Engine MRO providers are expecting greater demand for their services in 2016, even as older powerplants are increasingly replaced by new engines requiring fewer shop visits throughout their life cycles.
While the result is a transitional market, it will be one of modest sustained growth, according to Aviation Week data, which estimates engine MRO spending at $21.9 billion in 2016, increasing to a projected $34.9 billion by 2025 based on a 5.6% compound annual growth rate (CAGR).
Aviation Week lists the CFM56-7, V2500-A5, CFM56-5B, CF6-80C2, and CF34-3B families as the five biggest generators of shop visits and revenue in 2016 and 2017. Of those, the CFM56-7 and V2500-A5 likely will be the top two in maintenance spending, at more than $2.8 billion in 2016 and more than a projected $3 billion in 2017, according to Aviation Week data.
The data also forecast more than 900 CFM56-7 shop visits during 2016, increasing to 1,200 in 2017. For the V2500-A5, shop visits are also expected to increase from about 1,100 in 2016 to 1,400 in 2017.
Industry watchers and representatives of engine service providers generally agree with these projected assessments.
“In 2016, more second-generation, narrowbody aircraft engines—specifically the CFM56-5B and CFM56-7B—will be making their first shop visits,” says Ken Herbert, managing director of Canaccord Genuity in San Francisco. “Those engines have tended to stay on wing for 7-9 years, compared to the five years typical of the previous-generation CFM56-3B on the 737 Classics.” He adds that shop visits will also increase for the IAE V2500-A5—an Airbus A320 engine choice.
Thomas Boettger, director of CFM56 production lines at Lufthansa Technik in Hamburg, expects CFM56 and V2500 shop visits to grow 10-12% in 2016—mainly from the V2500-A5 and CFM56-5B and -7B models. “Much of the demand for shop visits will be due to the fact that the components on these engines will be reaching their life limits,” he explains. “For example, the CFM56-7B and -5B turbine discs have a life limit of about 20,000 cycles.”
Asked if he foresees a spike in demand in 2016 for MRO services on those engines, Boettger says 2016 will be a “next step” toward peak demand, which he anticipates in the 2019-20 time frame. “Beginning in 2017, there will be about a 4% annual increase in CFM56 and V2500 shop visits at Lufthansa Technik.” In contrast, he says, Lufthansa Technik expects a 5% decrease in shop visits on big engines in 2016-17—specifically the PW4000 and CF6 families—due to projected retirements of the older, widebody models they power.
In 2016, some MROs may face the difficult choice of allocating resources to the newer V2500-A5/D5 and CFM56-5B/7B or such “sunset-generation” engines as the CFM56-3, CF34-3 or the CF6-80A/C2, according to Andrey Baydarov, head of the engines teardown and parts trading unit at FL Technics in Vilnius, Lithuania.
“The choice is whether to focus on a short-term, descending market, or to invest in a long-term—but highly competitive and OEM-controlled—newer engines market,” he says. “Sunset engines are showing some recovery, since a lot of small operators in Asia and the [Commonwealth of Independent States (CIS)] use them. For example, the CF34-3 market is now recovering, thanks to the CIS/Russia region, with a high demand for 25,000 engine flight cycles (EFC) [low-pressure-turbine] module on-wing change and 18,000 EFC, [high-pressure-turbine] module change. However, the V2500-A5 and CFM56-5B/7B represent the main [MRO market] trend for major European and CIS airlines.”
Baydarov believes that continued use of mature aircraft such as the Boeing 737 Classics and Bombardier CRJ 100/200 regional jets will sustain the mature engine MRO market. But, he says, that will mandate tailored solutions, including—for example—long-term leases, exchanges, and engine purchasing. “The bankruptcy of major Russian operators, and a huge wave of 737 Classic and CRJ 100/200 phaseouts, will create additional demand for hospital [light, non-scheduled repairs] visits,” he adds.
Going forward, Baydarov says the customer base for engine MRO services is shifting from operators toward asset owners, such as lessors, banks, and asset and MRO management players. “Since aviation is not the main business of these new types of customers, and some of their engine assets are quite old, the MROs will have to take a new approach to their sales and marketing strategy,” he says.
Mature engines will present a somewhat stable MRO market for the near term. Bill Dwyer, general manager for marketing at GE Aviation Services in Evendale, Ohio, credits low fuel prices for continued viability of the CF6-80C2 MRO market. He specifically cites the return to service of some previously retired 747-400s as a reason. “From 2011 to 2014, the 747-400’s rate of return from the parked fleet was about 1.5 per quarter, on average,” Dwyer says. “But for the last three quarters of 2015, it [rose] to eight per quarter. That will slow the rate of decline in demand for maintenance on that engine.”
Low fuel costs have also stemmed the tide of retirements of the 737 Classic models, providing more stability to CFM56-3 MRO. “In 2013 alone, about 150 CFM56-3-powered aircraft were retired. But in 2015, we have actually seen a net return to the active fleet of those aircraft, even though there have been some retirements,” he says.
Dwyer adds that today’s robust leasing market will bode well for engine MROs, particularly for single-aisle aircraft. “About 50% of the narrowbody fleet is owned by leasing companies,” he notes. “Operators are extending their leases, even as leasing costs are increasing, particularly on the 737NG and A320 fleets. Lease rates and lease extensions are among the main metrics we look at when estimating market growth.”
The emerging MRO market for GE is the GEnx, which has been in service on the Boeing 787 and 747-8 since 2011. Dwyer reports that the GEnx group will undergo its first performance restoration shop visits starting in 2016, focusing on turbine and combustor workscopes. Those shop visits, he points out, are expected to ramp up over the following 3-4 years.
At MTU Maintenance, the strongest MRO growth in 2016 will be driven by the CF34-8/-10, GE90, CFM56-5B/-7, as well as the Rolls-Royce Trent family, according to Katia Diebold-Widmer, the Hanover, Germany-based company’s director of marketing. “The CFM56 and CF34 will account for the highest volume of shop visits, with the V2500-A5 remaining at 2015 levels, or growing marginally due to better on-wing times,” she says. “MRO services for the CF6-80 will further decline, as the engine will be replaced by the GE90.”
Diebold-Widmer adds that MTU Maintenance will continue to see a mix of light shop visits with heavy visits involving life-limited parts replacement. “But the trend is definitely toward fewer full overhauls for mature engines, due to the high price of a full overhaul compared to the engine’s residual value. Instead, cheaper and smarter repairs, as well as alternatives to MRO are promising,” she says.
MTU, Diebold-Widmer adds, has positioned itself for MRO on such next-generation engines as the PW1100G-JM, GEnx and GE9X, with capabilities for GEnx turbine center frame maintenance already in place and similar capabilities to be added for the GE9X. MTU’s Hanover shop should be ready for the PW1100G-JM by the end of the first quarter of 2016.
This article was first published on December 24, 2015.