nine option phone tree menu that I can’t find the right person. And then when I finally click the right button, I get a voicemail. If you’re putting millions of dollars into an engine program, that should not be your experience, nor should it be your expectation. 

Alex Bridgeman: Yeah, you shouldn’t know what the hold music sounds like. 

Delray Dobbins: No, no, you should not. Definitely. 

Alex Bridgeman: What’s so funny about that too is that’s not just a engine customer service point, like any business, if you call and someone answers the phone, it’s more rare than you would think, but it’s just a really good and basic step to providing better service, is just answer it. So when you call, is there a number system, press one for this, press two for that? Or is it just someone answers the phone and they help you? 

Delray Dobbins: There is a, it’s either one or two. It’s either one for AOG or two for sales, I think. 

Alex Bridgeman: Oh, that’s much better. That’s perfect. 

Delray Dobbins: Yeah. I mean, it’s about as simple as it can be. 

Alex Bridgeman: I like more simple things. So, there’s an evaluation- is there an evaluation of that engine that that customer wants on the program today and kind of where it stands and what it will need and the pricing? 

Delray Dobbins: Every time a customer asks us to quote an engine, we have to, everyone’s a case by case basis. We would look at, for let’s take like a Lear60, older aircraft, out of production since 2012. Somebody from Montana wants us to quote a Lear60, we would look at it, where the engines are at in their life cycle, have they already been through an overhaul? But we also look at the history, because if the aircraft spent its whole life in the Philippines or China, we know it’s going to be probably 20% or 30% more expensive to overhaul those engines than if they’d spent their whole life domestic. And so because our sole focus is older aircraft, we have to look at the history of that aircraft. Where has it been? Where has it been operated? Who operated it? And so there’s a bit of color and context we have to put around every quote because anybody who does an engine program, you’re assessing future risk. And you’ve got to make sure you price that future risk right. An aircraft that comes from, like I said, the middle of Africa or harsh climates…

Alex Bridgeman: Or saltwater. 

Delray Dobbins: Or yeah, saltwater. That’s factors we have to look at. 

Alex Bridgeman: Are there any lessons learned over the last eight years about pricing that risk better? 

Delray Dobbins: I think one of the big surprises that has occurred in the last four or five years that I’ve seen is corrosion issues. I’ve seen some of the OEMs tighten up their limits on corrosion, and that has increased the rejection rate of some critical parts, high-priced parts. And so a lot of engine programs out there do not cover corrosion. And so that’s a factor. Every engine program is not made the same, even on the OEM side. Some cover schedule line maintenance, some don’t. Some cover corrosion, some don’t. We’ve patterned EAP to basically mirror the OEM’s programs. And so that’s probably the biggest thing that surprises customers who are on an engine program going in for an overhaul is either, one, whether or not the rentals are available, and two, the corrosion factor seems to pop up more now than it did five years ago. 

Alex Bridgeman: One part I’m really fascinated about too is on the EAP site, it lists $42 million in inventory. And I assume that’s engines sitting somewhere. 

Delray Dobbins: We actually own- we have over a hundred engines in inventory, across the whole variety of products, engines, again, all focused on out of production aircraft. 

Alex Bridgeman: Are they all here in Dallas somewhere? 

Delray Dobbins: Yes, they’re all here in Dallas. 

Alex Bridgeman: That must be a pretty cool room to walk through. 

Delray Dobbins: It’s quite a few hangers. 

Alex Bridgeman: How much inventory do you, or how do you track inventory levels and give enough so you have parts and engines when you need them, but not so much that money is sitting on the shelves not being active? 

