Podcast: What Lies Ahead For The CFM56 Aftermarket?

Listen in as James Pozzi, Sean Broderick and Dan Williams discuss the present and future of the CFM International CFM56 engine aftermarket and how the in-service fleet will develop over the next few years.

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Transcript

James Pozzi:                 Welcome to the MRO Podcast. I'm James Pozzi, MRO Editor for the EMEA Region, and today we have our latest engine special. This time focusing on CFM International's CFM56 Family Engine. Its first incarnation entered service all the way back in 1982, which was before I was born incidentally, but has since been developed over the decades and, of course, has led to what we see in service today in the global fleet. Over the course of its long lifespan, the engine has been found on several applications but is best known as the world's most popular narrow-body engine option, being an engine option for the Boeing 737 and Airbus A320 aircraft. Given the volume of engines in the global fleet, there has been a consistently strong aftermarket for the past few decades, and today we'll be looking at the current landscape of the in-service CFM56 fleet and its current and future aftermarket. So joining me today are two podcast regulars, of course, Sean Broderick, who is Safety Editor for Aviation Week, and Dan Williams, who is Aviation Week's Director of Fleet Data Services. Gentlemen, thank you for joining me.

Dan Williams:               Thanks for having us again.

Sean Broderick:             It's good to be here, youngster.

James Pozzi:                 Excellent. Well, we'll just start then with the fleet side, and perhaps Dan can kick us off. What are some of Aviation Week's global fleet projections for the CFM56 engine encompassing all variants in service today? The -3, the -5, and of course the -7 variants.

Dan Williams:               Yeah, I don't know what shocks me most, the longevity of the CFM56 or the fact that they're older than you, James, but let's move on swiftly. Yes. Right now, the CFM56 is the engine to have, be you an operator with an aircraft that has them hanging off it or be you an MRO that can do engine overhauls on it. It's tried and tested; everybody likes it because it runs true, there's no teething issues, they're all worked out in the system, it's reliable. You know how many cycles you're going to get out of it before you require an overhaul, and barring an incident, then that's exactly what you get out of it. When we look at this engine, it's still going to be a prominent engine into the future. Our 2025 commercial fleet and MRO forecast still projects to be over 20,000 CFM56s in service by the end of 2025. It's a huge number.

                                   Now, obviously that's predominantly swayed to the 5B on the A320 family or the CEO family and the 7B on the 737 Next Gens. However, and they're going to persist still. When we get to the end of our 2025 forecast, which runs through 2034, there's still going to be nearly 13,500 engines in service. That's without spares. These are just aircraft with engines hanging off them. So there's a long runway for these engines. Yeah, and with the issues that we are seeing, and invariably we're going to end up talking about next-gen technology engines on this because the CFM is lasting longer courtesy of it, they're still a prominent player and will be, as I say, for the coming decade. 13,500 is going to require a lot of MRO between now and then, and it's going to require a lot of spares and a lot of supply chain help to keep them in the air and to keep them going.

James Pozzi:                 Yeah. What does that shop activity look like maybe over the next five to 10 years? I believe there are still a quite sizable percentage of CFM56 engines awaiting their first shop visit, amazingly. And one thing I've seen recently out and about is lease extensions; they are driving heavier engine work scopes, not just for the CFM56, but also its V2500 rival. But yeah. What can you tell us, maybe Dan, again, and bringing in Sean after, what can you tell us about some of the, I guess, the shop visit activity that we could expect to see on those engines?

Dan Williams:               Yeah, yeah, again, you are very right; just because you've got engine service, they don't need a shop visit every single year. In terms of the CFM56 engine shop, it's again, from our forecast, it's over 23,000 engine overhaul visits that are going to be required on those 20,000 that are still in service by the end of 2025 through the 13,500 that are still going to be in service come 2034.

Sean Broderick:             Zooming in on that a little bit, CFM, so Safran and GE, they've got about 23,000 of these engines in service, or they had at the end of 2024, that's just 5B and 7B. So, again, a huge fleet: 70% of them have seen either no shop visits or one shop visit. The no-shop-visit numbers are about 40%, or at least it was about 40%. So that's a lot of engines heading to the shops. If you look at the flow, five years ago or so, let's call it pre-downturn, we were expecting the peak shop visit volume to either be occurring now or to already have occurred, but because of the slowdown for the better part of two years, maybe three years, if you want to argue it, even the quick snapback or the snapback that the CFM56 and the V2500 have had because of the lack of reliability on some of the current generation stuff, even that hasn't been enough to sort of balance it out. The peak has sort of shifted to the right. And it's looking like 20...

                                   Their forecasts are around, somewhere between 2000 and 2500 shop visits this year. So call it 2200, 2300. That is going to stay that way through '26, '27. It's going to slowly begin to drop down, going to fall to around 2000 or below by 2028 and then still be above 1500 to 2030. That's per year. So a lot of engines coming in, in the next few years.

