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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