Engine maintenance, repair and overhaul (MRO) vendors should see increasing demand for maintenance services in 2015, driven primarily by CFM56- and V2500-powered single-aisle jets. In fact, that specific segment of the engine-repair market represents some interesting dynamics.
“Older aircraft, such as the 737 Classics, and some newer production A320s and 737NGs, will be going away over the next 3-4 years as the fleets transition to the new generation of narrowbody aircraft such as the A320neo and the 737 MAX,” says Ken Herbert, an aerospace and defense analyst with Canaccord Genuity, an investment banking firm. “At the same time, there will be an uptick in engine-MRO demand driven by operators of narrowbody jets delivered between 2005-08, and powered by the CFM56-5B and CFM56-7B, and the V2500-A5,” he notes.
Those powerplants are due for major maintenance events this year and will be the primary drivers for engine service of single-aisle aircraft. This, he says, will be coupled with a declining MRO market for CFM56-3s, because the aircraft they power are being retired.
Data compiled by Aviation Week indicate that the V2500-A5 and CFM56-7 will top global demand for MRO in 2015 and 2016, with the V2500-A5 the market leader in both years, accounting for more than $2.8 billion and $3.2 billion, respectively. For the CFM56-7, the MRO market value is projected to be $2.4 billion and $2.7 billion for 2015 and 2016 respectively.
But Herbert also expects to see “a pretty good rate of growth for MRO services on widebody-aircraft engines,” and specifically cites the General Electric GE90, which powers both the 777-300ER and the 787’s GEnx engine. “We expect both engines to account for most of the growth in widebody aircraft engine work. In fact, we believe we will see the first GEnx shop visits starting in 2015.” Still, Herbert cautions, that will be offset by a shrinking MRO market for older widebody powerplants such as the PW4000 on the 747-400.
Aviation Week data projects the GE90-115B to reach third place in the top 10 global-MRO market by 2016, accounting for more than $1.76 billion in maintenance services. That places it one notch up from 2015, when it is expected to rank fourth with a $1.4 billion MRO market. By contrast, Pratt & Whitney’s PW4000-94 will be 10th by 2016, at just $818 million. Its MRO-market projection puts it in seventh place for 2015, at $882 million.
Bill Dwyer, general manager, services marketing for GE Aviation Services, notes this year’s drop in jet-fuel costs is the “most important dynamic impacting the aircraft engine MRO market happening today.
“Jet-fuel costs, which had been running something like $200 billion per year, have decreased by approximately 22 percent—or about $50 billion—since July of 2014,” he explains. “That has provided a tailwind to continued—and more economical—operation of legacy aircraft.”
As a result, fewer older aircraft than anticipated are being retired, and some of the previously parked aircraft are being returned to service to meet increasing demand for air travel. “It’s very likely that if demand keeps up, we will see more legacy aircraft being operated for longer periods,” he says.
Dwyer calls the 737 Classics the “best example” of this trend, with approximately 950 still operating globally as of the first few quarters of 2014. “This means there will be a slowdown in what had been a reduction in demand for the CFM56-3,” he notes. “While it will continue to decline, the CFM56-3 MRO business will not do so as quickly as we had thought because these aircraft are staying in service longer.”
Legacy widebodies such as the GE CF6-80C2-powered Boeing 767 also will see continued service in the lower fuel cost environment, according to Dwyer. “Leases on those airplanes are being extended, and some are coming back from the parked fleet. As with the CFM56-3, the reduction in demand for CF6-80C2 maintenance has not accelerated as much as expected.”
Added to the mix is the fact that current-production Airbus A320s and Boeing 737NG lease rates have remained strong, meaning calls for MRO services for the engines powering these aircraft will continue. The 737NG and A320 are powered by the CFM56-7B and CFM56-5B, respectively.
“While there will be a decline in demand for engine service on the more mature fleets, maintenance events will increase for the mid-life fleets, which will probably remain in service for years to come,” says Dwyer.
In that regard, Katia Diebold-Widmer, head of marketing for MTU Hanover in Germany, predicts a surge in MRO activity for the V2500-A5, CFM56-5B and CFM56-7B in 2015-16. Those engines, she says, will overcompensate for the declining workload the company expects on the CFM56-3. The V2500, she adds, is MTU’s largest program for commercial airliner engines, accounting for about 250 annual shop visits, followed in volume by the CFM56, at 200.
