rolls-royce.jpg.crop_display Mark Hillary, Rolls Royce jet engine On a BA Boeing 777

Spare Engines: A New Era?

Spare engines ensure unbroken airline operations in the event of scheduled and unplanned engine removals.

Traditionally, engine lessors have estimated demand for their services on the basis of one spare for every 10 operational engines, but that ratio may widen as new technology comes on stream.

Firstly, this is because new engines are designed to be more reliable, with longer times between overhauls. Secondly, more engine sensors and better data analytics should reduce the number of unplanned removals and thereby lower the volume of spares required.

Of course, plenty of this technology is still untested in service conditions, and may even require more spare engine capacity in its early days as teething problems are ironed out.

However, even for current-generation equipment, the nature of demand for leased engines is changing.

“Cost-focused airlines would ideally like to reduce the required number of dedicated spare engines and where possible rely on the spot market, pooling or engine availability services,” writes Ben Hughes, marketing and business development director for Rolls-Royce & Partners Finance (RRPF), in The Engine Yearbook 2017.

OEM-linked lessor RRPF and GE Engine Leasing dominate the widebody engine leasing market and even lease each other’s equipment.

There is more competition on the narrowbody front, with traditional players such as ELFC and Willis Lease now supplemented by an array of smaller outfits and MRO companies offering alternative leasing options.

One example is green-time leasing – where an operator burns off the remaining cycles of a mature engine before it is torn down.

Another is the spot market, though Hughes thinks this has limited applicability to widebody engines, which are harder to move between airlines at speed and also carry larger unit costs.

This makes it difficult for investors to balance asset ownership costs against likely periods of down-time, uncertainty of spot market short-term lease rates, and low access fee revenues.

The Engine Yearbook 2017 is out this November.

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