CFM56-3 CFM
Detail of the turbine and the landing gear of a Boeing 737

CFM56 Aftermarket Assessment: Strong Prospects Ahead

After more than 40 years in service, the CFM56 will see an MRO bow wave

The CFM56 is the most successful engine in commercial aviation history. Almost 25 years since the -3 model started flying on the Boeing 737 Classic, more than 24,000 iterations of the engine are still in service, and it will take nearly another decade for the CFM56’s successor—the CFM Leap—to overtake it in the global fleet.

Numbers of the two most popular variants, the CFM56-5B powering the Airbus A320 family and the -7B for the Boeing 737NG series, will continue to grow until 2020, according to Aviation Week’s 2017 Commercial Aviation Fleet & MRO Forecast.

CFM, a joint venture between General Electric and Safran Aircraft Engines, predicts that it will produce roughly 1,400 CFM56 engines this year, 1,000 in 2018, 250 in 2019 and 100 in 2020. Against the Leap, this means that the CFM56’s share of production will decrease from 78% this year, to 51% in 2018, to 11% in 2019 and to 5% in 2020.

“Keep in mind that 2017 to 2020 are projections only; the CFM56 product line is still selling,” notes Jamie Jewell, CFM’s director of strategic communications.

Naturally, CFM takes its cue from narrowbody production at Airbus and Boeing, and particularly the latter, since CFM is the sole engine supplier for the 737NG and 737 MAX. Boeing’s rate of 42 single-aisles per month is dominated by the CFM56-7B-powered 737NG, but by 2020, when 57 will roll out monthly, the majority should be Leap-equipped 737 MAXs.

CFM says that CFM56 production peaked in 2016 at 1,665 units, while Aviation Week forecasts that the in-service fleet will top out in 2018 at just under 25,000 engines.

Nonetheless, accurate forecasts about engine numbers are tricky, not least because Boeing hasn’t specified its ratio of 737NGs to MAXs going forward. Also, some analysts think that production plans, including Airbus’s rise to 60 narrowbodies per month in 2019, are too aggressive. Slower growth in emerging markets, combined with ongoing cheap fuel could lead to a spate of deferrals for new aircraft, meaning the CFM56 count could stay higher for longer.

History suggests how market-leading engines are superseded. In 1997, there were almost 4,000 CFM56-3s flying on 737 Classic aircraft worldwide. The engine was approaching the peak of its popularity, but in the same year the 737NG entered service, sporting a new, more efficient powerplant, the CFM56-7, which became the fastest-selling engine to that date.

Production of the older CFM56-3 ceased four years later. Even so, the in-service fleet of -7s only overtook that of -3s in 2005, eight years after the former engine’s introduction.

CFM

Detail of the turbine and the landing gear of a Boeing 737

CFM56-3 values fell rapidly after in-service numbers were overtaken by its successor, the CFM56-7.


 

There appear to be parallels between the introductions of the CFM56-7 and the Leap, which were both designed to offer better fuel burn on re-engined variants of popular narrowbodies. CFM expects to complete transition to Leap production in 2020, so -7 production will wind down in roughly the same time as the -3—about four years after the introduction of their successors.

However, there also are several reasons why the CFM56-7’s story will not just repeat that of the CFM56-3. First, the newer engine outsold its predecessor almost three to one across a longer production run. Engine values usually start to drop once the population of a new iteration succeeds that of the older, so pricing for the CFM56-7 (and, to a lesser extent, the CFM56-5B) could remain stable for another decade.

On the other hand, Leap’s fuel-burn gain of 16% is twice what the -7 offered over the -3. From 2002 to 2008, oil rose from $30 to $145 per barrel, and CFM56-3 values were cut in half. Future oil price inflation could mean a quicker-than-expected demise for the -7.

Reliability

Any discussion of the CFM56’s future must note its exceptional reliability. When the -7 was introduced, its predicted mean time between overhaul was 20,000 hr., but engines operating in clement conditions have lasted up to one-third longer—to the consternation of some MRO providers.

Given this reliability and a production rate that peaked only last year, the bow wave of CFM56 overhauls is yet to arrive. CFM56-7 maintenance spending will jump from $3.3 billion to $4.2 billion next year, stabilize until 2022, and then steadily rise to $6.5 billion by 2026, predicts Aviation Week’s 2017 Commercial Aviation Fleet & MRO Forecast.

“We are seeing an upward trend for CFM56-5B and -7B shop visits, as more are due for scheduled maintenance, and we expect the trend to continue in the next year or so,” says Choo Han Khoon, executive vice president of engine total support at ST Aerospace.

Lufthansa Technik

‹berholung eines CFM56-7B-Triebwerks bei der Lufthansa Technik in Hamburg. / Overhaul of a CFM56-7B engine at Lufthansa Technik in Hamburg.

Better-than-predicted reliability and a long production run mean that CFM56-7 maintenance won’t peak until the mid-2020s.


 

Maintenance spending on the A320’s CFM56-5B powerplant will grow less dramatically than on the -7B but is still expected to rise by about one-third in the next 10 years.

In contrast, the mature CFM56-3 represents a shrinking market for MRO providers. Rather than overhaul such old engines, many operators decide instead to tear them down for parts or lease-in a replacement that still retains some service life.

Aviation Week forecasts that the CFM56-3 fleet will drop to 525 from 1,970 engines by 2026, and that MRO demand will fall to $74 million from $479 million.

The Maintenance Market

The CFM56 has more MRO options than any other engine. Globally, 42 facilities offer CFM56 overhauls and even Pratt & Whitney maintains its competitor’s powerplant. Unlike widebody engine OEMs, CFM has not tried to dominate the aftermarket, so a healthy mix of independent MROs, airline affiliates and OEMs all offer services. This deep market helps keep maintenance prices down and is, according to lessors, a major factor behind the enduring residual values of CFM56-5 and -7 engines.

CFM has promised to keep maintenance costs for the Leap at a similar level to the -7 and -5. This should ease the transition from CFM56 to Leap, although wavering buyers will pay close attention to the reliability of the new powerplant, which incorporates several new technologies.

That said, more than half of Leap engines have been sold with an OEM maintenance contract, a much higher proportion than for the CFM56. CFM Services, which provides the maintenance, is now a joint effort between Safran and GE; the two manufacturing partners once competed in the CFM56 aftermarket. The OEMs service about one-third of the global CFM56 fleet.

Such changes might not bode well for MRO pricing. Discussing Rolls-Royce’s ubiquitous TotalCare contracts, one customer tells Inside MRO: “We can’t tell if it is a good offer or not because there’s nothing to compare it with.”

Nonetheless, the sheer volume of Leap orders, now over 12,000, should ensure that independent MRO providers will eventually develop the needed overhaul capabilities. 

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