CFM56 engine
The recent trend that has new engine spare-parts prices increasing around 10% per year seems set to continue for at least a bit as manufacturers leverage strong demand for lift and supply-chain bottlenecks to boost aftermarket sales.
Both GE and Safran, 50-50 partners in CFM International, pushed through high-single-digit spares price hikes in August, executives confirmed on recent earnings calls. The hike came on the heels of a double-digit increase on Nov. 1, 2022.
“We don’t want to be abusive or to appear to be perceived to be abusive,” Safran CEO Olivier Andries told analysts. “There needs to be a rationale behind it. And if you look at what happened in the last years, even before the pandemic, we’ve always been above inflation by 3 to 4 points. That’s what we’ve been doing. And so we’ll continue on that path, I would say, at least for some years.”
The surge in third-quarter parts orders ahead of the price hike contributed to some eye-opening financial figures. External spares sales at GE were up 35% year-over-year.
The company’s “spare parts rate”—the average daily dollar amount of spares shipped to external shops or used in time-and-materials overhauls—was a record $42.2 million last quarter. The figure peaked in the low $30 million range before the downturn.
Bolstered by CFM56 demand, Safran boosted its full-year civil aftermarket guidance for the second consecutive quarter. It now sees revenues increasing in the low-30% range, or 10% better than its initial outlook back in the beginning of the year.
“Volume of shop visits was up year-over-year and sequentially, and we confirm that we are on track to reach around 2,000 CFM56 shop visits this year,” CFO Pascal Bantegnie said, returning to a level last seen before the 2020 downturn. “We also benefited from the price increase we had on the 1st of August.”
Both GE and Safran cited the same three factors in their aftermarket surge: volume, pricing, and increasing material consumption during shop visits.
“Work scopes have been heavier, both on the narrowbodies and widebodies,” GE CFO Rahul Ghai said. “Widebodies, they’re coming back to ... second shop visits. Narrowbodies is primarily a phenomena of customers trying to constrain spending in challenging times, especially in China last year. Now as they have a little bit more cash with departures growing, their work scopes are increasing.”
GE Aerospace is expecting full-year services revenues to be up 25-30% compared to 2022.
Manufacturers’ strong services performances are not necessarily producing content customers. At the recent Aviation Week MRO Europe conference, several airlines and aftermarket providers expressed frustration with what they perceive is manufacturers’ emphasis on supply-chain issues affecting new aircraft production at the expense of supporting the in-service fleet.
