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Power trip

Engine leasing remains a popular activity, especially with some aircraft staying in service longer. Keith Mwanalushi analyses the market demand for mid-life engines

Some evidence seems to show that demand for the Boeing 737NG has tightened the market for its engines – the well-liked CFM56-7B. The 737NG fleet has seen steady growth with thousands of them now in service. "Every year almost 500 aircraft are added with very few retirements," remarks Roger Welaratne, Senior Vice President and Manager at GECAS Engine Leasing.


On a net-net basis (accounting for deliveries, storage movements and retirements), Welaratne says the fleet increases in 2015 and 2016 have been higher, explaining a tightening in the market as compared with a couple of years ago. "The shop visits are still projected to increase over the next years, so the demand for spare engines is expected to also increase," he predicts. 


Marc Wilken, Director Product Sales & Engine Lease at Lufthansa Technik acknowledges [in 2016] the steady supply and demand on CFM56-7B engines: "For 2017 and beyond we will keep a close eye on further surplus engines that are expected to become available. The NG platform is expected to increase the number of surplus -7B spare engines further, either for lease or teardown."


Market forecasts at AerFin suggest that with the arrival of the 737MAX this year plus the fact that the earlier 737NGs are now reaching the 18-20 year age bracket, 737NG retirements are likely to increase. Although, as James Bennett, Director – Sales and Marketing AerFin, comments: "The increase in retirements is also expected to be slightly negated by the cheaper fuel prices, meaning airlines will look to extend the life of their fleet through utilising ‘green time’ engines." 


He continues: "We are therefore expecting to see some increase in available 737NGs on the market, and consequently more CFM56-7B engines." However, the current high demand for -7Bs, particularly green time engines, sees lease rates currently in the $60-70,000 rate, according to AerFin. 


Cliff Topham, Senior Vice President Sales and Business Development at Werner Aero Services observes that the CFM56-7B market is still relatively oversupplied to fairly balanced. "Demand is there from the low cost carrier (LCC) operators, and even legacy carriers are looking at providing some of their engine requirements through the lease market, which is well supplied, through the established lease market, MRO providers, and independent providers of green time utility value engines."


Topham notes that green time engines continue to be drawn from an increasing number of NG teardowns, with the best rates available for the higher thrust-rated models. 


A similar trend to that of 737NG fleet exists for the CFM-powered A320 family. The latter fleet has exceeded 3,500 aircraft in service with an increase of over 300 aircraft in 2016, as per GECAS figures. Welaratne says the demand for CFM56-5B (A320 Family) is expected to remain solid over the next few years, similar to the CFM56-7Bs.


On the other hand, GECAS see the IAE V2500-powered A320 fleet as "now reaching a plateau, and it appears that that fleet’s growth has softened". Welaratne explains that this leveling-off is due to larger numbers of retirements and engine part outs, as well as the current volume of shop visits. He explains that "the spare engine situation is very tight, but this is not necessarily a sign of a healthy environment from an asset point of view."  


Tadas Goberis, CEO at AviaAM Leasing weighs in on the IAE V2500, saying that its higher repair and overhaul costs makes leasing the engines a wiser solution, and a more cost-effective option. Topham thinks demand is strong for the V2500-A5, but the CFM56-5B is in balance with "continued long first runs, impeding the utility of the lease market". 


Lufthansa Technik reports that 2016 was challenging at times, especially for the availability of V2500 spares that proved to be tight. At the same time, demand was strong, which overall led to higher rates. The CFM side remained solid but uneventful in regard to spare engine supply. >>

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