V2500 Engine EIS.jpg

The Silver Lining to EIS Problems

Strengthening demand for used serviceable materials on older engines has led to higher prices.

The disruption caused by entry-into-service (EIS) delays of new aircraft as well as the teething problems of new-technology engines is rarely out of the headlines.

Airlines have also suffered from MRO bottlenecks for current-generation equipment, and while this does have undesirable knock-on effects, some parts of the aftermarket have experienced a silver lining to the multiplicity of issues outlined above.

Joseph O’Brien, deputy CEO and chief commercial officer of Engine Lease Finance, tells Aviation Week that the independent engine lessor was planning to start exiting the V2500 market in 2015, anticipating a transition to the geared turbofan.

At the time engine lessors were developing a range of short-term leasing products to buoy up softening demand for CFM56 and V2500 spare engines, but a combination of factors turned the situation on its head.

For the V2500, these included a quality-control problem at one of its manufacturing sites and reliability issues with the geared turbofan--both of which contributed to a spike in demand for V2500 spare engines that saw monthly V2500 lease rates rise from as low as $55,000 to as much as $75,000 today.

Another benefit has been the ever-strengthening demand for used serviceable material, which has allowed lessors to command enviable pricing for their run-out equipment

“As 60% owner of Inventory Navigators, we have been able to help them drive their revenue and profitability to new highs this past year by selling run-out engines into their system,” notes O’Brien.

“As demand is so high, we have also continued to sell on the open market as we own enough of the type to keep a steady supply available for sale to some of our more traditional buyers, including some of the OEM shops,” he adds.

For O’Brien’s full analysis of the unexpected benefits of EIS problems see the forthcoming Engine Yearbook 2020.

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish