Europe’s slow recovery is being offset by increasing headwinds in Asia, creating a mixed near-term outlook for some aftermarket providers, particularly those that rely on widebody flying that is most affected by international travel’s slump, Bank of America analysts report. 

“After a tick up in cycles in July, flight cycles for Rolls-Royce’s portfolio have fallen back to levels of May/June, with negative momentum,” an Aug. 23 Bank of America research note said. “This will be a watch item for the next few months, but weaker flight hours will be a risk, in particular for 2022.” 

Rolls, which relies heavily on widebody flying, saw flight hours approach 50% of 2019 levels in May and June, rising from 40% from January through April, the analysis calculated. But its heavy reliance on Asia-Pacific carriers—where about 40% of its installed base resides—means ongoing pandemic-related struggles in that region will hit the UK engine-maker particularly hard. 

“At a global level, flight cycles have stalled as a percentage of [2019] levels, with progress in Europe offset by the situation in Asia,” Bank of America analysts wrote.  

Eurocontrol’s weekly traffic summary for the period ended Aug. 22 has European network traffic down 30% compared to 2019—up 1.1% from the previous week.  

Asia is moving the other way. Flight cycles were within 17% of 2019 levels in May. The latest figures, from last week, has them off 46%, Bank of America said. Asia’s struggles will affect narrowbody fleets as well.

Both CFM International and International Aero Engines have more than 30% of their installed base in the region. “Weaker growth in Asia is clearly a watch item for these fleets” for the rest of the year, Bank of America said.

While many aftermarket providers reported strong sequential trends through mid-year and into the near future, warnings on engine overhaul scope, or material usage per shop visit, proliferated during the latest round of earnings calls.

So long as flying activity continues to recover, however, the corresponding reduction in available green time and available inventory should ensure the scope-limit trend is short-lived.  

“We expect scope and green time to continue to be a drag,” Bank of America said. “But increasingly attention will turn to 2022, where after almost two years of running down green time and reducing scope, there could be upside risk if demand does continue to improve.”