The aircraft engine market is showing early signs of recovery from the worst effects of the Covid-19 crisis, but is not set to return to pre-pandemic levels until the mid-2020s. The vaccine rollout is gathering pace in certain markets, including key transport hubs such as the UK and United Arab Emirates, and major markets such as the USA. As a result, IBA forecasts a positive forward trend for late 2021 in engine utilisation, focused initially on larger domestic markets until global vaccine uptake increases further. Engine MRO demand will continue to lag behind as operators continue to offset maintenance expenses.
The number of engine flight hours is currently plateauing at around 1.4 million per month, having plunged from around 2.8 million at the end of 2019, to less than 600,000 in April 2020. Full-scope engine shop visits are down by 70% compared to pre-Covid levels, and engine MRO revenue by 50%. However, IBA is now seeing three-month lead times for some shop visits, indicating that engine MRO providers have restructured their operations to better match capacity to demand.
However, IBA believes this capacity restructuring may negatively impact the timeframe to recovery in engine shop visits. If engine MRO providers are able to build back capacity in line with increases in demand, shop visit levels could recover to pre-Covid levels by 2024. If they lag significantly behind demand, IBA forecasts a five-year recovery timeframe to 2026.
Between June 2021 and February 2021, data from IBA’s InsightIQ platform illustrated a uniform increase in the number of active engines, and a decrease in those on aircraft that are parked or stored. However, we believe some of this activity is airlines opting to fly aircraft and their engines at very low utilisation rates rather than incur the building costs of long-term storage.
While engines for aircraft types such as the Airbus A350 (Trent XWB engine), Boeing 737 MAX (LEAP-1B) and A320neo (PW1100G) are 100% in service, conversely 51% of CFM36-3 engines which power the Boeing 737 Classic and 40% of PW4000-94 powerplants for the Boeing 747 and 767 are out of service.
The aircraft engine market as a whole is now well established on the path to recovery, but specific factors such as the ability of MRO providers to build back capacity will significantly affect its timeframe.
As engines are returned to service, issues resulting from long storage and low utilisation are likely to arise, and the MRO community will need to work seamlessly with airlines and regulators to ensure these are addressed so that the pace of the recovery is not restricted.
The dynamics of narrow-body aircraft engine utilisation have been significantly shifted by the return to service of the Boeing 737 MAX, with 168 LEAP-1B powerplants (powering 84 aircraft) entering service between November 2021 and March 2021. Whilst this engine type currently only represents 22% of the new-generation narrow-body powerplants in service, that proportion is expected to increase sharply as the 737 MAX re-enters service at greater scale across the globe.
There is a strong order backlog for all new-generation narrow-body engine types (LEAP-1A, LEAP-1B and PW1100G), totalling 7,466 engines. The backlog for many new-generation widebody engines types also remains substantial, in particular the GE9X (612), GEnx-1B (624), Trent 7000 (546) and the Trent XWB (1,008).
While the in-service status of current widebody engines is strong on many types, 44% of the 1,704 Trent 700 engines powering the A330ceo, and over 90% of the GP7200 and Trent 900s powering the A380 are either parked or stored. The delays to the Boeing 777X programme are also affecting this market segment by prolonging demand for the GE90.
Regional aircraft are leading the recovery in many regions as airlines downgrade to these aircraft types from larger narrow-bodies due to lower levels of demand, and they are also consistently being used on essential (public service obligation) services. As a result, data from InsightIQ shows that, between July 2020 and February 2021, the percentage of regional engines that were active increased from 44% to 64%.
IBA has over 30 years’ experience in delivering independent, expert business analysis and data on the aviation sector. Established in 1988, it provides a wide range of services including InsightIQ, an intelligence platform combining speed, accuracy, visual analytics and intuitive navigation