TULSA, Okla. — Parts and labor shortages. New aircraft delivery delayed boeing company and Airbus. Engine recall. Repair prematurely. The stuff is piling up and aircraft engine shops around the world are overwhelmed.
With record numbers of people boarding planes this summer, airline executives are anxiously awaiting engine repairs and overhauls.
The engine repair and overhaul business has grown from $31 billion before the pandemic to $58 billion this year, according to Alton Aviation Consultancy. It’s a cash cow for an engine builder like this General Electric Aerospace and hundreds of small specialists serving GE Engine and other manufacturers Pratt & Whitney and Rolls-Royce.
American Airlines‘The solution is to do more work yourself.
“We only have one customer, and that’s American Airlines,” said David Seymour, chief operating officer of American Airlines. “We can control our own destiny in that region.”
U.S. aviation workers perform maintenance on CFM-56 engines in Tulsa, Oklahoma
Erin Black | CNBC
American Airlines’ maintenance facility at Tulsa International Airport, which at 3.3 million square feet is the largest of its kind in the world, is bustling with activity in its busy engine shop as American expects to increase its overhaul volume from 2023. About 60% to this year, more than 16 engines per month. This number is an increase from 5 per month in 2022.
The work focuses on the CFM56 engine, which is built by a joint venture between GE and France’s Safran Group. They power America’s older Boeing 737 workhorse jetliners and many Airbus A320s. These narrow-body planes make up the majority of American’s fleet of more than 960 mainline aircraft, according to the company’s annual securities filings.
“I can overhaul these engines and get them through the shop in less than 60 days, whereas today (outside) shops take 120 to 150 days and in some cases more than 200 days,” Chief Operating Officer Seymour said.
Bottlenecks abound
American Airlines crews inspect an engine at a hangar in Tulsa, Oklahoma.
Leslie Josephs/CNBC
Most of the bottlenecks in engine repair stem from the industry’s After the epidemic, companies are in a difficult situation, and companies have laid off thousands of skilled workers. Airlines that put off maintenance during the travel slump are scrambling to get planes flying again when demand picks up, but face worker shortages and shortages of key items from engine parts to plane seats.
Meanwhile, Airbus and Boeing have fallen behind on deliveries of new, more fuel-efficient planes, forcing airlines including American Airlines to keep older planes longer than planned.
Airbus this summer lowered its aircraft delivery forecast and announced cost cuts in response to supply chain issues and late landing gear and engine problems.
“I would also call it a surprise factor in 2024,” Airbus Chief Financial Officer Thomas Toepfer said on a July 30 earnings call.
In addition to supply chain issues, Boeing is facing a safety crisis after a door panel on one of its 737 Max aircraft exploded in the air earlier this year, causing delays.
With many engines requiring overhaul approximately every 7,000 flights, extending the service life of older aircraft means more routine maintenance and modifications, increasing demand while the aircraft is in storage. These weeks-long overhauls are radical: They can cost up to $5 million each, twice as much for wide-body aircraft, said Kevin Michaels, managing director of Aerodynamics Consulting.
At American Airlines’ factory in Tulsa, workers removed hundreds of parts, replaced those with limited life and cleaned and inspected others, including spraying them with fluorescent penetrant so they would glow under a black light. Defects can be seen below.
An American Airlines worker sprays fluorescent penetrant on engine parts to check for defects at a hangar in Tulsa, Oklahoma.
Leslie Josephs/CNBC
But key components are hard to find and must be intact. Plus, they cost a lot. Dozens of engine compressor blades can cost up to $30,000 each.
On top of that, some older engines run hotter, suck in more air, burn less fuel and end up in engine shops earlier than expected, frustrating airline executives.
“No business can afford not to utilize key assets to generate revenue,” AirBaltic CEO Martin Goss said.
The Riga, Latvia-based airline is an Airbus A220 customer and has had to lease aircraft in recent years to make up for grounded aircraft.
“Unfortunately, passengers will be unhappy when they can’t fly on the new planes,” he said. “This is a problem that will end one day. We thought it would end now. I’ll give it another two years and then we’ll fix it.”
There’s another problem plaguing engine plants: Pratt & Whitney’s recall of some narrow-body engines. In light of ongoing issues, some low-cost airlines, including JetBlue Airways and spirit airlinesis delaying deliveries of new aircraft to try to save money.
“This is something sinister brewing that has significant implications for the engine supply chain,” said Michaels of Aerodynamics Consulting.
A windfall for engine builders
American Airlines workers inspect the inside of an engine at a maintenance shop in Tulsa, Oklahoma.
Erin Black | CNBC
High demand for engine overhauls is lucrative for engine suppliers, who make billions by maintaining the engines sold with new aircraft.
In the first half of 2024, GE Aviation’s engine maintenance, repair and overhaul revenue was $11.7 billion, accounting for 65% of its revenue.
“When it comes to engines, this is a razor blade business,” Michaels said, describing how buying razors at the drugstore meant repeat business of replacing blades over the years. “So the money is made in the aftermarket in the engine business.”
GE Aviation becomes Independent company in April, said it would invest in July US$1 billion Upgrading its engine shops around the world over the next five years.
Are there any spare parts?
For many airlines, there aren’t many alternatives to costly engine overhauls as the need for replacement engines increases, especially if the airline has only one type of aircraft or only one supplier’s model.
Aircraft engines at the American Airlines test facility in Tulsa, Oklahoma.
Leslie Josephs/CNBC
Lease rates for engines that match newer and older aircraft have soared. For example, the CFM56 engine used on the Boeing 737-800 costs $96,000 per month, up from $78,000 in 2017, according to aviation data firm IBA.
Meanwhile, lease prices for Pratt & Whitney and CFM engines that power new Airbus A320neo aircraft are $127,000 per month respectively, up from $80,000 and $85,000 in 2017, IBA said.
Leasing companies such as AerCap and Avolon have been snapping up spare engines due to high demand.
However, access to the engine shop remains difficult.
Delta Air LinesLike American Airlines, it overhauls, repairs and maintains its own engines. It’s available to other airlines as well, but Chief Executive Ed Bastian said stores are full.
“If you don’t have an existing contract, you can’t join,” he said in a July interview. “It would be easier to attend a Taylor Swift concert.”
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