‘Perfect storm’ clouds the engine aftermarket

By the end of 2020, nearly 70,000 civil aircraft engines are expected to be in service. Analysts predict that just three narrow-body engines will account for 50% of that market: the CFM56 family with one-third, followed by the IAE V2500 and General Electric (GE) CF34 with 9% and 8% respectively.
The MRO demands of this fleet, which is well represented in the Middle East, are unprecedented. It has the makings of a “perfect storm”, in the opinion of Sami Ben-Kraiem, vice-president marketing and sales, Middle East and Southeast Asia for MTU Maintenance.
David Archer, senior analyst at the independent aviation consultancy, IBA, said the industry had seen this situation approaching for a long time as a consequence of the rate of delivery. Compounded by delays to new programmes and the number of concurrent mature and first-run shop visits, a squeeze on MRO slots “had to happen”.
What nobody could forecast were factors such as the way low fuel prices and high air transport demand have lengthened the service life of older engines, which adds to the maintenance burden and reduces the stock of used serviceable material (USM). Combined with shortages of new parts from OEMs, who are focussed on their latest products, operators face an engine overhaul bottleneck.
Ben-Kraiem said MROs foresaw the increase in shop visits for newer versions of the CFM56 and V2500 engine families to peak demand by the mid-2020s. But new generation engines are also entering the shops earlier than anticipated, a trend that will accelerate in the coming decades.
“All this has led to our shops being fully loaded worldwide,” he said, adding that operators who have failed to plan ahead could be left in the cold.
Archer said demand – especially among narrow-body operators – will remain “close to its peak“ for another four or five years. “After that, we’ll see a steady decline but no massive cliff-edge. That’s the cyclical nature of the market.”
In the short term, he said, there are winners and losers. The grounding of the Boeing 737 MAX fleet and teething problems with LEAP and geared turbofan (GTF) entrants has put a premium on CFM56-7B engines, for example.
While the agreement by CFMI to drop what were seen as anti-competitive practices surrounding third-party maintenance of its engines is “obviously beneficial”, Archer has seen little or no change because of it.
In reality, he said, the agreement struck with the International Air Transport Association (IATA) a year ago put into writing what the company was already doing, while removing pay-walls related to documentation, for example. “Privately, other OEMs have said if IATA came to them, they’d be open to similar agreements,” he said. “After all, a healthy aftermarket is good for everybody.”
The growing emphasis on narrow-bodies has left the wide-body market somewhat adrift. There, Archer said, the latest engines on types such as the B787 and A350 are in general “doing well”, their value depending ultimately on their condition.
He reports a “limited aftermarket” for older B777 engines, such as the Rolls-Royce Trent 800, PW4000-112 and GE90-7/8/9.
Issues with newer wide-body powerplants, notably the Trent 1000, have boosted demand for A330 engines, including the Trent 700, CF6-80E and PW 4000-100.
The demise of the A380 programme leaves the Trent 900 and GP7000 with limited options. Four on each of the 250 aircraft ordered make for “a lot of engines” with predominantly low cycle utilisation typical of long-haul operations.
Part-out will benefit only the remaining, diminishing fleet. “It depends how long the fleet stays in service,” said Archer. “In 20 years, materials will get used up.” After that, scrap or possibly alternate uses as terrestrial powerplants could be their fate.
A useful comparison, he said, could be with the Trent 500s on the A340-500/600 – a “similar platform that petered out earlier than expected”.
Where the CFM56-5Cs on A340-200/300 types had commonality within the CFM56 family, the Rolls-Royce engines on the larger variants did not.
“Now Trent 500 engines have minimal, if any, value outside of the fleet,” he said, adding that the few remaining A340 operators “will lend value to the asset”.
MROs will feel the effect if investors believe they have minimal chances of recouping the cost of expensive maintenance, but for now, demand is strong and shops remain full.