TULSA, Okla. — Parts and labor shortages. Delayed deliveries of recent airplanes from Boeing and Airbus. An engine recall. Premature repairs. It’s all piling up, and aircraft engine shops world wide are overflowing.
As travelers boarded planes in record numbers this summer, airline executives waited anxiously for repairs and overhauls of their engines.
The repair and overhaul of engines has swelled from a $31 billion business before the pandemic to $58 billion this yr, in line with Alton Aviation Consultancy. It is a money cow for engine makers like GE Aerospace and the a whole bunch of smaller specialists that service GE engines, and others made by Pratt & Whitney and Rolls-Royce.
American Airlines‘ solution is to do more of the work itself.
“We just have one customer and that is American Airlines doing our work,” American’s chief operating officer, David Seymour, said. “We are able to control our own destiny in that area.”
American Airlines employees perform maintenance on CFM-56 engine in Tulsa, Oklahoma
Erin Black | CNBC
At its bustling engine shop on the airline’s 3.3 million-square-foot maintenance facility at Tulsa International Airport, the biggest such space on this planet, American is on course to extend its overhauls roughly 60% from 2023 to greater than 16 engines a month this yr. That is up from five a month in 2022. It’s added some 200 jobs there, as well more equipment like cranes to hold the 2-ton engines during overhauls.
The work focuses on CFM56 engines, made by a three way partnership of GE and France’s Safran. They power American’s older Boeing 737 workhorse jetliners and lots of Airbus A320s. Those narrow-body airplanes make up the vast majority of American’s mainline fleet of greater than 960 aircraft, in line with an annual company securities filing.
“I can get these engines overhauled and thru the shop in lower than 60 days versus [outside] shops nowadays [are] 120 to 150 days, in some cases north of 200 days,” COO Seymour said.
Bottlenecks abound
American Airlines employees overhaul an engine at a hangar in Tulsa, Okla.
Leslie Josephs/CNBC
Much of the bottleneck in engine repairs stems from the industry’s rocky emergence from the pandemic, when firms shed 1000’s of expert employees. Airlines that delayed maintenance throughout the travel slump then raced to get airplanes into shape to fly when demand snapped back, but faced employee and experience shortages and shortfalls of key items from engine components to aircraft seats.
Meanwhile, Airbus and Boeing are behind on deliveries of recent, more fuel-efficient airplanes, forcing carriers, including American, to carry on to older jetliners longer than they planned.
Airbus this summer reduced its aircraft delivery forecast and announced cost cuts because it grapples with supply chain issues and late-arriving landing gear and engines.
“I’d also call it the surprise factor for 2024,” Airbus CFO Thomas Toepfer said on a July 30 earnings call.
As well as to provide chain issues, Boeing aircraft have been delayed as the corporate navigates a security crisis after a door panel blew out from considered one of its 737 Max planes midair at the beginning of the yr.
With many engines needing overhauls about every 7,000 flights, keeping older airplanes longer means more routine maintenance and revamps, adding to demand once they’re on account of come into the shop. Those weekslong overhauls are exhaustive: They will cost $5 million apiece and might go for double that for wide-body airplanes, in line with Kevin Michaels, a managing director at AeroDynamic Advisory.
At American’s shop in Tulsa, employees remove a whole bunch of parts, replacing life-limited components and cleansing and inspecting others, which incorporates spraying them down with a a fluorescent penetrant so defects may be seen under a black light.
An American Airlines employee sprays florescent penetrant on engine components to envision for defects at a hangar in Tulsa, Oklahoma.
Leslie Josephs/CNBC
But key parts are hard to search out and they have to be flawless. Plus, they’re costly. The handfuls of engine compressor blades can go for $30,000 a pop.
On top of that, some newer engines — which run hotter, soak up more air and burn less fuel than older types — are coming into engine shops sooner than expected, frustrating airline CEOs.
“There is no business which might digest not using the important thing assets to generate revenue,” said AirBaltic CEO Martin Gauss.
The Riga, Latvia-based carrier, an Airbus A220 customer, needed to lease planes in recent times to make up for its grounded jets.
“Unfortunately, passengers usually are not completely satisfied when they cannot fly on latest aircraft,” he said. “It’s a difficulty which will likely be over in the future. We thought it might be over by now. I’d give it one other two years after which we’re through it.”
There’s one other problem that is clogging up engine shops: A Pratt & Whitney engine recall of a few of its narrow-body engines. In light of the continuing issues, some low-cost airlines, including JetBlue Airways and Spirit Airlines, are deferring latest jet deliveries to attempt to get monetary savings.
“It’s sort of a wicked brew that is had a major impact on the engine supply chain,” said AeroDynamic Advisory’s Michaels.
Windfall for engine makers
American Airlines employee looks inside engine at maintenance shop in Tulsa, Oklahoma.
Erin Black | CNBC
The high demand for engine overhauls has been lucrative for engine suppliers, which make billions from maintaining engines they sell with latest airplanes.
GE Aerospace brought in $11.7 billion from engine maintenance, repairs and overhaul in the primary half of 2024, making up 65% of its revenue.
“With regards to engines, it is a razor-razor blade business,” said Michaels, describing how buying shavers in a drug store can mean repeat business for alternative blades for years. “So the cash is made within the aftermarket on the engine business.”
GE Aerospace, which became an independent company in April, said in July that it is going to invest $1 billion to upgrade its engine shops world wide over the following five years.
Got spares?
For a lot of airlines, there aren’t many alternatives to costly engine overhauls with demand on the rise for alternative engines, especially if the carrier has one variety of aircraft or a model that only has one supplier.
An airplane engine at American Airlines’ test cell in Tulsa, Oklahoma.
Leslie Josephs/CNBC
Rental rates for engines that match up with each old and latest planes have skyrocketed. For instance, a CFM56 engine used on the Boeing 737-800 was going for $96,000 a month up from $78,000 in 2017, in line with aviation data firm IBA.
Each Pratt & Whitney and CFM engines that power the newer Airbus A320neo airplanes, meanwhile, have logged lease rates of $127,000 per 30 days, up from $80,000 and $85,000, respectively, in 2017, IBA said.
Leasing firms like AerCap and Avolon have been snatching up spare engines due to the high demand.
It remains to be difficult to get into an engine shop, nevertheless.
Delta Air Lines, like American, overhauls, repairs and maintains its own engines. It also does work for other airlines, but CEO Ed Bastian says the shop is full.
“For those who’re not on an existing contract, you are not getting in,” he said in an interview in July. “It might be easier to get right into a Taylor Swift concert.”
