Aviation Week & Space Technology - 3 November 2014

Sean Broderick Washington

As the CFM56 order book cools,

the aftermarket heats up

C

FM’s new Leap engine family booked 1,393 orders in

2013—or 63 more than it took in for the CFM56. The

figures mark the first time that the new model sur-

passed its predecessor in annual order book figures. While

the Leap’s future is bright, it will take some time for the mod-

el to move past the venerable incumbent as an aftermarket

revenue-generator.

Demand for more efcient narrowbody lift drove Airbus

and Boeing to develop new versions of their successful A320

and 737 families, but demand for more immediate lift pushed

them to raise production rates on the current versions. With

the A320neo and 737 MAX still several years away from full

production—entry into service is slated for 2015 for the neo

and 2017 for the MAX—operators are adding current-gener-

ation versions as fast as the manufacturers can build them.

This has helped push CFM56 deliveries to record levels. The

2012 figure of 1,442 engines produced was double that of 2002,

and delivery figures have risen steadily since, topping 1,500

in 2013 and slated to reach 1,550 this year.

The production surge, combined with on-wing life exhib-

ited by current-configuration, second-generation engines—

CFM56-5s and -7s—means that about 40% of the nearly

20,000 CFM56s in service have yet to undergo initial shop

visits, which usually take place from seven to nine years after

entry into service. A Bernstein Research analysis earlier this

year determined that 80% have yet to reach subsequent shop

visits, which are more lucrative for service providers because

of the amount of material needed to complete the overhauls.

“Much of the recent growth [in CFM56 aftermarket work]

has been driven by second-generation CFM56 engines com-

ing of wing for their first and second shop visit,” Bernstein

noted in its report. Citing the trends, Bernstein projects a 9%

compound annual growth rate in shop visits through 2019.

Industry estimates put annual shop visits at about 2,000

this year, and potentially doubling in about a decade. Capacity

is not an issue: CFM joint venture partner General Electric

says there are 45 shops with CFM56 capability, including 29

that handle second-generation engines. That is enough to

handle about three times the current shop visit rate, meaning

there is plenty of room to absorb the projected boost.

Safran, parent company of Snecma, which along with GE

is a 50/50 partner in CFM, is banking on CFM56 aftermar-

ket growth to help boost its bottom line. Safran aftermarket

activity grew 19.2% in 2013, “mainly driven by overhauls for

the latest CFM56 engines” as well as a boost in GE90 work,

the French company said. The trend is expected to continue,

with CFM56 spares revenue doubling from its 2010 levels—

the recent low-point stemming from reduced flight activity

triggered by the 2008-09 global recession—by 2020.

While Safran references spare parts revenue as an indicator

of aftermarket activity, it is hesitant to use the figure alone as a

primary benchmark. One reason: a shift in how new spares are

consumed, especially in the CFM56 market. Several years ago,

Safran noticed that its long-reliable spares forecasting model,

based largely on the engine’s technical performance, was no

longer matching up with reality. A 2011 study concluded that

operator behavior was having much more of an influence on

spares demand than before. Specific variables range from the

explosion of low-cost operators that fly Boeing 737s—which

are powered exclusively by CFM56s—or A320s with CFM56

engines, to the increasing utilization of used parts.

Safran’s revised, behavior-based forecasting model shows

that CFM56 spares demand will rise steadily until about 2025

before beginning to tail of. First-generation spares demand

will fade out much more quickly, as aircraft being parked make

more used parts available for the earliest CFM56s still flying.

Analysts at Canaccord Genuity estimate that as much as

90% of the spares demand for the early CFM56s is satisfied

through used parts.

The market for newer CFM56 material is much smaller and

should stay that way until A320neo and 737 MAX deliveries

begin to supplant in-service aircraft powered by the newer en-

gines. Safran calculates that less than 5% of the CFM56-5B and

-7B spares demand is filled by used parts, and does not expect

this to change for several years. When it does, the consortium

will be well-positioned; CFM estimates that its branded used

parts division, CFM Materials, has about 35% of the global

market share of used current-generation CFM56 parts.

Safran’s civil aftermarket figures factor in long-term agree-

ments that help drive spares revenue. Safran estimates that

about 65% of CFM56 shop visits will either be done at one of

its shops or under a service agreement.

Competing for work against independent providers, espe-

cially as engines mature, is seen as a benefit, the manufac-

turer maintains.

“Our goal is to be flexible and adapt our maintenance for

each customer,” said GE Aviation Director of Service Mar-

keting Bill Dwyer. From risk transfer to time-and-materials

support, “our calling card is customization. Our goal is to let

customers pick.” c

Growth Mode

MRO Edition ENGINE ANALYSIS

MRO34 AVIATION WEEK & SPACE TECHNOLOGY MRO EDITION NOVEMBER 3/10, 2014 AviationWeek.com/mro

CFM

With new engines rolling of the assembly line and many

older powerplants still facing second or third shop visits,

the CFM56 spares market has room for growth.

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