The Freighter engines with MRO upside

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17 February 2021 - 16:15, by , in Fleet Analysis, Comments off

The introductory infographic above depicts the geographical provision of engine MRO services in 2019 as covered in our recent report – Aero-engine Maintenance, Repair and Overhaul 2021. For 2020, these totals are expected to decrease by as much as 50% once provider results are released, due to increased aircraft storage; airline fleet rotation; and retirements of specific aircraft types, and airline strategies aimed at cash preservation. During these hard times, some of the most mature engines in the market have proved more resilient, and in some cases, it has even been business as usual. The well-publicised continuation and growth in freight operations has meant that some Aero-engine markets have retained their demand for MRO services from providers. The continuation of P2F conversions and airline diversification to perform freight operations with passenger aircraft has also aided this portion of the market.

We identify mature engines that have not felt the full impact of Covid-19 as the General Electric CF6-80C2; Pratt & Whitney PW4000-94” and PW2000; and Rolls-Royce RB211-535. In the following sections, we isolate a PW4000-94” and RB211-535 to identify the asset traits, and how both are accommodated in the aftermarket.

PW4000-94” Asset Overview

The PW4000-94” is a mature ‘sunset’ engine with a stable base in freight operation; for example, its use powering UPS’ A300-600F fleet. As has been witnessed with 767-300ER operations, predicting service exit is difficult, but on the other hand, there is a sizeable and growing freighter market in which airlines such as UPS, FedEx, and DHL, do not have exit strategies for all their PW4000-94” powered aircraft. As for major passenger aircraft operators, United Airlines has no imminent retirement plans, and Delta Air Lines will still retain some 767-300ER out to 2025 although we have seen some sales and retirements.

Summarising:

  • A sizeable and fragmented fleet amongst operators. Freighters will remain long-term and K-46A production means a continuation of PW4000-94” OE deliveries.
  • How long these aircraft will remain in passenger service with American majors is now a cause for concern. Order commitments for newer aircraft such as A330neo could lead to earlier than previously expected retirements.
  • Reactive airline fleet planning could still bring forward retirements especially as the engine represents some of the oldest assets in airline fleets, thus decision making and resulting retirement can occur quicker.

RB211-535 Asset Overview

The RB211-535 remains a steadfast engine, accentuated by its popularity powering the 757 converted freighter, and for its longevity with passenger operators such as United Airlines (inherited as part of the Continental Airlines fleet), American Airlines (although now-exited), and Icelandair. The engine has been boosted by the popularity of 757 passenger to freighter conversions, and this continues today with airlines such as SF Airlines. In late-2020, aftermarket specialist AAR acquired 24 RB211-535 powered 757-200s for freighter conversion and part-out feedstock. Counterpoint comments that the engine is renowned for being a durable engine and can achieve upwards of 6,500 cycles on-wing assuming a full-overhaul shop visit workscope. Powering the 757, it could be argued it has been utilised beyond expectations, as airframers struggled to answer the market’s requirement for a 757 replacement. Summarising:

  • The engine has been the popular choice for 757 freight conversions.
  • Good RB211-535s have not been readily available and this had been seen as a reason for possible RB211-535 757 P2F slowdowns.
  • Covid and the advent of the A321LR/XLR will push existing 757 PAX retirement or freight conversion. Many PAX operators now have imminent phase-out plans.

PW4000-94” MRO

We believe that PW4000-94” MRO inductions have remained comparable to 2019 levels throughout Covid-19. MRO providers continue to invest in this market and we note several recent developments to support this:

  • IAG Aero Group recently gained capability at its Miami facility
  • AAR agreed on a deal to supply MRO and programme share partner MHI PW4000-94” engine components
  • United Tech Ops further announced an MRO partnership with Fortress Transportation and Infrastructure Investors (FTAII) purchasing engines from United Airlines and inducting them into United Tech Ops MRO for maintenance.
  • Kalitta Air opened a 50,000ft² facility to perform in-house maintenance from 2020.

Most promising for MROs is the KC-46A aircraft. With a current order book of 183 aircraft, lead operator USAF is likely to take advantage of the established MRO network.

MRO trends in the PW4000-94” market are typical for green-time operations meaning USM insertion, module building, and extensive component repair practices. PMA usage and DER repairs are not uncommon to reduce maintenance costs. Common reasons for engine removal include HPT & HPC blade, vane and disk damage; high oil consumption and leaks; cracks in the combustor; and high time and cycle use. Operators will prioritise the matching of aircraft operational life with the life remaining in the engine thus avoiding and minimising unnecessary maintenance costs.

RB211-535 MRO

A small network of MRO suppliers continues to benefit from a flourishing aftermarket for RB211-535 engines. Most would agree that due to little competition from another passenger aircraft, and the success of the P2F conversion, the aircraft and engine combination looks set to exceed typical average in-service economic life estimates. A further surge in passenger retirements could increase activity in preparation for P2F conversions.

We think that the aftermarket is driven by 70% planned or unplanned shop visit induction events and 30% for smaller workscope visits. Specific drivers of planned and unplanned maintenance include LLP expiry; engine removal without the requirement for maintenance; the time between overhaul reached; high-pressure nozzle guide vane thermal degradation; HPT blade degradation; application of a fan case teflon sleeve to resist fan case corrosion; planned overhauls; fan case corrosion inspection; and fan case attrition liner.

Considering the current MRO suppliers, each has a very comprehensive capability. There are also smaller players such as EL AL Tech which performs field support responding to AOG events. Other providers include GKN Aerospace which repairs Fan Blades, Fan Discs, and Annulus Fillers. Of the independents, Iberia Maintenance is the largest and has had relative success in recent times securing a 10-year contract to support DHL Air UK and Blue Dart’s RB211-535E4 engines. The surge in demand for RB211-535 MRO is illustrated by Ameco which saw 75 engine inductions in 2019 compared to 50 in 2018. It also collaborates with fellow aftermarket provider AAR for repair, exchange and spare engine leasing for the type.

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