Delray Dobbins: We look at a horizon for our customer base basically on a one to two year basis. And we look at what events are coming up, what events will require a rental engine. And we start planning one to two years out to make sure, one, if we’ve already got the assets, great, if we don’t have the necessary assets, we need to make sure to have those assets. We actually have a 99% success rate getting rental engines for our customers when they need one. There’s one event that precluded us from saying it’s a 100% success rate. We actually had a customer who had, it was an unscheduled event, I forget if it was a bird strike, but it was an unscheduled event. And he’s like, I need a rental engine. And we looked at what we had and we’re like, didn’t have one available. We went out and bought an aircraft just to create the rental engine that guy needed. And so the willingness to look outside your own network, because when we sold the program, we sold a set of services. While we do everything to plan for the scheduled events and unscheduled, on that particular day, we didn’t have an engine available for him. We went and got one. We went outside our own network, and we did whatever it took to honor the commitments we made. That’s one of the reasons that EAP has built such a great name in the Honeywell space on the older Honeywell engines, and now we’re starting to build that brand into the legacy Pratt and the legacy Rolls Royce engines. 

Alex Bridgeman: You’ll do whatever it takes. 

Delray Dobbins: It’s a simple thing. It’s almost cliche, but the more I look around the industry, it’s the exception, not the norm. 

Alex Bridgeman: What will be the norm? What’s a more average experience? So if I don’t have an engine, what’s the- 

Delray Dobbins: We hear stories all the time of AOG customer and they start calling their provider, and they’re like, well, it’s Friday, I could have a technician to you next Thursday. And that’s just to get out to do the troubleshoot. And so we are very successful at recovering AOG experiences in days, not weeks and months. I mean, we usually, if we need to have a technician on a plane, then in 12 to 24 hours, we will do it. And it’s not always our technicians. The beauty of flying around in the US is there’s almost always an FBO around the corner. No matter where you are in the country, you’re usually not far from a mobile repair technician. But when you call a lot of the service providers, the AOG support system, everybody I talk to, if they got 20 technicians, they need 40. If they’ve got 60, they’re like, I’d hire 30 more tomorrow if I could find qualified technicians. And so it’s not all the service providers fault when they can’t always provide AOG support. This actually comes back to the pipeline of technicians for the next five to ten years. The industry talks a lot about the pilot shortage, but for every five articles I’ll see on the pilot shortage, I feel like I only see one about the maintenance technician shortage. One of the reasons I joined the NBAA Maintenance Committee was to be able to find a way to give back to the industry. And I love the fact that the NBAA Maintenance Committee goes around once a year to a major part 147 A&P school. We go in and we talk to college kids about, you may just be thinking airlines. Don’t overlook this really amazing segment of aviation called business aviation. When I graduated from Purdue, I never even heard of business aviation. I thought I was going to be a sheet metal mechanic on a second shift at Delta for the rest of my life. And I’m really glad that didn’t happen. But a lot of the kids in aviation schools today don’t even know that this segment of aviation exists. 

Alex Bridgeman: Which is wild because you see a way bigger variety of planes and some of them are much cooler than the 747s. 

Delray Dobbins: And thanks to social media, it is probably a bit more known today than it was 30, 40 years ago. I mean, you’ve got Taylor Swift and all the rock stars that are jetting around. But it’s still often overlooked that BizAv is not just for the rich and famous, it’s actually a fundamental business tool. All your Fortune 200 companies, most of them run a flight department. It’s not for luxury, it’s because it’s a cost-effective means of getting around to your different sites and doing business and getting back home on the same day. 

Alex Bridgeman: I love all the Taylor means of flying across the street or making fun of all the short flights that her plane would take. Yeah, it’s certainly a more- social media does certainly help get the word out. 

Delray Dobbins: It creates more awareness than there was decades ago, yeah. 

Alex Bridgeman: Is there an EAP Instagram channel? 100 engines in a room, there’s got to be some content there that you guys can make. 

Delray Dobbins: You know what, I don’t know the answer to that. 

Alex Bridgeman: Or a podcast. There’s got to be something. I’d be happy to help. 

