Podcast: Euro Engine MRO-Dynamics Shaping Next Few Years

Managing narrowbody engine MRO is a complex puzzle. Aviation Week editors discuss the challenges, opportunities and changes in the European engine aftermarket—including highlights from AeroEngines Europe in Hamburg Sept. 8-10.

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Lee Ann Shay (00:16): Welcome to the latest MRO podcast. This week's topic, European engine maintenance. Aviation Week's popular AeroEngines Europe event just took place in Hamburg, Germany. In addition, so far this month there's been quite a bit of engine news coming from Europe as well. I'm Lee Ann Shay, Aviation Week's executive editor for MRO and business aviation. And joining me today are colleagues, James Pozzi, who is our MRO editor for the EMEA region and Jens Flottau, executive editor for commercial aviation. The three of us attended AeroEngines Europe, so we have lots of things to discuss on this topic. James, welcome.

James Pozzi (00:58): Hi, Lee Ann.

Jens Flottau (00:58): Hi, Lee Ann.

Lee Ann Shay (01:00): Our colleague Dan Williams shared some preliminary, I want to stress preliminary, 2026 Aviation Week forecast data. The full 10-year forecast will be out soon, but this preliminary data shows that Europe should expect to receive about 5,200 new aircraft over the decade. And to put this in perspective, globally, about 75% of the deliveries will be narrowbodies. So Airbus A320s and Boeing 737s. From an engine perspective, this means it's easy to see why we have so many discussions about CFM56s, V2500s, the geared turbofan and the Leap engine. So speaking of narrowbodies, Jens, you interviewed Pegasus Airlines CEO on stage. What stands out to you about the fleet strategy?

Jens Flottau (01:52): Well really two things, Lee Ann. First of all, they are an unusual airline in the sense that they switched twice over the history of the airline. They started out as a Boeing operator, a low-cost carrier, obviously one of the fastest growing in Europe and the world and one of the most profitable ones as well. As I said, they started out with Boeing, then they placed a big, big order for Airbus, which is still the aircraft coming from that order, still being in the process of being delivered, actually 44 of them still coming. But then late last year they decided to go back to Boeing and ordered a hundred Boeing 737-10s plus a hundred options. So they changed course twice, and obviously that's unusual. They did say that they will operate a dual fleet, which is also kind of unusual for a low-cost carrier.

(02:52) And I asked Mehmet Nane, the chairman of Pegasus, why he did that, and the answer was mainly pricing. It was very honest answer I should say was mainly pricing and availability. So if Airbus could have delivered A321neos earlier, then they might've had a better chance of getting that order. But since Airbus basically sold out until the early 2030s, Boeing was the earlier opportunity for them to be able to grow, and they're growing very fast: 16% capacity growth this year is the plan. So, very successful airline. And what does that mean for engines? We talked about that because obviously on the Neo side they are hit by some of the problems. Luckily for them they are a Leap operator. They didn't go for the GTF. Mehmet Nane was very, very outspoken about the Leap engine. Then he said basically if we had ordered the Pratt & Whitney geared turbofan engine, if we had ordered the GTF, we would be bankrupt by now. That's what he said on stage, simply because of the groundings and the repairs that are required. And that leads to such a big part of the fleet being on the ground. Obviously the MAXs that are coming in are also Leap powered, so at least on the engine side there's some commonality that remains for the airline.

Lee Ann Shay (04:28): That sounds good. Do you think that due to the ramp-up problems that we've written about extensively over the last few years, that European airlines will use these mixed fleets instead of relying on one fleet more often?

Jens Flottau (04:42): I do think so, yeah. I mean they are a perfect example. There are others. I mean Eurowings for example is an A320 operator right now. They are moving into the MAX as well and will operate a dual fleet made up of MAXs and Neos for years to come. And I think one, as you say, one aspect is availability. Another aspect to me is also risk management because if you rely on one single source then you are a lot more exposed to delays, technical issues. And I think that is coming more and more to the forefront of airline management thinking and strategy that people are looking differently at these issues than they would've done maybe 10 years ago when all these problems that we've seen over the last few years hadn't happened yet.

Lee Ann Shay (05:47): So that leads perfectly to two questions that I've got around engines specifically. So Dan's preliminary 2026 through 2035 forecast shows that European engine MRO demand will increase a lot until about 2031. James, do you think that there's enough capacity for this?

James Pozzi (06:08): Well, it could certainly present a few challenges. I think OEMs and their MRO partners and whether that's independent MROs or airline maintenance companies or OEM-aligned MROs, are certainly looking to address this by adding shop capacity. Of course that's as we've mentioned on previous podcasts, that has been a prominent trend of the last few years in Europe as it has I guess in other regions too. But in Europe certainly that's been the case. You're right, shop demand in Europe is very strong. It's mostly narrowbody driven from legacy engines like the CFM56 and the V2500 and then the new-generation engines notably the Leap, but also we'll start to see more GTF work coming into play in the next five years. No doubt of course, a lot of this is quick turn services right now, especially for the new-generation engine programs. But we're also seeing some heavier induction demand too, particularly on maybe some of those legacy engines.

