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Engine lessor and maintenance provider Willis Lease Finance (WLFC) believes demand for midlife engines like the CFM56 will hold up better than for the midlife aircraft they power in the event of sustained high fuel prices.
“If fuel prices remain elevated longer than anticipated, some of the parked aircraft will likely be retired, and that could lead to lower lease rates and values for midlife aircraft. We would expect changes in midlife engine values to be more resilient than aircraft as they will continue to support shop visit avoidance,” WLFC CEO Austin Willis said May 5 on its first-quarter earnings call.
As airlines feel liquidity pressure from higher fuel costs, they will turn to leasing to avoid expensive overhauls, Willis believes, while demand for spare engines remains strong in any case due to “extended maintenance timelines and sustained pressure on spare engine supply.”
That demand was evident in WLFC’s quarterly results, which showed a 14% rise in lease rent revenue to a record $77 million.
And even if demand for current-generation engines does suffer from higher fuel prices, Willis said his company is “well hedged” due to having more than half its leasing portfolio in new-generation power plants like the CFM Leap, Pratt & Whitney GTF and GEnx.
The company’s engine and airframe maintenance operations also performed strongly in the first quarter, rising 75% year-on-year to $10 million, with growth in engine and aircraft storage and repair services driving the improvement.
Willis noted that the company’s growing module exchange business is well positioned to tap into demand for low-cost alternatives to full engine overhauls, while the WLFC engine repair center performed its first core engine restoration of a CFM56-7B in February.
He added that WLFC expects strong demand for these types of shop visits into the 2030s.
“Our services businesses remain a core strength for our platform, reducing both off-wing time across our fleet and turnaround times for our own customers’ assets as compared to larger MROs,” Willis said.
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