Delray Dobbins: We’ve looked at starting some of our own podcasts just to increase awareness. One of the other things that I find is a big gotcha to customers is life limited parts. And so obviously a turbine engine is a rotating spool of blades and wheels and stuff. Those wheels in the engine are typically referred to as life-limited parts or life-limited components. Those wheels have a cyclical life. And so that cyclical life is often somewhere in the 10,000 to 20,000 cycle range. And by the way, a cycle is a takeoff and landing. That’s one cycle for the engine. But a lot of the industry is just used to tracking engines and the term of hours. And so like a Phenom 300 is a good example. You overhaul that engine every 5,000 hours. But the wheels on the engine are cyclically rated somewhere on the 12,000 to 14,000 cycle range. So that means you’re going to go through an overhaul at 5,000 hours, another overhaul at 10,000 hours, and somewhere in that, between the second and third overhaul, between 10,000 and 15,000 hours, that whole stack of life-limited wheels in the engine is going to cycle out because LLPs cannot be overhauled. And so, I just had a conversation last week with an owner here in Texas, and I had to walk him through, and he’s like, well, how can I have a buy-in? My engines were just overhauled, doesn’t that reset everything to zero? No, your overhaul does not reset everything to zero. Because those cycles, those cyclically limited parts, those life-limited parts, they get inspected at overhaul. But if they pass inspection, they’re put back in the engine, and they continue accruing cycles. So I’ve seen people go out and buy a 20-year-old Excel, no programs. And the stack of wheels in the engine is about 2,000 cycles away from cycling out. And remember, you can’t overhaul them. You’ve got to replace them. And that might be $2 million a side. And so there are a lot of things in the business that can bite you. But if buyers are buying aircraft using Google as your trusted advisor, they’re going to miss some things, and those things are going to cost you millions of dollars. 

Alex Bridgeman: Oh yeah, no kidding. How consistent are those, some of those parts? Are there parts that you could have on inventory that work for multiple engines across maybe the same OEM or different OEMs? Or is it so specific that this one engine has just…? 

Delray Dobbins: Generally, almost everything in an engine is specific to that engine. You might find, for example, the 545 Alpha on the Citation Excel. There is a variation of that engine on the XLS and the XLS Plus, the 545 Bravo and Charlie. Those do have some common parts. But usually when you switch from, say, a Pratt engine on a Citation to a much bigger engine on a Citation Sovereign, completely different. Almost nothing’s interchangeable. Some of the TFE engines, a little bit of commonality, but they are mostly unique. So as we provision spares, we have to provision for every engine model that we’ve got enrolled. And that can be expensive. 

Alex Bridgeman: It sounds like it. Who does the- You mentioned having an AOG service. Who does the overhauls for these engines? 

Delray Dobbins: Most of the engines that we enroll can be overhauled by a variety of parties that have been endorsed by the OEM. In some cases, that’s Standard Aero. In some cases, that’s Duncan Aviation. Those are probably two of the main overhaul shops. And of course, the shops themselves, Pratt & Whitney has their own shop in West Virginia that can do it. They’ve got another shop in Europe. Rolls-Royce has a shop in Montreal. And so not all the OEMs have allowed third-party shops to overhaul their engines. So really, it’s a little bit manufacturer-specific whether or not we have to go to the manufacturer to get the engine overhauled or whether we can go to a third party to get the engine overhauled. 

Alex Bridgeman: So, you don’t do any overhauls in-house, it’s through different…? 

Delray Dobbins: EAP does not overhaul engines themselves. We are not an overhaul facility. We partner with quite a few shops, several of the main ones, to help keep cost in check and provide a good cost experience for our customers and to minimize any surprises. 

Alex Bridgeman: Which is so interesting because the commercial world, you have tons, there’s dozens of engine overhaul shops, especially in Florida. And there’s a different relationship between the OEMs and those MRO shops. It is completely different as a dynamic than business aviation. 