(07:07) One panelist of mine from this week mentioned that those engines lend themselves well to shorter builds, which we're also seeing a lot of in terms of the engine restoration. So of course as well on the fleet side, operators are holding onto aircraft longer with engines undergoing these extended maintenance to maximize their lifespan. So there's some interesting points on one of our panels on the first day at the conference where I had representatives from an OEM, Safran, of course a partner in the CFM joint venture, the maintenance division of TAP in Portugal, and then two big MROs in the industry of course MTU Maintenance, one of the giant MROs of Europe, and HAECO of course Hong Kong based, but with shops in Europe, in Amsterdam and London out at Heathrow. So yeah, certainly all of these participants were investing in capabilities, and they're expanding capacity for new-gen engines mostly TAP for example, are bringing the Leap variants online as we speak.

(08:08) MTU has been investing in capacity and of course its joint venture network, notably in Europe, EME Aero of course the joint venture it has with Lufthansa Technik in Poland and Safran of course are developing shops in-house most recently in Brussels, also across their open Leap MRO network. They're adding new partners to that or have been consistently for the last five years and that now I think surpassed 20 shops as it stands. And of course there's new players being involved in that through offload agreements through GE and Safran, both partners in that program, of course. One of these who spoke at the conference is United Aircraft Maintenance Company who are based in Cyprus and focused on Leap engine quick turns and they started operating at the beginning of this year. So I think the way this will be grown, it's an interesting one. I think a lot of these big MROs still take a very much a global approach.

(09:03) They've got these big expansive networks with locations all across the world, and they've stressed the need to utilize those. But I think some of them will look, as we've talked about before, kind of a more localized strategic engine locations, particularly for things like component repairs for example. A good example of this I think is Lufthansa Technik of course they are opening a component shop in Portugal near Porto by 2027. And of course outside of Europe they are also that same year in 2027 will add a Leap-1B quick turn engine shop and test cell too, which is quite significant for that region given the lack of testing capacity on some of those narrowbody engines in North America following a deal with the Canadian airline WestJet . So they're being very strategic in terms of where they place some of these shops, whether it's the components or things like quick turns as well.

(10:01) There's definitely a big need for capacity and I think one of the key takeaways was, and this may not be any kind of massive revelation, but yeah, more capacity is needed. More shops need to come online, more hangars need to be built or engine shops and more partnerships are needed. So that's something I guess we can expect to see more of in Europe or continuing to see MROs partnering either with each other or airline divisions or perhaps OEMs as well to build that. So yeah, we'll expect more of that in the next few years as well. And just one more thing actually I think a good scale of it. I know they're on the OEM side and one of the big players in the industry, but Safran told me that they obviously as they have done today, segregated the Leap network a bit from the CFM56 network, not just in terms of those engines being repaired separately from each other but also internally and externally. Of course they've got their own shops in the network as I mentioned, and then the external partners in the network. So they told me they're going to need in the next few years up to 4,000 new people needed just in their Leap MRO network. And that really highlights the need I guess for people for just one program, albeit of course a very big narrowbody one. So yeah, still a lot of work to do in capacity all across Europe, but certainly strides or progress is being made.

Lee Ann Shay (11:20): Thanks James. Well the engine maintenance market is just a very complex entity. Not only are they managing the difference between the current generation and the Leap generation and trying to figure out which parts go to which engine. I think it was really interesting, James and I visited Lufthansa Technik this week and went into an engine shop that used to be a flow line. I went there when it opened and it has all these gantries and the engines used to flow between the two stations, but now they have converted those into engine bays. I think that's so telling. So why the change? Part of it is airlines are using a variety of strategies to manage engine maintenance from module swaps to core replacements to repairs, use serviceable material and those engines just don't flow because there's also different builds. And then we've got the material issue, which we all know has been a problem. I was moderating a narrowbody engine panel and one of the poll questions we asked the audience was, when do you think the availability of use serviceable material increase? And the most popular answer by far was three to five years, which signals the next few years. We're still going to be talking a lot about the availability of material, but then there's also repair development, which came up quite a bit. James, any insights on that?

James Pozzi (12:48): Yeah, I mean there's some really good insights from Lufthansa Technik to their engine division leadership. Derrick Siebert who is VP of engine services operation and Georg Fanta who is VP of commercial engine services spoke on day one in the keynote and they had some really interesting insights on repair development. Of course we know ideally the engine market and especially some of the big engine MROs would like to see some of these repairs developed quicker for new-generation engines, particularly maybe on the narrowbody side, the Leap certainly and the GTF of course as well. But yeah, that's desirable to them. So Lufthansa Technik obviously have a lot of experience of this. They do still develop a lot of repairs for other programs. CFM56 for example, they are constantly developing repair techniques for that. So that's not going to stop given the lifespan of that engine.

