Fortress Buttresses CFM56 Position

IBA said that a 1999-vintage CFM56 engine for an Airbus A320 has only lost 10% of its value “due to the combined benefits of OEM price inflation and regular reinvestment”.
Credit: Vallair

Given the horrendous coronavirus statistics emerging from the United States this month, it takes strong nerve to back a recovery for aviation in 2021, especially since January’s infection and death counts are likely to be even worse.

Nonetheless, Fortress Transportation and Infrastructure Investors (FTAI) is pushing ahead with plans to position itself for a shortage of CFM56 engines that it expects to occur around the middle of next year, as the rollout of vaccines allows the release of pent-up demand in the narrowbody market.

FTAI is pursuing a pan-aftermarket strategy that encompasses engine leasing, parts sales and maintenance, the latest element of which is a deal with U.S. MRO provider AAR for the teardown, repair, marketing and sale of spare parts.

These will be sourced from a pool of more than 200 CFM56 engines that FTAI continues to add to amid the “extraordinary opportunities” of the pandemic, its chief executive, Joe Adams, has said.

“We believe Serviceable Engine Products, combined with our proprietary products and partnerships, completes our unique suite of CFM56 aftermarket offerings aimed at delivering the lowest cost per cycle solution to our airline customers,” he added in amore recent statement.

Consultancy IBA, like FTAI, believes that while current demand for used serviceable material is low, it will return strongly as airlines seek to bypass costly shop visits with actions such as module changes instead.

Meanwhile, Aviation Week’s 2021 Commercial Fleet & MRO Forecast predicts that CFM56 maintenance demand will total $8 billion next year (almost $2 billion lower than the pre-Covid forecast for 2020) and rise to a peak of $11.4 billion in 2024.

Given that half of CFM56 engines are yet to undergo a first shop visit, the maintenance market will remain strong for all of this decade, but in the near term there could be significant choppiness as airlines juggle equipment and use green-time leasing to avoid paying for overhauls.

For a detailed look at all the trends discussed above, see the forthcoming Engine Yearbook 2021.