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Aircraft engine market regaining REVS, but lengthy recovery timeframe says IBA

The aircraft engine market is showing early signs of recovery from the worst effects of the COVID-19, but is not set to return to pre-pandemic levels until the mid-2020s, according to aviation data and advisory company IBA.

During a webinar on the engine market, IBA outlined how 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 US. As a result, IBA forecasts a positive forward trend for late 2021 in engine utilization, focused initially on larger domestic markets until global vaccine uptake increases further. Engine 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 re-structured their operations to better match capacity to demand.

However, IBA believes this capacity re-structuring may negatively impact the time-frame 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 time-frame to 2026.

Between June 2020 and February 2021, data from IBA's InsightIQ platform illustrated a uniform increase in the number of active engines and decrease in those on aircraft that are parked or stored. However, IBA believes some of this activity is airlines opting to fly aircraft and their engines at very low utilization rates rather than incur the building costs of long-term storage.

While engines for aircraft types such as the A350 (Trent XWB engine), Boeing 737 MAX (-1B) and A320neo (PW1100G) are 100% in service, conversely 51% of CFM56-3 engines which power the Boeing 737 Classic and 40% of PW4000-94 power-plants for the Boeing 747 and 767 are out of service.

The dynamics of narrow-body aircraft engine utilization have been significantly shifted by the return to service of the Boeing 737 MAX, with 168 LEAP-1B power-plants (powering 84 aircraft) entering service between November 2021 and March 2021. Whilst this engine type currently only represents 22% of the new gen narrow-body power-plants in service, that proportion is expected to increase sharply as the MAX re-enters service at greater scale across the globe.

There is a strong backlog for all new gen narrow-body engine types (LEAP-1A, LEAP-1B and PW1100G), totaling 7,466 engines. The backlog for many new gen wide-body 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 wide-body engines is strong on many types, 44% of the 1,704 of the Trent 700 engines powering the A330ceo, and over 90% of the GP7200 and Trent 900s powering the are either parked or stored. The delays to the Boeing 777X program 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 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%.

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