(13:39) It's going to run for at least another two decades, maybe even longer. A sizeable amount of those engines not even undergoing their first shop visit yet. There's still quite a decent number for that. So they're not going to stop doing that, but they would like to see accelerated development for the Leap. Of course, the benefit of this, I guess enabling what are restrictor repairs would mean they get to reduce material costs, they can undertake the repairs and not just fully replace the parts via the OEM. So Derrick Siebert said many parts are replaced still then repaired. That's still an ongoing thing. And yeah, you can see why of course they reached a milestone inducting their 100th Leap engine in Hamburg, of course their headquarters where they do some of the narrowbody engine work in Europe. So the current environment would mean Derrick feels that in order to achieve this there needs to be a lot of more broader industry cooperation to speed up those availability of repairs for customers.

(14:39) Of course, as I said, the repair pathway is a well established on legacy engine types, but how long will it be until we see these new engine repairs developed at quicker speed? Could take another five years yet based on what I've heard from conferences where it's come up quite a lot as a topic certainly in the last few years. But yeah, that's certainly desirable to the industry and it'll be interesting actually LHT of course will one of the inaugural five members of the premier MRO network for the Leap. It'll be interesting to see if that leads to this becoming a reality and they're able to speed up some of these repairs by being part of that network too, of course, I think it was last October, just nearly a year ago since that was announced. And it's added a couple of members since I think we're about six or seven members now of the premier MRO network.

(15:27) So yes, that would be advantageous. On the part side I think as well as worth mentioning, Lee Ann, PMA parts and DER repairs of course Designated Engineering Representative repairs came up from Lufthansa Technik as well. Of course alternative repair strategies. We've seen that that's grown prominence I guess in maybe the last five years since the pandemic perhaps. Certainly from my side. I guess airlines of course are always looking to be efficient and keep costs streamlined, so they've been a bit more open to some of this. There are obvious benefits of this, of course, cost savings, TAT improvements are just two of those things. But of course there are barriers to that. Lessors famously are resistant to accepting DER repairs. Although one of the breakthroughs I think is airline acceptance. I think in Europe that's been more of the case in recent years as it has been in certain other regions and having those broader repair options probably is helping them in some regards.

(16:29) As I mentioned about the barriers, some airlines and lessors still worry that non-OEM repairs could reduce asset value. For example, complicate lease returns or avoid OEM warranties, just some example of those. And also lessors feel it can affect some leasing contracts or resale scenarios. So yeah, despite the approvals I guess of the regulators, I think the prominent regulators FAA, EASA for example, there is also still this perception, which is probably maybe a bit unfair, that somehow they are maybe a bit second tier compared to other repairs, more common repairs such as OEM-designated repairs for example. So yeah, I'll be interested to see how that develops over time because there's definitely a change in the acceptance and I think the market may have to push to some activities more in that space given as we've mentioned, the constraints that are currently in the market. Long TATs, for example, supply chain constraints and a lack of slot availability.

Lee Ann Shay (17:25): Well, speaking of repairs and repair development, MTU Maintenance obviously is another very big player in the European engine, MRO space and MTU Maintenance has a new CEO as of September 1st, someone who is well-known in the European MRO market, Johannes Bussmann who led Lufthansa Technik for several years. Jens, any insights on to the leadership change? Do you expect any changes at MTU Maintenance?

Jens Flottau (17:54): If there are any changes, then there would be only positive, I would assume. Obviously Johannes Bussmann is, as you say, extremely well known in the industry having run Lufthansa Technik for I think 8 years or seven years. And he was very successful at the time, growing revenues a lot and obviously having had a great run there. Then he left the industry for two years, but obviously missed it and returned when the opportunity arose and now runs MTU. I think his appointment at MTU is a very smart move for two reasons. It obviously strengthens the already strong MRO part of the business, which is the most profitable. Even further, he has this not only the great technical knowledge in the space, but also the relationships with the airlines through his past at Lufthansa Technik, not only into the Lufthansa group, but also into the broader industry. He also has a very deep engineering background, which will help MTU in other ways. Yes, MRO is extremely important, but also the company has to prepare the next generation of engines, the next generation of the GTF being part of the consortium there with Pratt & Whitney leading. So defining that next generation defining specifications and also trying to find obviously applications for the engine will be key for MTU and the experience, as I said, both in the engine development space and in the MRO space will be a really good asset for the company.

Lee Ann Shay (19:44): Good points. Well, we could talk a lot more about engine MRO, but we've got to wrap this up. So James and Jens, thank you so much for your insights and thank you to Andrea Copley-Smith who is producing this episode. Don't miss the next MRO podcast by subscribing to it wherever you listen to them. And one last request, please consider leaving us a star rating or writing a review. Thank you so much and have a wonderful day.