The CFM56 engine is expected to generate high volumes of MRO demand in the next five years. What is Aero Norway’s take on the market?
The CFM56 engine market is pretty buoyant right now. Companies are struggling to induct engines because there’s so many of them in operation. The -5 and -7 have performed strongly from an operational perspective which has led to delays in shop visits due to the time they have spent on-wing. It hasn’t been uncommon for some engines earmarked for a first shop visit in 2015 and 2016 going in for repair in 2018 and 2019. There was a shortage of work in 2015 and 2016 because shop visits weren’t realized from this year through to 2020, operators could actually struggle to get their engines into the shop. We had forecast a 60% to 40% split this year between the -3 compared to the -5 and -7. However, demand is so great for the latter two that we believe it could be closer to a 50-50 split.
Having predicted peak demand for the CFM56 will occur from this year through to 2021 at your Stavanger engine shop, do you anticipate to be running to full capacity during that time period?
Our plan is to induct 92 engines at the facility this year, comprised of 52 -3s and 40 -5s and -7s. By 2020, we foresee the engine shop running at full capacity of around 120 engine inductions. We don’t want to go beyond 120 and will be satisfied with that figure in two years’ time.
After the predicted peak period of CFM56 ends in 2021, which direction will Aero Norway go in?
We would like to remain a CFM repair specialist as this is where we hold expertise and knowledge. Ultimately, our strategy is to obtain a licence for the LEAP engine because eventually, there will be a lot of demand for it. We’ve already told CFM our intentions concerning the LEAP and so far they’ve been receptive but also made it clear an independent like ourselves won’t get any licence until at least the end of 2018. We also have to look at how much it’ll cost to introduce the model and evaluating which tooling is required, among other considerations. I believe any potential introduction of the LEAP would be 2020 at the earliest.
Last year Aero Norway added a UAE General Civil Aviation Authority approval. Are further approvals likely?
Our approach to approvals is simple: if there’s a business opportunity and we require approvals to obtain this, then we will chase what is required. We aim to keep our customer base as wide as possible and across all global regions. The sweet spot for us has always been with smaller airlines operating no more than 40 aircraft as we can customize according to their needs. Right now, we are satisfied with our current approvals, however we must always be ready for opportunities. For instance, we were recently approached by a company in South America which if we proceeded, would require us to gain the necessary regional approval. However, we benefit from already possessing EASA, FAA and CAAC accreditations. We generally find that most organizations will get an idea of your strong credentials if you possess approvals from these three regulators.
Aero Norway recently announced it had secured financing from Norwegian high street bank Sparebank 1 SR-Bank to fund a series of business requirements. Specifically, what areas of the business will be financed?
There was a definite need to have leased spare engines available to customers, so some of this funding has been used to procure engines that can then be leased to operators while their other CFM56 engine undergoes a shop visit. Typically, turnaround times on the CFM56 can be between 55 to 60 days, and smaller operators especially cannot afford to stop flying. Bigger MROs have taken this approach, we found it benefits both us and the operator. It’s lets us offer a more complete package and of course, money was required to do this. We’ve also looked to make investments from the finance at making our facility paperless and investing in machinery to improve our operations. There are many advantages of a paperless operation: for instance, when signing off an engine maintenance program instead of using documentation, we can just send a PDF file without printing anything. The paperless project is still ongoing and as of now, we predict completion in the first quarter of 2019.