Delray Dobbins: Well, and it’s the intervals are much, much longer. An airline engine will stay on wing for 30, 40,000 hours, sometimes maybe more than that. And they’re certified that way. They’re certified on condition that you do trend monitoring and you monitor those engines, and they will last a long, long time. Business aviation corporate engines are not- smaller engine, and they’re certified, the intervals are much more frequent. Rightly or wrongly, they just are. And so it’s a little bit different mindset because when an airline orders an aircraft, they’ve probably already got a relationship with the engine manufacturer. The other big difference between the airlines and the corporate world is that when the corporate world airframer certifies an aircraft, it’s only certified with one engine. Usually when you order a Boeing aircraft, you usually get the selection of two different engine manufacturers. It’s like ordering a Mustang with a V6 or a V8. In the corporate world, it’s only certified with one. And so, the flexibility that exists in the airline world simply just does not exist in the corporate world. 

Alex Bridgeman: Do you think it’s trending that way or not really going…? 

Delray Dobbins: I think when you look at the certification costs from the airframe manufacturers, the cost of certifying a corporate business jet with two different engine manufacturers is probably cost prohibitive. Because, I mean, if you look at the volume of Boeing, thousands of aircraft for one model, the airline, the corporate world really does not achieve that scale of volume. You don’t see 1500 of any one model ever made. In fact, if you use 500 units as a bar, there’s only a handful of aircraft, business-grade aircraft that have ever crossed 500 units produced. Phenom 300 has, G550 has, it’s a short list. I think when you look at just the scale, I don’t think it’s cost-effective for airframe manufacturers to certify a second engine. 

Alex Bridgeman: Gotcha. So, the individual markets for each engine are small enough that OEM can still have a lot of control on that overall market. Has there been much consolidation platform wise around a couple sets of engines? Or does each aircraft OEM, is there still kind of such a broad portfolio of engines they could choose from that that kind of, small markets scattered across different airframes is still going to proliferate? 

Delray Dobbins: I think the short answer is no, I do not think there’s been a lot of consolidation. I think every time an airframer brings an airframe to market, they’re looking for the right engine at the right thrust category, at the right weight. And of course, I’m sure cost is a factor. I think it’s been that way for 20, 30 years. So, I don’t- The ability to mix and match and take one engine off of one airframe and put it on another, it’s been done. The Beechjet 400 was retrofitted. The Williams engine, I think it was. But it’s very small scale to be able to mix and match 20, 30 years after an aircraft was produced and try to fit in another engine. It’s just economies of scale. 

Alex Bridgeman: Yeah, makes sense. Within your sales role for EAP, are you selling primarily to individual owners or larger operators? What’s kind of the customer mix? …look at your pipeline the next…

 Delray Dobbins: We’ve got a couple of government subcontracts with some foreign governments. We work with fractional, we work with management companies, we work with individual owners, operators. It’s really an interesting cross-section, what our customer base is. But anybody who’s operating an older out-of-production aircraft that wants to be able to control their cost and minimize surprises, I think that’s a potential customer for us. It doesn’t matter if it’s a corporate flight department, if it’s a single operator part 91, we’ve got part 135 customers enrolled with us. It’s kind of across the board. 

Alex Bridgeman: What kind of feedback have customers given you in the last year on like here’s areas that you can improve on or where can you eventually start doing this with us or this service that you can provide? What are ideas that customers are sending you?

Delray Dobbins: I think the biggest dissatisfaction point that customers are experiencing right now is lack of rentals and AOG support. And those are two things that we have done exceptionally well. So I think where customers are maybe on an existing engine program or they’re on an existing engine program that doesn’t cover the life-limited parts, and they see that big cliff coming at them in 5,000 hours, I think those are scenarios where they would look at us and say, can you guys provide a better service? And we do very well at that. 

Alex Bridgeman: What are some areas of improvement for AOG, especially given that that one’s very logistics heavy and you mentioned the technician shortage, which seems worse than the pilot shortage? Where do you feel like that can, that service can improve the next couple of months to year? 

