Engine MRO Demand Accelerates

aircraft technician
MTU’s overhaul shops are full for the coming year—a sign that demand is pushing capacity as maintenance providers ramp back up.
Credit: MTU

Engine shop activity is accelerating quickly to support a busier global commercial fleet, lending more credence to predictions that a return to 2019 aftermarket-activity levels is not far off.

A strong fourth quarter of flying activity was bolstered by the usual late-year parts-buying spree that airlines and shops conduct just before manufacturers post their annual price increases (AW&ST Feb. 21-March 6, p. 28). Preliminary data from early in the first quarter showed the most recent COVID-19 flare-up did not really slow air traffic demand’s momentum.

“Despite some of the hiccups that we saw in airline scheduling and some of the challenges that we saw in December and January with the airlines, the aftermarket continues to recover,” Raytheon Technologies President and CEO Greg Hayes said during a late-February Barclays investor conference. “We’re [part-way] through February, so I’ve only really seen the final January numbers. They would support this recovery trajectory that we had assumed back at the end of the year.”

Raytheon’s Pratt & Whitney unit, bolstered by busy narrowbody fleets operating the PW1100G and IAE V2500 engines that provide large chunks of its services business, saw aftermarket revenue jump 17% in the fourth quarter compared to the third quarter. While end-of-year spares stocking helped drive some business, executives say the larger factor is an overall increase in demand—a trend they expect to continue throughout 2022.

“We’re talking to the airlines,” Hayes said. “They need parts, they need to get engines back into our shops. They need the repair activity to continue, and we’re busy, which is good.”

CFM International partner Safran, which like Pratt is benefiting from its heavy narrowbody-fleet exposure, delivered similarly encouraging data points during a Feb. 24 earnings call. Civil aftermarket revenue, which includes business aviation as well as airline activity, jumped 32% sequentially in the fourth quarter.

“Our baseline scenario is an increase of narrowbody [available seat kilometers] in the 35%-40% range compared to 2021,” said Safran CEO Olivier Andries. “This will drive an increase in civil aftermarket revenue in the range of 25%-30% compared to 2021. On spare parts, number of shop visits, in terms of volume, we would expect good growth more or less in line with the growth in traffic, meaning in the mid-30s.”

MTU Aero Engines’ overhaul shops are “fully booked” in 2022, CEO Reiner Winkler said on a Feb. 16 earnings call. Meanwhile, work scopes are expanding as well, added Chief Financial Officer Peter Kameritsch.

“In the middle of the crisis, airlines really tried to push out shop visits, and the shop visits from a scope perspective [were] quite small—really only minimum shop visits to keep the engine flying, but not more,” Kameritsch said. “Now we see that the scope of the shop is also increased [to] full and heavy shop visits.”

The maintenance ramp-up reflects rising global fleet utilization. January 2021 marked the 13th straight month in which the total number of commercial jets and turboprops in service grew, the Aviation Week Intelligence Network’s Commercial Aviation Fleet Discovery database shows. The total in-service fleet size of 27,850 commercial jets and turboprops—including parked and excluding those in long-term storage—was 6% below January 2020’s comparable figure, but 13% above January 2021’s total.

The steady increase in activity has some suppliers confident that pre-downturn activity levels will be reached within the next 12-18 months.

“As we think about this, we really believe you’re going to see recovery in the commercial aftermarket to roughly 80% of 2019 levels by the end of this year,” Hayes said. “We expect international travel to recover. We also expect not just international but long-haul international probably recovered by about 50% of what we had previously seen.”

A late-2021 uptick in long-haul international activity, particularly in the Asia-Pacific region, is driving such optimism. But aircraft such as the Airbus A350 and Boeing 787 must get busier—and stay that way—for those projections to become reality.

Rolls-Royce, the engine manufacturer most dependent on widebodies, posted a year-over-year increase in services revenue in 2021, the company said Feb. 24. But its £2.9 billion ($3.9 billion) top-line services total was still 15% short of 2019’s total.

Engine inductions totaled 610 in 2021—the company’s lowest level since 2017. Just 208 of those were high-value major overhauls, while the remaining 402 were “check-and-repair” visits. The figures represent, respectively, 33% and 39% declines from 2019’s comparable figures of 306 heavy visits and 660 lighter checks.

“Fewer large engines were required to fulfill customer-build schedules, but sales of spare engines increased,” the company said of its 2021 figures.

As pent-up demand for long-haul service translates into more flying, aftermarket activity should follow suit. For Rolls, that translates into a projected total of 400 heavy shop visits in 2022.

While the most unpredictable headwind remains the possibility of more COVID-19-related disruption, it is far from the only major risk. Capacity linked in part to a lack of skilled workers is one watch item as well.

“We see some labor shortages with skilled positions,” Hayes told analysts on the company’s fourth-quarter earnings call Jan. 25. “Probably the most important one right now is in the castings, where we see a shortage of welders.”

Supply chain issues were a concern before Russia’s military incursion in Ukraine. Long-term geopolitical and practical ramifications, from mandatory sanctions to de facto breaks in the supply-chain links for key products such as raw materials needed to make aircraft and engine parts, remain unclear.

“Thus far, U.S. and [European Union (EU)] sanctions have largely avoided raw materials, with the risk to aerospace being sanctions affecting titanium exports, as [Russia-based] VSMPO contributes 25% of global titanium supply,” a Feb. 24 Jefferies analysis noted. “We believe U.S. and EU sanctions are unlikely to affect titanium. However, the Kremlin could restrict titanium and aluminum exports to counter Western sanctions. We see a subdued impact from potential sanctions, with enough inventory in the supply chain and the ability to shift supply chains prior to any impact.”

Some suppliers prepared for possible disruption by changing their sourcing strategies. Safran, which along with CFM joint-venture partner GE has had a dual-sourcing strategy from the beginning on the Leap engine program, is increasing its non-Russian titanium supply base.

“VSMPO is our main supplier of titanium,” Andries said. “We have other suppliers. We have increased our stock of titanium since the start of this year. So we have, let’s say, several months in advance in terms of stock of titanium for our landing gears and for our engines. But we are going to accelerate also the other sources of titanium.”

Sean Broderick

Senior Air Transport & Safety Editor Sean Broderick covers aviation safety, MRO, and the airline business from Aviation Week Network's Washington, D.C. office.