Aftermarket service demand for a specific aircraft or engine is not always driven by use. Occasionally, regulatory mandates trigger upticks in work. International Aero Engines (IAE) V2500 MRO providers are finding themselves in the rare sweet spot of benefiting from both.
The mandate uptick stems from the investigation into the Sept. 18, 2014, inflight shutdown of the No. 2 engine on a JetBlue Airways Airbus A320 climbing out of Long Beach (California) Airport. The failure was traced to a fatigue crack in the engine’s high-pressure turbine (HPT) Stage 2 disk hub. IAE’s detailed inquiry led to the discovery of several manufacturing deficiencies at supplier Avio Aero, including one that was leaving tool marks on disks. IAE and NTSB investigators pointed to one of these marks as the starting point for the fracture, which occurred in one of the disk’s lugs. They also discovered a similar anomaly on Avio-supplied Stage 1 disks.
IAE developed a fleet-wide inspection program to cover some 4,000 Avio Aero-made disks manufactured prior to May 21, 2015, and sent it to operators in November 2015. “Production defects have been observed in the blade slots and other areas of Stage 1 and Stage 2 HPT hubs manufactured by one vendor,” the bulletin states.
The FAA mandated implementation of IAE’s program, issuing a draft directive last April and a final rule in September, with an effective date of Oct. 7. The European Aviation Safety Agency has adopted the FAA’s directive.
The mandate covers about 950 hubs on 670 engines flying on U.S.-registered aircraft. The FAA estimates as many as 570 hubs will need replacement. The inspection deadlines are based on service history. The newest hubs—those with up to 7,000 cycles—must be checked before they reach 13,000, while those with more than 15,000 cycles must be checked within 1,500. IAE designed the inspection procedure so it could be performed during a scheduled shop visit.
Even with IAE offering credit for the projected remaining lives of removed disks, the program is boosting parts revenue.
IAE majority shareholder Pratt & Whitney reported a 20% year-over-year hike in second-quarter commercial aftermarket revenue on the heels of a 19% jump in the first, driven in large part by V2500 support demand.
“Strong V2500 activity drove the growth in the form of both pre-buy from a service bulletin and also from where we are in the cycle for this engine,” says Paul Lindstrom, vice president of investor relations for Pratt parent United Technologies Corp.
The number of in-service V2500s is on track to reach 7,000 next year. The fleet’s average age is about nine years, “a sweet spot for overhaul activity,” Lindstrom notes, particularly amid steady global traffic growth.
Global revenue passenger kilometers (RPK) were up 6.0% year-over-year through July, International Air Transport Association figures show.
“The bigger picture is that passenger traffic this year has still grown broadly in line with the average pace seen over the past decade or so,” IATA notes. “All told, passenger traffic is set for another year of solid growth and we continue to see [RPK] growth.”
The steady growth combined with the V2500 fleet’s sweet-spot position will result in a steady increase in annual MRO events for the powerplant, to 1,900 from about 1,250 in 2016, through 2022, Aviation Week’s Commercial Fleet & MRO Forecast projects. Events will dip a bit in 2023 then climb again to 1,780 in 2025. The per-year average will be 1,660. The vast majority of the work will come from the V2500-A5 family, which powers some A320s; the CFM International CFM56 is on the others’ wings.
Annual V2500 MRO revenue will average $4.1 billion for the 10-year time frame, climbing to an annual high of $4.7 billion in 2022 from $3.0 billion in 2016. The -A5 will generate more than 97% of the total.
Possible disruption within these figures could come from the used serviceable material (USM) market. The V2500-A5 is among the engines that are expected to see a surge in available USM in the coming years, as early-build A320-family aircraft reach retirement age or are pushed out of the fleet by newer-generation narrowbodies, such as the A320neo and Boeing 737 MAX.
“[We] believe the market is saturated in material associated with older airframes and engines, such as the CF6-80C2 or the CFM56-3B, but is still very much in its infancy for newer-generation aircraft and engines,” including the V2500, Canaccord Genuity analysts say.
Another potential disruptor: the scramble to fill capacity at engine MRO facilities. “It is well understood that there is excess capacity in the engine MRO market,” especially for older powerplants, Canaccord says. “We believe OEMs are starting to use more aggressive MRO pricing to drive more MRO volume through their own networks, which is adding to the pressure on the independent MROs.”