Jamie Davey, Manager – Engines & Parts
Pedraam Behnoudnia, Aviation Analyst – Engines
In recent months throughout the aviation industry, there have been many issues and challenges. Aircraft engines in particular have felt the impacts of shop visit escalations, costs of ownership, inflationary pressures, and a higher cost of borrowing. Operators who have newer generation engines such as the LEAP-1A and PW1100G are feeling these impacts to a greater extent.
IBA has witnessed increases in the cost of ownership, with some cost escalations nearing double-digit percentage increases. The ownership economics of newer and more fuel-efficient engines are more favourable to airline operators, and it is therefore expected that operators will absorb the cost of shop visits in the long run. For more mature assets, IBA expects questions to be raised about the likelihood of an engine being serviced. IBA’s value opinions have been adjusted to reflect market conditions within the last year. Values for new technology engines are still currently tied to OEM prices and, as such, base and market values have increased further in line with OEM published figures.
A lack of spare engines has hit operators in many parts of the world, resulting in aircraft being grounded. This has driven operators to more mature engines, which have resulted in increased lease rates. IBA is expecting a large wave of shop visits for the CFM56 family and the V2500 engines. Long turnaround times are still reported, often exceeding 100 days, mainly due to a lack of spare material and labour shortages.
The Pratt & Whitney PW1100G engine has faced a particularly challenging 12 months as it navigates through several major setbacks. These include the recent discovery of a rare condition in the powder metal of HPT stages causing over 1,200 engines to require off-wing inspections, potentially grounding many A320neo family aircraft. This is expected to progress into 2024. To add further trouble to their woes, Go First (formerly Go Air) are in the process of suing Pratt & Whitney, blaming engine issues for their recent demise with approximately 64 defective engines having been reported as of August 2023.
In the regional market, the CF34-8E continues to benefit from pilot scope clauses in North America affecting the Embraer E175-E2. However, criticisms have also become apparent regarding the cost of ownership for the CF34-10E as it falls in line with the CFM56-5B which is a massive blow for the regional engine type. IBA has witnessed limited activity for the PW150 engine because of the high number of engines tied into ‘power by the hour’ agreements.
Some of the more memorable order highlights in the last quarter include Riyadh Air who, despite initially planning to opt for Trent 1000 engines, instead chose the GEnX-1B engine to power their 39 Boeing 787 aircraft in a major blow for Rolls Royce. Air India also made a particularly large order for 80 Trent XWB engines which would inevitably make them the largest operator of the Trent XWB-97 globally, once this order is fulfilled. China Aircraft Leasing Company has committed to a further 60 A320neo aircraft that will be powered by PW1100G engines, marking a win for the US engine manufacturer. Qantas recently placed an additional order for nine Airbus A220 aircraft that includes 18 PW1500G engines, bringing their total backlog up to 29 aircraft.
IBA’s Engine Market Intelligence Reports (EMIRs) are available upon request and can be quoted from selectively if credited to IBA. For more information, click here.