AerCap CEO: New Engines Unlikely To Achieve Big Time-On-Wing Gains

Values of spare CFM Leap and Pratt & Whitney engines are likely to hold up even as more enter the market from increased teardowns of young narrowbody aircraft, according to Aengus Kelly, CEO of the world’s largest engine lessor, AerCap.

“We are by far and away the biggest engine lessor in the world, and we have a lot more visibility than anyone else, and I think we are going to see sustained engine demand for a long time to come,” he said on an Oct. 28 investor call.

Kelly was responding to a question that could have drawn on a recent Engine Yearbook interview with the head of independent engine lessor ELFC, Richard Hough.

In it, Hough says he is aware of more than 100 new-tech narrowbody aircraft earmarked for teardown, adding: “It was always expected that there would be a period of relative softening in spare engine demand as the GTF and Leap products stabilized and the required spares ratios moved towards more mature levels. The premature part-out of aircraft is going to exacerbate the level and duration of market softness, and therefore I question whether the aircraft lessor assumption around better returns bears out over the longer term.”

However, Kelly—who at AerCap also manages the world’s largest fleet of commercial jet aircraft—questioned whether there would be a significant improvement in time on wing for the latest generation of narrowbody engines, without which demand for their spares would be unlikely to fall.

“The key to the valuation or the demand for engines will be, can the time on wing of new technology assets improve dramatically in harsh environments? I think that is a question for the engine OEMs," Kelly said. "I don’t see that happening. There’ll be gradual improvements, but I don’t really see that happening.”

One reason for this, he said, is that aviation’s growth markets are now often in countries with harsh operating environments, increasing the demands on modern engines. Thirty years ago, in contrast, harsh environments were a small part of the air travel market.

For the full interview with ELFC’s Richard Hough, see the Engine Yearbook 2027, out soon.