By Kevin Michaels, Managing Director at AeroDynamic Advisory
Aeroengine OEMs are facing strong headwinds after a bullish decade of changes and new technologies. Production and aftermarket revenues are being crushed while risks are increasing, and new investment is required. Aeroengine OEMs face five crucial questions:
1. When will aftermarket demand return? Aeroengine OEMs derive all of their air-transport profits from the $30 billion aeroengine maintenance, repair and overhaul (MRO) segment, which was experiencing robust growth until the COVID-19 crisis. Shop visits and aftermarket activity are down 50-60% and will likely remain depressed for another 2-3 years as thousands of aircraft are retired. Moreover, OEMs must deal with the phenomenon of “green-time management,” which means about 15% of next year’s anticipated shop visits could be deferred, postponing the corresponding spare-parts business. AeroDynamic Advisory forecasts engine MRO demand will not return to pre-crisis levels until 2023.
2. What is the timing of the next Boeing aircraft? Boeing needs to address its competitiveness issue versus the Airbus A321neo after canceling its new midmarket airplane (NMA) program in January. Many analysts believe a slightly smaller NMA—with perhaps 200-250 seats and requiring new engines—would be the best response. Boeing may decide to offer a a powerplant choice, diverging from its single-engine 737 approach. If Boeing moves forward, Airbus will respond, and major investments by aeroengine OEMs will be required while they are financially challenged.