                                   And retirement's going to start to tick up a little bit, but we don't expect that to really surge because of the ongoing demand for this engine and the expected slow ramp-up that we're going to see with max build rates and max deliveries and then even Airbus getting up to its notional goal of, I don't know, 75 a month or whatever on the A320 family by 2027 or 2028. I mean, the CFM and the V are backstopping that, they have been for five years, and they will continue to do that. So it's going to be extremely busy, which is going to put pressure on those shops to keep engines moving at a pace that rivals turnaround times that we used to see. Suffice it to say.

James Pozzi:                 Yeah, it does seem capacity over the next few years certainly is going to be a real challenge. I think even encompassing those engines and, of course, the new generation engines that are kind of, I guess, slowly growing in the fleet, but having that capacity balance between kind of current and the newer engines is going to be a big challenge by the looks of it. That's something you'd agree with, Sean?

Sean Broderick:             Yeah, I mean, one of the challenges that these MRO providers have is that, you know, it's not a one-for-one where everybody that does CFM work can do LEAP work for obvious reasons. The LEAP work is newer; the network on the CFM56 is bigger, but the LEAP network is growing. But if you do both or if you're CFM, you have to look at resource allocation. LEAP shop visits are not where CFM56 shop visits are, but they will be perhaps as early as next year, and by 2030 they're going to be looking at 3000, 3500 LEAP shop visits.

                                   So it's going to have far surpassed... And then it's going to keep going up, and it could top 5000 by 2040. So that ramp combined with the continued demand on the CFM56. It's going to mean that those networks are really going to have to be smart in their forecasting and smart in their planning to make sure that the older engines are supported for as long as they need to be. And again, so many of them haven't had a first shop visit. I mean, when we talk about these engines and we talk about the A320neo and the 737 MAX as having been in service for a decade now, well, the CFM56 aftermarket is really peaking right now. So it's like you have the LEAP coming, but the CFM56 is going to be around for a good long time. And there's going to be an interesting balance, you know, on the aftermarket side that we're going to be covering for years.

Dan Williams:               And just to jump on your point, Sean, what we are seeing, you are right, we're coming to the height of CFM56 overhauls; we are in it. And we're going to experience the same with the LEAP with the GTF as well at some point in the future. The difference is, between these two, is if you look at the ramp-up rates for the CFM56 compared to the LEAP in the GTF, they are completely different, completely different. James, you said it before. Before you were born, these engines were rolling out, and they were rolling out a couple of hundred a year. Right now, to keep up with demand, let's just pick Airbus's rate of 75, let's throw in some 220s, let's throw in some E2s, let's throw in some MAXs.

                                   You're going to need 400 engines a month combined. That's a lot of engines. And then those 400 engines a month are going to bubble and peak in terms of overhauls. Okay, there's going to be slight differences, but run with me with this. They're going to bubble and peak X many years down the line when they start building 400 per month, then you're going to need 400 overhauls per month at some point, and so on and so forth. So that takes the 2500, 3500; you're talking 5000, 6000 potentially. It bubbles up very quickly.

James Pozzi:                 Absolutely. And Sean obviously touched on retirement, Dan, and how that's going to kind of look, but what can you tell us maybe about some of the, either the numbers or how you see the CFM56s retirement market picking up? Because I think it's fair to say the industry would be pretty happy about that given the shortages of various engines in the CFM56. I think I've seen like -5Bs and some 7Bs were in high demand, big lease rates, and a lot of operators wanting those assets. But yeah, what do you see in terms of retirement?

Dan Williams:               Yeah, so that's another good one. So over the coming decade, we anticipate around, on average, about 700-ish engines, CFM56, to retire every year because they're associated with the aircraft that are coming out of service. However, and there is a big asterisk with this, obviously every time we move on and we still have issues with the new build deliveries, then actually that has potential to shift some of those numbers. And we've seen it already. People are holding onto 737 Next Gens. People are holding onto A320 classics, CEOs, call them what you will, because they need the aircraft. Now, there are other factors happening in the globe. We've seen recently United have announced they're actually going to retire a few more aircraft this year than they were originally going to because of the geopolitical quasi-trade tensions that are going on, a slight drop in demand, be it from US government travel, be it from US corporate travel.

                                   There's some uncertainty there. And as a result, you've seen the big US legacy carriers drop some of their forecast numbers for the year. So that's going to start, and that's a completely outside factor. They may start playing with these numbers and may encourage some operators to retire some of their old aircraft. Doesn't mean to say they're going to retire CFM56-powered aircraft because they really like those. You will probably find that these bigger fleets will look at the slightly more niche aircraft within their route network and say, "Hey, do you know what? We've got X many such and such; that's just on its own. Let's just retire those because it simplifies our fleet." So that's probably what we'll find. However, as a result, some CFM56-powered aircraft will come out of service and may help the USM market, may help the spare engines market, or may not, because some of these aircraft that are coming out, the engines might be right at their life limit. And in which case there is no use to anybody except for beer cans.

