Concerns over a looming commercial-aircraft cycle downturn are not hard to find. Production-rate cuts on current-generation widebodies have been made, and more may be coming. But harder to spot is anything beyond mild concerns related to the narrowbody market.
A recent supplier survey by Canaccord Genuity found relative optimism about the narrowbody market in general, and planned rate increases specifically. More than 50% of the 30-odd suppliers surveyed said they are either “somewhat” or “very” confident that Airbus and Boeing will boost narrowbody rates. Consensus among suppliers polled pegged the ideal monthly production rate for narrowbodies at about 90 per month, or about 25 below the planned rates, factoring in announced increases.
“We believe Airbus and Boeing will push rates up on the A320 and 737 to monetize as much of the backlog as possible, even if they believe they are overproducing for demand,” Canaccord says. “The OEMs will push as much risk as possible on the suppliers, and will likely take rates down post-2019-20 to better reflect a more aligned supply and demand balance.”
Airbus has announced plans to push its A320 rates from 42/month last year to 50/month in 2017 and 60/month in 2019. Canaccord’s aircraft-delivery model is less optimistic, pegging A320-family deliveries at 651 in 2020, or about 54/month.
Meanwhile, the number of parked A320s has been steadily declining for several years, reversing a steady climb during the downturn. A UBS analysis shows there were about 30 parked A320-family airframes in December 2007, the recession’s dawn. The figure quickly rose and topped 200 in late 2013 and 2014. The recent monthly figure peaked in January 2015 at 227, but had fallen to 122 by September 2016—the lowest in at least 30 months. Included in the 122 figure were 56 aircraft delivered in the last decade, suggesting the number could decline further if near-term demand persists. The average age of the parked fleet was 12.8 years, UBS said.
Even if Airbus does not stay at or reach its planned 60/month rate, the A320’s enduring popularity means it will continue to generate significant aftermarket returns for years to come. The in-service fleet is slated to climb from 7,600 in 2017 to slightly more than 13,100 in 2026—a 73% jump, Aviation Week’s 2017 Commercial Fleet & MRO forecast projects. The near-term increase will be on the back of the A320neo family, which boasted a backlog of 4,800 from 87 customers as of September 2016, Airbus figures show. Counting current-generation models, the Airbus narrowbody backlog stood at 5,520.
On the aftermarket revenue side, total value of non-engine-related maintenance will total $9.7 billion in 2017 and climb consistently throughout the decade to just more than $15.0 billion in 2026, Aviation Week figures show. For the decade, A320 aftermarket work is projected to total $209.8 billion, of which $82.5 billion, or 40%, will be for engines. Component work is the next-largest slice, at $47.8 billion, or 23%; followed closely by line maintenance, at $42.7 billion, or 20%.
Line maintenance’s share of the overall total is projected to stay relatively constant during the forecast period. However, emerging trends could change this. Airlines are increasingly interested in moving work from heavy to lighter checks, including line work, where possible. The goal: shorter downtimes when aircraft are pulled out of service. At the recent MRO Europe show, several airlines explained that they often go task-card by task-card to identify work that can be completed in parts during several overnight checks—when line-maintenance personnel are less busy—and removed from heavy-check packages.
Engine manufacturers are onboard as well, using analytics to help streamline overhauls and move more work from off-wing to on-wing. The trend will take time to have a noticeable impact, however. Safran is among engine MRO providers that continue to report increases in material consumption during overhauls—a byproduct of airlines deferring non-essential work during and just after the recession. “[We] are still a bit flattish in terms of the quantity of shop visits, but the unit value per shop visit is still extremely good and has not reduced at all since the beginning of the year,” Safran CEO Philippe Petitcolin said in late October.