The commercial aftermarket, bolstered by continued strong traffic and low fuel prices, appears to be “in the early innings of a sustained recovery,” Canaccord Genuity analyst Ken Herbert says.
Pointing to recent quarterly earnings data points as evidence, Herbert says that the big-picture MRO market continues to brighten, with engine work maintaining notable momentum.
“[C]an it get any better for commercial transport engines?” Herbert writes in a recent research note. “We see steady growth here based on the ~10% growth in narrow-body engine shop visits,” including the IAE V2500 and CFM56-5B and -7B.
Widebody engine trends are also positive. Rolls-Royce cited the aftermarket as a primary driver in its 14% year-over-year jump in civil revenues last quarter. And while much of Safran’s 8.4% quarterly jump in civil engine aftermarket business was driven by CFM56 work, CEO Philippe Petitcolin cited “very good” performance for GE90 parts and services as part of the good-news story.
Herbert also pointed to work on older aircraft racking up higher-than-expected utilization figures as a positive driver. “Lower fuel is finally translating to increased usage of older aircraft with above-normal traffic,” Herbert says. Global passenger traffic demand was up 7.9% in the first half of 2017, a 12-year high, International Air Transport Association figures show.
The trend has advanced beyond hearsay into needle-moving territory. MTU is among those reaping the benefits of strong V2500 overhaul demand. But the company cited better-than-expected demand for mature engines, including the GE CF6 and Pratt & Whitney PW2000, as a “the reason” it recently increased its 2017 engine MRO revenue growth projection to the mid- to high-teens, up from 10%.