Delray Dobbins: I think as an industry, we have to be willing to pay more for technicians. So when you look at graduating classes out of A&P schools, an uncomfortable large percentage of A&P school students never make it to graduation, because the other industries are out there actually poaching these technically minded students. You look at marine, automotive, HVAC, welding. I actually had a customer of mine, he was in a flight department for nuclear power plants. And he’s like, I’m sorry, Delray. He goes, we actually go in and we hire the whole graduating classes of A&P schools because they are an excellent fit for what we do and they can interface between engineers, they can read blueprints, they can turn wrenches. And so when you look at all the students, the technically minded students, of which there’s not enough of these days, these technically minded students coming out of high school and they go into a technical trade, whether it be an A&P school or welding school or HVAC, and then you look at, there’s one entity in this industry, they want to start out their technicians at $29 an hour. Well, I can start at an HVAC making $45 an hour, and I don’t have to put my name in a logbook risking my license for the safety of somebody else’s life. I’ll take HVAC, your honor. 

Alex Bridgeman: Yeah. That seems like a pretty easy decision. 

Delray Dobbins: And so, it’s- now there’s other flight departments that I’ve talked to over the years, they’ll start their technicians out at 40 or 50 bucks an hour because they are serious about getting the right people in their flight department, and they want to keep them for 30 years, which I applaud. But there’s still parts of this industry that say, I need 30 MRTs, mobile repair technicians. Well, what’s your starting rate? $29 an hour. I think I see part of the problem. 

Alex Bridgeman: Is there pricing power on the other side of that? If you charge 45 an hour or 50 hour, or sorry, you pay 45, 50 hour, are you able to raise prices because your service is now either more available or through puts faster? 

Delray Dobbins: I think a AOG rate, a call out for most of the industry, is anywhere from 175 to 300 bucks an hour. Now, if you’re on a maintenance program, then that becomes a sunk cost for your maintenance program provider. But somewhere, there’s got to be a balance between paying enough to have the right technicians to be able to fulfill your customers’ needs or not. And I think in a lot of cases, providers have not found the right balance. 

Alex Bridgeman: Is there some poaching you could do after the fact? 

Delray Dobbins: I like how you used my word there. 

Alex Bridgeman: Well, I thought once they go back to, let’s say they go to HVAC or automotive, you could turn right around and tell them, hey, do you want to work on toilets and cars or do you want to work on- not toilets but AC units- 

Delray Dobbins: Most of the people that I run into in this business that I become close to, they’re not in aviation just for the paycheck, they’re in aviation because they love it. They love the history of it. They just like being immersed in this industry. I don’t know if a kid coming out of high school or college or a part 147 school who just wanted to make money, would you choose aviation? I mean, you can make a good living in aviation. Could you make more working for a Mercedes or BMW dealership? I don’t know. What do you love? You can make a living both ways. What do you want to do? And that’s kind of the cool thing about the maintenance committee going in and talking to these part 147 schools is we’re already talking to a room full of students who are engaged in aviation. We want to make sure they’re aware of the option of coming into business aviation. 

Alex Bridgeman: So, what’s your pitch? You have a classroom of 20 students. What’s your pitch for here’s what we- here’s a part of the industry maybe you didn’t know about, or here’s the kind of stuff that we get to work on every day? 

Delray Dobbins: We got up in front of 200 students at Western Michigan a couple of years ago. And I was actually kind of- I’m not usually one at a loss for words, but it’s a little bit intimidating. I can talk to a roomful of industry peers. Trying to connect with a roomful of 200 students, I found that challenging. That was a little intimidating actually. But it’s like anything else – once you get started, it kind of flows. 

Alex Bridgeman: You were a DJ. You can… pull from that.

