aw11032014mro3912.jpg CFM International

CFM56 Aftermarket Boom Is Imminent

MRO shops, OEMs see growing market for CFM56 maintenance

CFM’s new Leap engine family booked 1,393 orders in 2013—or 63 more than it took in for the CFM56. The figures mark the first time that the new model surpassed its predecessor in annual order book figures. While the Leap’s future is bright, it will take some time for the model to move past the venerable incumbent as an aftermarket revenue-generator.

Demand for more efficient narrowbody lift drove Airbus and Boeing to develop new versions of their successful A320 and 737 families, but demand for more immediate lift pushed them to raise production rates on the current versions. With the A320neo and 737 MAX still several years away from full production—entry into service is slated for 2015 for the neo and 2017 for the MAX—operators are adding current-generation versions as fast as the manufacturers can build them. This has helped push CFM56 deliveries to record levels. The 2012 figure of 1,442 engines produced was double that of 2002, and delivery figures have risen steadily since, topping 1,500 in 2013 and slated to reach 1,550 this year.

The production surge, combined with on-wing life exhibited by current-configuration, second-generation engines—CFM56-5s and -7s—means that about 40% of the nearly 20,000 CFM56s in service have yet to undergo initial shop visits, which usually take place from seven to nine years after entry into service. A Bernstein Research analysis earlier this year determined that 80% have yet to reach subsequent shop visits, which are more lucrative for service providers because of the amount of material needed to complete the overhauls.

“Much of the recent growth [in CFM56 aftermarket work] has been driven by second-generation CFM56 engines coming off wing for their first and second shop visit,” Bernstein noted in its report. Citing the trends, Bernstein projects a 9% compound annual growth rate in shop visits through 2019. 

Industry estimates put annual shop visits at about 2,000 this year, and potentially doubling in about a decade. Capacity is not an issue: CFM joint venture partner General Electric says there are 45 shops with CFM56 capability, including 29 that handle second-generation engines. That is enough to handle about three times the current shop visit rate, meaning there is plenty of room to absorb the projected boost.

Safran, parent company of Snecma, which along with GE is a 50/50 partner in CFM, is banking on CFM56 aftermarket growth to help boost its bottom line. Safran aftermarket activity grew 19.2% in 2013, “mainly driven by overhauls for the latest CFM56 engines” as well as a boost in GE90 work, the French company said. The trend is expected to continue, with CFM56 spares revenue doubling from its 2010 levels—the recent low-point stemming from reduced flight activity triggered by the 2008-09 global recession—by 2020.

While Safran references spare parts revenue as an indicator of aftermarket activity, it is hesitant to use the figure alone as a primary benchmark. One reason: a shift in how new spares are consumed, especially in the CFM56 market. Several years ago, Safran noticed that its long-reliable spares forecasting model, based largely on the engine’s technical performance, was no longer matching up with reality. A 2011 study concluded that operator behavior was having much more of an influence on spares demand than before. Specific variables range from the explosion of low-cost operators that fly Boeing 737s—which are powered exclusively by CFM56s—or A320s with CFM56 engines, to the increasing utilization of used parts.

Safran’s revised, behavior-based forecasting model shows that CFM56 spares demand will rise steadily until about 2025 before beginning to tail off. First-generation spares demand will fade out much more quickly, as aircraft being parked make more used parts available for the earliest CFM56s still flying. 

Analysts at Canaccord Genuity estimate that as much as 90% of the spares demand for the early CFM56s is satisfied through used parts. 

The market for newer CFM56 material is much smaller and should stay that way until A320neo and 737 MAX deliveries begin to supplant in-service aircraft powered by the newer engines. Safran calculates that less than 5% of the CFM56-5B and -7B spares demand is filled by used parts, and does not expect this to change for several years. When it does, the consortium will be well-positioned; CFM estimates that its branded used parts division, CFM Materials, has about 35% of the global market share of used current-generation CFM56 parts.

Safran’s civil aftermarket figures factor in long-term agreements that help drive spares revenue. Safran estimates that about 65% of CFM56 shop visits will either be done at one of its shops or under a service agreement. 

Competing for work against independent providers, especially as engines mature, is seen as a benefit, the manufacturer maintains. 

“Our goal is to be flexible and adapt our maintenance for each customer,” said GE Aviation Director of Service Marketing Bill Dwyer. From risk transfer to time-and-materials support, “our calling card is customization. Our goal is to let customers pick.” 

A version of this article appears in the November 3/10 issue of Aviation Week & Space Technology.

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