737 MAX LEAP.jpg

CFM Benefits from Max Breathing Space

Boeing's decision to maintain 737 Max production rates at a certain level a help to the engine manufacturer.

Continuing our look from earlier this week into some of the positive effects of entry-into-service delays, we turn our attention from engine lessors to the OEMs, and CFM in particular.

The grounding of the Boeing 737 Max, for which the CFM LEAP-1B is the sole engine option, might have caused big cash flow headaches for the engine’s manufacturer if Boeing had slowed or halted production.

However, its decision to maintain rates at a certain level minimized any disruption, while CFM was able to use the time to implement certain fixes without having to worry about AOG pain for airlines--one example being for a fuel nozzle coking issue.

Another benefit for CFM of the Max grounding is that it has been able to catch up on LEAP-1B deliveries, having been widely reported to have fallen behind earlier this year.

“By maintaining a high production rate throughout the grounding CFM quickly made this ground up and now is back on schedule, which should help to smooth re-entry to service, which is inevitably going to be heavily scrutinised,” writes David Archer of consultancy IBA in Engine Yearbook 2020.

Archer also notes that Max grounding has had little impact on LEAP values.

“Issues have arisen and more are likely to come, but the backlog and operator base remains incredibly strong and diverse, and this is the key factor which has not changed or been affected by the grounding process.”

But what about the impact on CFM56 values and lease rates during a period in which demand for their platform, the 737NG, has spiked.

Archer says that while this situation has certainly supported buoyant values, “it would be a stretch to suggest this was the driving factor.”

A far more significant influence, he says, has been tight MRO capacity during a bow wave of shop visits for the CFM56.

For Archer’s full analysis, see Engine Yearbook 2020, out this November.

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