Delray Dobbins: A little bit. So, I don’t know, poaching back and forth from other industries back into the aviation world, that’s a tough one. Because the carrot that corporate aviation might put out there for a guy coming out of A&P school, is that a bigger carrot than what automotive and marine might offer? I don’t know. I had a boat for a while. About four years ago, I took it in to have it serviced. And in big bold letters over the service desk, it said labor rate, 150 bucks an hour. And I was- apparently, I hadn’t had a boat worked on in a while because I was rather shocked at the labor rate of 150 bucks an hour. And I asked the guy how he justified charging me $150, 150 bucks an hour to work on my boat. And he did not bat an eye. He’s like, if I didn’t charge you 150 bucks an hour to work on your boat, I wouldn’t have anybody to work on your boat because I would lose all my technicians to the automotive world and aviation world. I thought that was a pretty good answer actually. 

Alex Bridgeman: Yeah. Sounds about right. I mean, if you’re a technician who’s, you went off to the marine world and now you want to switch over to aviation, from a skills and certifications standpoint, what do you need to happen or what needs to happen to make that leap? 

Delray Dobbins: You still got to be a licensed- I mean, there’s a couple of ways you can get your airframe and power plant license. A lot of people go through a part 147 school, or they actually take you, it’s like going to school, a trade school. 

Alex Bridgeman: How long is that usually? 

Delray Dobbins: Probably 18 months is a good window. Some a little bit more, some a little bit longer. In some cases, it’s case by case based on how fast the student learns. But 18 months is probably a good target. There’s other ways to get your airframe and powerplant license through an apprentice program. So, if you’re working in an aviation shop or a repair station, I think it’s a 30-month window where you’re an apprentice and you go through different things and they sign you up to take your A&P skills test. One of my very close friends actually did it that way, got his A&P that way versus going to like a formal college university. 

Alex Bridgeman: Seems like an attractive option to continue getting paid versus shelling out money for your school fee. 

Delray Dobbins: Absolutely. Absolutely. 

Alex Bridgeman: Are there any incentives or carrots that programs or companies are making to try to get students or just technicians from other industries to make that leap, to make the financial commitment a little easier? 

Delray Dobbins: Actually, there’s quite a few MR&O facilities, maintenance facilities, in the industry, because of the technician shortage, they have started taking students, I even saw a fractional operator on the East Coast, they’re actually taking technically minded students out of high school and putting them to work in their shop and let them do an apprentice program. And that’s- which, I mean, it’s a little bit of a sign of the times. If you can’t find your labor force, you need the open market, then at some point you start creating your own pipeline. Because if you don’t create your own, in these cases, if you don’t create your own pipeline, you’re not going to be able to service your customers at a scale they need in the next, three, five, ten years. 

Alex Bridgeman: So, is it the same 30 hour apprentice program if you’re…? 

Delray Dobbins: 30 months.

Alex Bridgeman: Or 30 months, yeah, sorry. 30 months. So, you could start, you could be a full licensed mechanic before your peers are graduating college? 

Delray Dobbins: Yes, absolutely. 

Alex Bridgeman: Pretty attractive for the right student. How many high schools have they done that with? If you really want to get ambitious with it and you’re in the Atlanta area, for instance.

Delray Dobbins: I don’t know. I don’t have a number for that one. I don’t know. But I know as I look around the industry, I see more and more of the big MR&O facilities starting to take control of their own pipeline rather than just relying on the open market to supply the technicians they need. 

Alex Bridgeman: What kind of infrastructure on the MRO side does that require to have a good, a well-run apprentice program and to support those, once those students get into your company and are now on their path, what are the key things you need in place to make sure that they’re continuing on, they get to the 30 months and they’re successful and they’ve got the knowledge they need? 

Delray Dobbins: I think there’s a little bit of brand loyalty there. I mean, arguably, I would think a lot of students that come into an apprentice program and that facility or that employer helps them learn a trade and even after they get their license, I like to think there’s some brand loyalty there. They’ll stick around. 