James Pozzi:                 Absolutely. Yeah. It could be very interesting how that develops over time, I think, because there's been some very interesting trends in the CFM56 market, especially over the last five years that a lot of people do state. I wouldn't have anticipated this at all a few years ago, but then they'll say a certain engine type is in demand or whatever else. So yeah, very interesting. And just finally then we'll look to come into the future; of course, we've mentioned the LEAP, I guess, the successor engine or the long-term successor to the CFM56 from CFM International. What can we expect? And throwing it out to both of you. What can we expect in terms of the inflection point between in-service CFM56s and in-service LEAPs? And how will that develop over the next five to 10 years, maybe into the aftermarket?

Dan Williams:               Well, I guess I'll go first because it's numbers. We anticipate that that inflection point somewhere, 2029, 2030, that's going to be the time where the in-service LEAP engine figure is greater than the CFM56. Again, there's still plenty of caveats with this because all it takes is one further shutdown on a production line or one bit of extra oversight or a new teething, durability, reliability, whatever issue to appear on a, not necessarily a LEAP, but just on a modern engine that forces the CFM to live longer. It's quite ironic. If we'd have gone back five years or so and having this conversation, we'd be like, "Do you know what? The inflection point for CFM56 to LEAP might be like '26, '27." However, with all the durability issues with the GTF and teething issues with introducing so many new engines at such a high rate and all the other exponential issues with the airframe OEMs, actually it keeps shifting everything slightly to the right, which is, again, great news if you are in the CFM56 aftermarket.

Sean Broderick:             On the other hand, if things keep heading south on the global economic front, we could see the number of CFM56-powered aircraft come down in a way that was projected before everything sort of went... Before the last five years mixing in the downturn, which is partially offset by all the problems you just talked about. I mean, at some point though, some of these older aircraft, they're going to stop overhauling engines that are... They're going to stop that third overhaul, if you will, and they're going to let them go at the end of their second set at 16, 17 years, or whatever it will be, and start feeding the USM market.

                                   And some airlines may not survive a significant global downturn. The conventional wisdom among the airline folks is that there is enough maturity in markets around the world where it's no longer when the US gets a cold, then everybody else gets sick. Or when Asia sneezes, everybody else catches a cold. I'm not sure... I'd like to think that that's true, but there's enough going on around the world now that if you start mixing in things like tariffs that are touching half of the globe out of the United States, you never know what that could do. And that could lead to the kind of, at least, economic flatlining, at least, that could prop more of these deliveries to become replacements and not network expansions. And if that happens, then that inflection point may indeed be a little; it may stop moving to the right at least.

Dan Williams:               Yeah, all it takes is the price of oil to go above 100 bucks a barrel, right? And that can be determined in many different ways. I think we could have this podcast again this time next week, and we could end up with something slightly different because things can change. We are looking around the possible inflation, possible stagflation, possible high interest. We have no idea where it's going to go because we're not economists. However, we still have to build these into our models and our theories because, Sean's right, the scales get tipped one way or another. And it could be good for the CFM56, could be bad for the CFM56. Until that weight is applied. Who knows?

Sean Broderick:             The production rates are increasing, right? We know that, especially on the Boeing side. I mean, they're down around 37 737s a month. That's again, barring issues, that's going to climb. And so there's going to be more going into the operator's fleets. And the question is, "What do they do? Do they grow? Or do they retire? Or do they get rid of the airplanes? Do those airplanes find second homes or additional homes, or do they retire?" Certainly, it's going to be an interesting next five years in terms of that inflection point and tangentially the impact on USM and retirement numbers and everything that goes with it.

Dan Williams:               Yeah, you get one reasonable sized airline go south, and all of a sudden you can flood the market with 150 aircraft.

Sean Broderick:             Right.

Dan Williams:               Who knows where they could be redeployed, and are you going to replace... Because there's going to come a point where we're going to start getting environmental pressure saying, "You need to stop using 737 Next Gens. You need to stop using A320ceos. You need to use NEOs and MAXs together." 20% fuel burn, therefore carbon emissions saving. But again, right now, these operators just want to make money to compensate for the downturn.

James Pozzi:                 Yeah, absolutely. And as we said, an interesting few years ahead; of course, we've discussed a really stalwart of the fleet, a reliable engine, but certainly it's a potentially very volatile global landscape. And the factors we discussed today, obviously, are going to play a big role in that. So yeah, again, as I often say on this podcast, something to come back to in the near future, no doubt, I think. Always a relevant topic for this engine program. Sean and Dan, thank you so much for your insights today and for joining us again on the MRO Podcast. And no doubt we'll be hearing from you both again soon.

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