More than 100 new-generation narrowbody aircraft have been, or will soon be, torn down for parts, according to the chief executive of engine lessor Engine Lease Finance Corporation (ELFC).
Speaking to the Engine Yearbook, Richard Hough said the lessor is aware of 100 Airbus A320neo-family aircraft and five Boeing 737 MAX units that have been either disassembled or committed for disassembly. Of the A320neos, 65 were powered by Pratt & Whitney GTF engines and 35 by the CFM International Leap—those engines have now entered the leasing market.
“Over the past 12 months, however, numerous aircraft lessors have concluded they can get more revenue from leasing two engines and storing the airframe rather than transition the complete aircraft to a new lessee,” Hough says.
“This has increased near-term engine availability but will also contribute to softer spare-engine demand later on,” he says.
A key question for engine lessors is how quickly lease rates soften for expensive new-generation engines like the GTF and Leap. Some pricing moderation was always expected once OEM output ramps up and durability problems are addressed, but an influx of more than 200 spare engines into the market from the parted-out aircraft above is another dampening factor.
“The premature part-out of aircraft is going to exacerbate the level and duration of market softness, and therefore I question whether the aircraft lessor assumption around better returns bears out over the longer term,” Hough says.
Nonetheless, Hough stresses that new narrowbody engines remain excellent investments for long-term players in this market, while cautioning that their transition to maturity could be turbulent.
“The outcome will be determined largely by how the engine manufacturers manage future spare-engine production and their dominant positions in the MRO market,” he says.
A full interview with Richard Hough, covering his thoughts on a wide range of engine leasing, maintenance and technology issues, will be in the forthcoming Engine Yearbook 2027.
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