Teardown, Leasing Opportunities In The Mature Engine Segment.jpg

Teardown, Leasing Opportunities In The Mature Engine Segment

The likes of the CFM56 and V2500 engines are not only generating repair opportunities but also hold potential for teardown and leasing--but supply is a challenge.

New-generation engine programs such as the CFM LEAP and the Pratt & Whitney geared turbofan may be the future of the global narrowbody fleet, but multi-service MROs are seeing repair, lease and disassembly opportunities around mature in-service models.

The CFM56-5 and -7 engines, along with the V2500, are attractive to MROs not just for maintenance and overhaul work but also as teardown or leasing options. However, with many carriers still keeping aircraft and their engines in-service for longer, acquiring the assets can be challenging.

According to James Bennett, director - sales and marketing of U.K.-based AerFin, says these MRO shop capacity constraints have also made acquiring engines for teardowns tricky.

“It’s clear that engine teardown slots are hard to come by these days as every engine MRO is running near full to capacity,” he says. “From a revenue generation perspective, the last thing providers holding the capabilities want are teardown slots and instead, they would prefer to do overhauls and core performance restoration jobs.”

However, when a specific engine can be acquired, demand outstripping supply has benefited some engine part-out specialists in areas such as pricing, he says. “If a company can acquire a CFM56-5B or -7B right now, whether this is for lease or disassembly, they will be looking at good returns,” he says. “In such a saturated market, we have seen instances recently where we have secured deals at rates of around 40% more than 12 months prior.”

Damon Bowden, vice president global sales and business development at AerSale, says these narrowbody engine options will continue to be strong for the company, which conducts the part-outs in Roswell, New Mexico.

“We’ve torn-down 69 V2500s and that will continue to be strong for a long time along with CFM56-5 and CFM56-7,” he says. While there has also been spikes in demand for the older CFM56-3, certain engine types aren’t predicted to have much in the way of longevity. “Some older assets such as the PW4000 will likely to continue to tail off however,” Bowden says.

An article on the engine part-out market is included in the June issue of Inside MRO.

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