Alex Bridgeman: But from a role standpoint, who are the different, is it just a normal A&P technician that can take on an apprentice, or is there some additional capability that technician needs to have to manage an apprentice program? Essentially, you’re not just the one turning wrenches, you’re teaching someone else now, which is a different skill set. 

Delray Dobbins: I’m not sure I understood. Repeat that again. I think I lost something.

Alex Bridgeman: For a technician to be good at working on wrenches and working on planes, that’s one skill set. But to teach someone else how to do that as an apprentice in that 30 month program, that seems to- My first reaction is that that probably raises the bar on who that person who’s going to take on an apprentice needs to be. They need to have those skills of education, and, of course, it’s going to be faster if they do some job themselves, but then the apprentice won’t learn. So that has to be a very special person. 

Delray Dobbins: I think it’s like any other training program. You’ve got to have the right infrastructure and the right people governing it internally. A lot of the skills are doing side-by-side with experienced mechanics. And so not every mechanic makes a good teacher. But I think if you have the right people and the right supervisory roles overlooking, like you said, he’s earning a living while he’s learning a trade. The plans that I’ve talked to, MR&O facilities, it’s producing, it’s solving the pipeline problem while teaching these students a trade. I’ve heard nothing but upside from it. I really haven’t seen any downside. 

Alex Bridgeman: It’s good to hear. What are you excited to see happen in the next year? 

Delray Dobbins: In the next year, actually, I tend to look more five to ten years out. If when I’m talking to students coming out of A&P school or at an aviation program out of college, I think the next five to ten years is going to be as exciting as the late fifties when the industry transitioned from piston to jet. When you look at all of the emerging technologies, when you look at advanced air mobility, when you look at hybrid, when you look at electric, when you look at supersonic, there are so many things that are coming to fruition in the next 10 years. I’m near the end of my career, probably another six or eight years, but students coming into this industry now, the transitions that they’re going to live through in this industry over the next 10 years, I think it’s as amazing and as transformative as the piston to the jet age was. 

Alex Bridgeman: That’s a bold statement. 

Delray Dobbins: It is, but there’s a lot of cool stuff happening that’s R&D. And it’s in all of our trade journals. We hear about it. Not all of these emerging technologies will become viable and in production, but a lot of them will. I think there are positions and roles in these new emerging technologies that don’t even have titles yet. But for people coming out of school in this industry now that are going to live this transition over the next 10, 20 years, I think it’s an amazing time.

Alex Bridgeman: On the electric side, I’m just kind of curious, a big pitch for electric cars is much simpler maintenance; is the story pretty similar for electric aircraft motors? 

Delray Dobbins: I think that the maintenance is probably simpler. I think the battery technology is the biggest limiting factor, battery technology versus weight. Anytime an airframer goes to an engine manufacturer and says, build me an engine for my next model of aircraft, they always want more thrust than the last one, and they always want it to be lighter than the last one. So, I want more- and the request won’t be any different for battery technology. I want more power and less weight, because every 50 pounds saved on the powerplant, there’s another 50 pounds of people and baggage you can put in the aircraft. 

Alex Bridgeman: Which goes a long way. 

Delray Dobbins: Which goes a long way. And so, it’s the, regardless of the technology, the requirements for power versus weight, that’s the yardstick by which every power plant is going to be measured. 

Alex Bridgeman: And you have the added challenge of playing with jet fuel, it’s going to land lighter than when it took off, whereas electric’s going to be the same weight, could be probably the exact same weight when it took off, which is a whole new performance question. 

Delray Dobbins: It’s a new landscape. 

Alex Bridgeman: Absolutely. Well, Delray, thanks for sharing your time. 

Delray Dobbins: Thanks for having me, Alex. 

Alex Bridgeman: And having me come by. It’s good to see you. 

Delray Dobbins: Alrighty. Thank you.