Design, Economic Competitiveness, and Profitability of a 2025 LNG Fueled Turboprop for the LNG Air Transportation System J. Gibbs, B. Nagel

Contents What is LNG? Motivation & Previous Work Research Questions Market Share/Profitability Assessment Process Results Conclusions

What is LNG? H H H C H H C C H C … H H H H H C C … H H H H H H Liquefied version of natural gas, stored at cryogenic temperatures with cryogenic tanks Less dense but also lighter than jet fuel (more energy containing, C-H bonds, fewer C-C bonds than encourage compactness) Cheaper and fewer lifecycle emissions than Jet A for all GHG species Fewer carbons per C-H bond  lower combustion CO2 per unit energy/unit of mechancial work High combustion energy bond H H H C H H C C H C … H H H H H C C … H H H H H H

Motivation / Previous Work: 2009 Level 0 AC design and mission assessment Level 1 price and emissions Used average prices for production processes, Used stoichiometric calculation for CO2 emissions,

Motivation / Previous Work: 2013 LNG Only Jet A-1 Only Full LNG Aircraft (New Aircraft) Full Fuel Available Payload: 100% LNG Fuel: 100% ? NR Jet (Baseline) 2 Engine LNG (50% Retrofit) Full Fuel Available Payload: 100% LNG Fuel: 0% Full Fuel Available Payload: 37% LNG Fuel: 23% Rigorous (level 2+) weight, cost, emissions and mission performance assessment Establish relationships between design changes, ROI, emissions reduction per $ of investment By accident, we found we can do this for an LNG aircraft without generating a new detailed design if a Jet A performance model is available

Motivation / Previous Work: 2013 LNG Only Jet A-1 Only Full LNG Aircraft (New Aircraft) Full Fuel Available Payload: 100% LNG Fuel: 100% ? NR Jet (Baseline) 2 Engine LNG (50% Retrofit) Full Fuel Available Payload: 100% LNG Fuel: 0% Full Fuel Available Payload: 37% LNG Fuel: 23%

LNG Aircraft Design Changes Almost no changes Some changes (combustor retrofit) Significant changes (composites rqd)

Research Questions What are the likely manufacturer profitability and likely market share of an alternatively fueled new aircraft design? What design sensitivities drive these numbers? Mission Requirements Design Goal (min Fuel burn or gross weight) Generate Initial Geometry Available Technology Execute Design Loop Conventional Design Process

Research Questions What are the likely manufacturer profitability and likely market share of an alternatively fueled new aircraft design? What design sensitivities drive these numbers? Mission Requirements Design Goal (min Fuel burn or gross weight) Design Goal (max Market Share / IRR) Generate Initial Geometry Available Technology Market Share/Profitability Assessment Execute Design Loop Design Process Modifications

Pre-Design Processes: Market Share/Profitability Assessment Establish operating costs of competitors 2) Derive a market share assessment law (EIS, Opex)  examine the eco system 3) Take best guess for new aircraft (markish-model) 4) Determine pricing sensitivity and IRR scenarios

1) Incumbents and Competitors ATR 72 (31.96 orders / year), 68 seats, 275 knots, no stretch possible, EIS 1989 Average Bombardier Q-400 (32.27 orders / year), 78-88 seats, stretch possible, 360 knots, EIS 1999 44% better fuel economy @ max range, 24% higher acquisition cost, Average 3 potential new entrants from India, China, South Korea

2) Ecosystem

3) Development Costs for new TP aircraft New aircraft cost Markish 777 Dev & MFG part cost breakdown % Dev & MFG part effort Raymer new aircraft R&D + Boeing 777 share same cost part breakdown and non recurring costs per pound per part (no fixed cost) Raymer/Dapca IV RTD&E Costs (Does contain fixed costs) Estimate Changes LNG Aircraft Sub-system Development Effort Percentage of Jet A Subsystem Effort LNG Turboprop Estimated Development Cost ($USD) Baseline Jet A Turboprop development cost ($USD) Wing Empennage Fuselage Landing Gear Installed Engine Systems Payloads 90% 100% 125% 25% 110% $2,442,156,174 $2,081,008,647

3) Manufacturing Cost Model 1st Unit Cost Markish Learning Curve Assumptions Nth Unit Cost

3) Manufacturing Cost Model 1st Unit Cost Markish Learning Curve Assumptions Nth Unit Cost Pick an average margin

4) Pricing Sensitivity Customer break even 50-50 MFR/Customer split of econ benefits

4) Pricing Sensitivity 5.7 % margin

Results for 5.7% mfr margin

Results: Operating cost differences vs. competitors Operating Cost Reductions relative to Incumbent Turboprops (Q400 & ATR 72) Older jet fueled turboprops with acquisition price discounts New Q400 derivative Jet fuel Turboprop New LNG Turboprop 5%-6% 5.1% 9%-15% Operating Cost Advantages of a new LNG turboprop relative to future competitors Older jet fueled turboprops with acquisition price discounts New Q400 derivative Jet fuel Turboprop Current Turboprops 3%-11% 4.9%-8.9% 9%-15%

Results: Profitability & Market Share Scenarios Un-discounted profits   Manufacturing Profit Margin Total # of Aircraft Built, Maximum Build Rates, Resulting Market Share 316 aircraft, 2.5 aircraft per month: 24% market share 630 aircraft, 5 aircraft per month, 47% market share 1005 aircraft, 8.3 aircraft per month, 75% market share 5.7% mfr margin (50-50 split of cost saving benefits between manufacturer and airline) Not Profitable $4,265,524,201.87 $7,818,669,957.21 20% mfr margin $1,546,367,252.71 $7,729,047,300.75 $13,591,208,455.33 25% mfr margin (maximum for positive airline ROI) $2,153,800,541.22 $8,940,069,363.29 $15,609,578,559.57 Actual market share depends on strength of actual competitive response Market size allows for only 2-3 incumbents to all be profitable Internal Rate of Return Grid   Manufacturing Profit Margin Market Share, Total # of Aircraft Built & Maximum Build Rates 316 aircraft, 2.5 aircraft per month: 24% market share 630 aircraft, 5 aircraft per month, 47% market share 1005 aircraft, 8.3 aircraft per month, 75% market share 5.7% mfr margin (50-50 split of cost saving benefits between manufacturer and airline) Not Profitable 9.3% 17.1% 20% mfr margin 4.5% 14.0% 21.8% 25% mfr margin (maximum for positive airline ROI) 5.9% 15.4% 23.2%

Results: Cashflow

Conclusions What are the likely manufacturer profitability and likely market share of an alternatively fueled new aircraft design ? What design sensitivities drive these numbers ? With a 5.7% manufacturing margin, 9.1-11.7% IRR can be achieved vs. likely competitive responses Lease financing is required Infrastructure investment is 20% of required lease financing for to equip all commercial airports

Conclusions What are the likely manufacturer profitability and likely market share of an alternatively fueled new aircraft design? What design sensitivities drive these numbers? Mission Requirements Design Goal (min Fuel burn or gross weight) Design Goal (max Market Share / IRR) Generate Initial Geometry Available Technology Market Share/Profitability Assessment Execute Design Loop Can Generate Profitability Sensitivities for Fuselage design MFR margin Infrastructure spend Cruise speed …

Questions?

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