CFM56-5B-1.jpg ELFC

Narrowbody Engine Leasing Demand Strong, But For How Long?

Longevity predicted for CFM56-5B, -7B engines by lessors at Aero-Engines Europe on September 13.

The leasing market for current generation engine types, particularly of the narrowbody variety such as the CFM56-5B and -7B, is proving robust with engine specialists still on the hunt for more spare powerplants. But in the midst of a healthy period, some are wondering for how long the positive trend can continue for.

Julie Dickerson, managing director of CFM International wholly owned subsidiary Shannon Engine Support, which focuses predominantly on CFM engine types but also provides spares for the LEAP-1A and -1B, says she is hopeful the industry will see its strong upward trend continue with longevity for current engine types. However, given this is driven by several factors, Dickerson says like many in the segment, she “wonders about the longevity of it.” “We've been in a long positive upcycle in the aviation industry and many are wondering what is going to trigger the tipping over the edge,” she says.

Regardless, Shannon Engine Support is confident in the longevity of the CFM56 engine. “We project the CFM56-5B and -7b engines in our portfolio will be our principal income generator for the next five, six and maybe even up to 10 years before it starts to switch to the LEAP,” Dickerson says. Capacity for growth is still very much there, simply as aircraft will be needed to support industry expansion worldwide, but Dickerson says it is accepted that overall demand is outstripping supply. “Every engine seems to be in short supply now with everyone looking for spares of almost every type,” she says. "I don't know how much of this is driven by other pressures in the market," she adds, noting the turn time issues in relation to CFM engines.

Danilo Colombo, engine program manager at SGI Aviation, says a high volume of transactions are occurring for “short-haul” engines such as the CFM56-5B and -7B, but in recent times, he is also seeing increased demand on even older models such as the -3 variants of the CFM56 and sunset engines during the green time phase. “There’s also been some older RB211s coming over from Rolls-Royce in the past few years,” he says.

The RB211, a multi-engine option for the 747, 757 and 767 aircraft, has had a mixed impact on the business of AJW Group, which operates a spare parts and engine leasing division. “The RB211 provides us good cashflow as a lessor, but as a residual value play, it doesn’t provide a lot of teardown value compared to a CFM56-5 or -7,” says Ian Malin, treasurer, director and chief investment officer at AJW Group. “If a lessor owns those engines they’re in a good spot, but if they’re bought as an investment hoping for a lot of part-out value, then not so much.”

Alan Rennie, technical director at Australia-based lessor Bellinger Asset Management, which has a lot of widebodies in its fleet including the A330 and 767, says the segment is slightly different compared to its smaller aircraft counterparts. “In my experience, demand on a narrowbody aircraft and their engines is huge and investing or leasing in them means they are hard to come by,” he says. While Rennie concedes demand for widebody airframe and engine leasing isn’t as strong, it is still very much there. “We’ve had a number of lease returns in the past year and they’ve arrived and left again in a matter of months,” he says.

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