The commercial aviation aftermarket experienced significant growth during the first quarter (Q1), although challenges in the supply chain are currently impacting the engine market segment.
By J Prakash
Maintenance, repair, and overhaul (MRO) sales saw a 12% increase from January to March, as highlighted in an April 18 report by RBC Capital Markets. This growth was primarily driven by a 15% increase in components and a 12% increase in heavy segments. However, the engine segment experienced only a 9% growth due to shortages of parts and slow shop turnaround times.
According to analysts Ken Herbert and Stephen Strackhouse from RBC, the modest growth in engine MRO is concerning, especially for leading engine manufacturers such as GE and RTX. Despite strong demand for engines like CFM56 and IAE V2500, challenges in the supply chain and OEM support are evident, particularly for legacy engines like the Pratt & Whitney GTF.
RBC Capital Markets suggests that some engine MROs have unused capacity, particularly for CFM56 engines. This observation might seem counterintuitive given the current high utilization of CFM56 engines, but various factors explain this phenomenon. Some engine MROs might hesitate to sell CFM56 capacity for future periods if they're uncertain about acquiring necessary spare parts. Additionally, they may prioritize flexibility, holding off on selling slots if demand shifts towards other engine types.
The focus of leading OEMs on new generation engine technology has led to support challenges for legacy engines. This situation disproportionately affects Pratt, especially in spare part sales associated with the V2500.
As OEMs concentrate on newer engine technology, third-party entities are likely to play a more significant role in supporting legacy engines, creating new opportunities in the aftermarket. The continued use of older aircraft fleets is expected to benefit the MRO segment, with approximately 1,750 more aircraft above 20 years old compared to 2019. This trend is anticipated to increase shop visits and provide growth opportunities for legacy engines such as V2500, CFM56, CF6, and PW4000, as indicated by respondents in RBC's recent survey.
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