Overhaul Alternatives ‘Not The Holy Grail,’ Says MTU Leasing Director

LONDON— Extended turnaround times and long waits for replacement parts have driven a surge in interest for alternatives to full engine overhauls. Nonetheless, maintenance avoidance “is not the holy grail,” according to Patrick Biebel, managing director of MTU Maintenance Lease Services.

At Aviation Week Network’s recent Engine Leasing, Trading and Finance Europe conference, Biebel argued that overhaul alternatives such as module replacements do not always make economic sense in the medium term, whilst also adding technical complexity to a fleet.

“Especially in a market like now that is getting very hot in terms of valuations, the cost per cycle on a 2,000-4,000-cycles-remaining engine is getting very high,” he said. “If you come to the conclusion that you need to operate the aircraft for another five to six years, a full build might be a pretty good value proposition for you, and from a dollar-per-cycle perspective, a pretty cost-effective way for you to do it.”

Speaking on the same panel as Biebel was Alun Roberts, head of engine leasing for FTAI Aviation, which expects to perform 250-300 module exchanges—mostly for CFM International CFM56 engines—this year. Roberts revealed that FTAI is so focused on providing 5,000-cycle CFM56 engines that it will remove 10,000-cycle modules from engines it acquires and bolt on a 5,000-cycle replacement

Fellow panelist Graeme Crickett, chief technical officer of SMBC Aero Engine Lease, joked that the financial complexities of this arrangement must require FTAI to “give its accountants Valium,” with Roberts agreeing that it’s a “very interesting and creative model.”

“We have a certain book value in that asset, so when we remove an LPT [low-pressure-turbine], that LPT will have an assigned book value, which will then be transferred over to the next engine,” he added.

Roberts also noted that FTAI’s engine leasing strategy means it prefers to offer lower lease rates in exchange for longer terms and the company takes all the maintenance associated with the engine.

Like other participants on the panel, Tarla Dunne, risk and investment manager for SES, noted very strong competition for CFM56-5B and -7B engines, adding that “customers have to take what they can get” in terms of technical specification.