Navigating the challenges of spare engine management – today, tomorrow and beyond

It’s been two years since air travel returned following the Covid crisis. But a surge in demand for spare engines means aviation is now grappling with new challenges that will likely continue into 2030. AerFin has the way ahead.

Fewer new aircraft and longer MRO turnaround times: The perfect storm

After Covid reduced global flight volumes by 43%, traffic bounced back to within 2.5% of 2019 levels by December ‘23, teeing-up the return to normal growth patterns this year. But for airlines, lessors and investors, this unexpected rapid recovery has been a double-edged sword.

Supply chain disruptions and labour shortages continue to hamper the production of aircraft – but not airline orders and growth plans. A further 286 aircraft order commitments were announced during this year’s Farnborough International Air Show. Whilst Airbus and Boeing have already confirmed they won’t deliver all the new aircraft originally planned this year.

Concerns are rising that the gap between demand and supply will keep mid-life and older aircraft in service longer and pile further pressure on OEMs and the aftermarket, right through to the end of the decade.

Simultaneously, labour and material shortages have also created MRO capacity issues leading to longer engine maintenance turnaround times (TATs) – ramping up the demand for spare engines further still.

According to global consultants Bain & Co, TATs are up by 35% or more for legacy engines and more than 150% for new generation engines, compared to pre-pandemic levels. Again, with the demand for spare engines outpacing supply, these extended timescales to maintain and repair engines are reducing the availability of airline fleets. The postponement of engine shop visits to preserve cash during Covid has come back to bite the industry hard.

Bespoke solutions, faster turnarounds and lower costs

For the past 10 years, AerFin has been providing tailored services to airlines and asset owners in the mid-life to fleet phase-out space. We offer immediate, flexible engine management solutions for our customers, including MRO Lite services for the storage, maintenance, technical assessment and repair of engines according to an airline or investor’s long-term plans.

At a time when third-party engine shop capacity is limited, our MRO capabilities include module swaps, top case repairs, borescope inspections, ‘C’ Check, SB /AD, short and long-term preservation and storage and engine piece-part disassembly. Our experienced team of aviation technicians can run as many as 10 engine lines simultaneously in our EASA 1/ CAA & FAA 145 approved facilities and we have a global stock of over 230,000 overhauled engine parts readily available. All sourced by our best-in-class originations team to ensure excellent value and adherence with rigorous technical and paperwork review processes.

For our airline customers this provides a faster and more cost-effective option than OEM quick-turn or hospital shop visits and keeps mid-life fleets flying. For investors this ultimately means we can turn engines quicker between leases, thus generating quicker revenue.

Although we typically focus on shorter term leases from six to 24 months, recent years have seen an increase in our flexibility and a diversification of our product-lines, which now support a wide range of core engine types including CFM56-5B/7B, V2500, CF34-8/10, CF6-80C2, PW4000, Trent 700 and RB211.

Avoiding ‘Zero-spare’ situations

Owning engines has become increasingly expensive in recent years, making it harder for airlines to own them outright. Engine manufacturers, who typically raised the prices of their new engines by approximately 5% annually, are now experiencing increases of up to 15%. While market values for aircraft engines such as the CFM56-7B have also risen by up to 20%.

In the last 14 years we’ve built partnerships with airlines across six continents, with each airline’s spare-engine requirements differing according to the type and age of fleet it operates. We offer a broad range of both engine purchase and lease options including outright purchase, operating lease, forward purchase and consignment – all tailored to meet your financial, accounting, investment and operational needs.

Given the rising costs, engine leasing can be the smarter option for engine management, as our customers not only save on the upfront purchase price but benefit from increased operational flexibility too.

More comprehensive lease structures such as constant thrust are also available to those airlines unsure about the longevity of their fleet and want more certainty. These structures offer power-by-the-hour on engines, via a sale lease-back on the aircraft. Under this arrangement, airlines pay only maintenance reserves, and the lessor recycles engines on, and off-wing. This removes the burden of spare engine provisioning away from the airline and onto the service provider, giving the airline the certainty they need to plan ahead.

Repair or exchange? The dilemma for older-generation engines

The decision between repairing or exchanging engines hinges on the engine’s lifecycle stage. We can play a pivotal role in either choice.

At our EASA 145-approved, 116,000 sq. ft. facility we can dismantle and efficiently repair, recycle and repurpose engines and valuable engine components. Our workshops include advanced product-line tooling for disassembly, capacity to teardown four engines simultaneously whilst storing up to 60 engines, depending on the fan size.

The benefits are three-fold: maximising the residual value of engines for owners, putting valuable engine components back into the supply chain and addressing the ongoing demand for spare engines.

Investors often prefer to avoid extensive repairs, opting instead to exchange older engines for younger, more capable ones, circumventing the uncertainties of repair lead times and costs. So, we also offer investors attractive returns through engine exchanges.

It’s an excellent demonstration of the many ways we’re breathing new life into aviation.

The way ahead for spare engine management

The challenges of spare engine management are continuously evolving. As airlines navigated the post-pandemic recovery and are now looking for growth, the ability to adapt to changing conditions and leverage innovative solutions will be critical.

Our blend of commercial and technical expertise gives us a fresh perspective on our industry. Coupled with our comprehensive MRO service offerings and strategic approach, we are well positioned to support airlines and investors in meeting their spare engine needs. In a still unpredictable and unreliable world, our flexible solutions and working in genuine partnership is helping the industry overcome the challenges of today and ensuring a resilient future. So, our customers know just what to expect today, tomorrow and beyond.