Similar trends are taking place on the regional-jet side as 50-seaters phase out. “There will be a significant decline in our CF34-3 workload, but any losses there will be made up by the CF34-8, and the CF34-10, from [respectively] the 70- and 90-seat market,” says Diebold-Widmer.
/site-files/aviationweek.com/files/uploads/2014/12/MROengines.pngMTU anticipates some changes in the MRO market for widebody-aircraft engines. As an example, Diebold-Widmer cites the CF6-80C2 as reaching “a mature phase,” and will likely enter the surplus market as the aircraft they power retire. “We are planning for a decreasing global-MRO market for those engines, as well as reduced work scopes.”
Asked about the effect of early retirements of younger aircraft on the engine-MRO market, Diebold-Widmer says the subject is “highly debatable.”
“At this time, we cannot honestly say that early retirements of comparatively young aircraft are a definite trend and are going to become the norm—although it’s something that might be sporadic,” she says. Retirement of older aircraft is, indeed, accelerating. “That is something we can say for sure.”
MTU, reports Diebold-Widmer, is projecting a 5-6% annual increase in MRO work for commercial aircraft engines in 2015-16, and is expanding into new engine groups. For instance, MTU will add PW1000G capability this year. In 2014, it initiated GE90 service. Still, she points out, there are some challenges to meet, especially as overcapacity continues to plague the market, forcing downward pricing pressure.
“The overcapacity has definitely led to a buyer’s market for engine MRO,” Diebold-Widmer explains. “Mature aircraft are being retired in larger numbers, and for those shops that have prepared to service the newer engine, the volume simply isn’t there yet.”
She also notes that as the original equipment manufacturers (OEMs) become increasingly active in the repair market for new-generation engines, the overcapacity problem hits the independent shops, since they cater primarily to older engine models. “Many operators of older aircraft are opting for used-serviceable engines rather than sending their existing powerplants in for shop visits, given those airplanes’ limited remaining time in service.” MTU, in fact, entered the used-serviceable engine market in 2014, when it announced “MTU Plus Mature Engine Solutions” at MRO Americas. That program currently caters to the CFM56-3, CF6-50 and the CF34-3.
In 2015, engine MRO—as with airframe MRO, in general—will remain stable, according to Lim Serh Ghee, president of ST Aerospace in Singapore. “We are unlikely to see any surprises” he says. “With fleet growth, a surge in demand for MRO services for some engine models such as the CFM56-5B/7B and V2500 is expected. As long as airline operators plan sufficiently ahead of time, there should be no issues with scheduling shop visits.” Ghee adds that with a global MRO network, ST Aerospace has sufficient shop capacity to handle any growth.
“The CFM56-7 will represent our biggest MRO growth in 2015, at over 20% above 2014,” says Rob Cords, president, airlines and fleets for StandardAero. “That is considerably above the projected global-MRO market growth for that engine of plus-or-minus 8%.” In the same year, he adds, the company expects an average increase of 5% across its portfolio, mainly from the CFM56-7, CF34-3 and -8, AE3007 and the PW100 and PT6.
Cords attributes CFM56-7 growth to a “bow wave of shop visits” generated by its contract-program customers. “But we also anticipate growth in the transactional market, which does not involve long-term maintenance contracts. We are making a very strong commitment to get more transactional work on the CFM56-7.”
Looking ahead, Cords predicts a major shift in its CF34 business, with less MRO activity on the CF34-3, but growth in CF34-8 MRO in 2016, and “very good growth” in 2017 and 2018.
Aviation Week statistics estimate a 2015 Asia-Pacific engine MRO market of $3.8 billion (excluding China), and more than $4.3 billion in 2016. Not surprisingly, Cords reports that StandardAero is seeing an increasing amount of potential business there. In late 2013, in fact, StandardAero established a dedicated sales team for the Asia-Pacific market in Singapore. “The main opportunities in that area are the PW100, CF34 and CFM56. There are possibilities to capture that business from Asia, and repair those engines in North America, as well as joint ventures.”
A version of this article appears in the December 29/January 14 issue of Aviation Week & Space Technology.