TULSA, Okla. — Parts and labor shortages. Delayed deliveries of new planes from Boeing and Airbus. Engine recall. Early repairs. Everything is piling up and aircraft engine shops around the world are overflowing.
As travelers boarded planes in record numbers this summer, airline executives anxiously awaited repairs and overhauls to their engines.
Engine repair and overhaul has swelled from a $31 billion business before the pandemic to $58 billion this year, according to Alton Aviation Consultancy. It is a cash cow for engine manufacturers like GE Aerospace and the hundreds of smaller specialists who service GE engines, and others made by Pratt & Whitney and Rolls-Royce.
American AirlinesThe solution is to do more work yourself.
“We only have one customer and that’s American Airlines that does our work,” said American’s chief operating officer, David Seymour. “We can control our own destiny in this area.”
American Airlines workers perform maintenance on a CFM-56 engine in Tulsa, Oklahoma
Erin Black | CNBC
In its busy machine shop at the airline’s 3.3 million-square-foot maintenance facility at Tulsa International Airport, the largest such space in the world, American is on track to increase overhauls by about 60 percent from 2023 to more than 16 engines per month this year. That’s up from five a month in 2022. About 200 jobs have been added there, as well as more equipment like cranes to hang the 2-ton engines during overhauls.
The work focuses on the CFM56 engines, manufactured by a joint venture between GE and France’s Safran. They power America’s oldest Boeing 737 aircraft and many Airbus A320s. Those narrow-body planes make up the majority of American’s mainline fleet of more than 960 aircraft, according to the company’s annual securities filing.
“I can get these engines repaired and from the shop in less than 60 days vs. [outside] shops nowadays [are] 120 to 150 days, in some cases north of 200 days,” said COO Seymour.
Bottlenecks abound
American Airlines workers repair an engine in a hangar in Tulsa, Okla.
Leslie Josephs/CNBC
Much of the bottleneck in motor repair stems from the industry’s difficult performance since the pandemic, when companies laid off thousands of skilled workers. Airlines that delayed maintenance during the travel downturn then scrambled to get planes in shape to fly when demand slumped, but faced shortages and shortages of workers and essential items from engine parts to aircraft seats.
Meanwhile, Airbus and Boeing are falling behind on deliveries of new, more efficient planes, forcing carriers including American to keep older planes longer than planned.
Airbus this summer lowered its aircraft delivery forecast and announced cost cuts as it grapples with supply chain issues and the late arrival of landing gear and engines.
“I would also call it the surprise factor for 2024,” Airbus CFO Thomas Toepfer said on a July 30 earnings call.
In addition to supply chain issues, Boeing’s planes have been delayed as the company faces a safety crisis after a door on one of its 737 Max planes exploded in mid-air earlier this year.
With many engines needing repairs about every 7,000 flights, keeping older airplanes longer means more regular maintenance and renewal, increasing demand when they come into the shop. Those weekly overhauls are exhausting: They can cost $5 million apiece and can cost twice that for wide-body planes, according to Kevin Michaels, chief executive of AeroDynamic Advisory.
At American’s Tulsa shop, workers remove hundreds of parts, replacing life-limited parts and cleaning and inspecting others, which includes spraying them with a fluorescent penetrant so defects can be seen under a black light.
An American Airlines worker sprays fluorescent penetrant on engine components to check for defects in a hangar in Tulsa, Oklahoma.
Leslie Josephs/CNBC
But key parts are hard to find and must be flawless. In addition, they are expensive. The dozens of motor compressor blades can cost $30,000 a foot.
In addition, some newer engines — which run hotter, suck in more air and burn less fuel than older types — are hitting engine shops earlier than expected, frustrating airline CEOs.
“There is no business that can absorb not using core assets to generate revenue,” said AirBaltic CEO Martin Gaus.
The Riga, Latvia-based carrier, an Airbus A220 customer, has had to lease planes in recent years to replace its grounded aircraft.
“Unfortunately, passengers are not happy when they can’t fly new aircraft,” he said. “It’s an issue that will end one day. We thought it would be over by now. I’d give it another two years and then we’ll be done with it.”
There’s another problem clogging engine shops: Pratt & Whitney’s recall of some of its narrowbody engines. In light of the ongoing issues, some low-cost airlines, including JetBlue Airways and Spirit Airlinesthey are delaying deliveries of new jets to try to save money.
“It’s kind of a bad manufacture that has had a significant impact on the engine supply chain,” said AeroDynamic Advisory’s Michaels.
Unexpectedly for engine manufacturers
American Airlines worker looks inside engine at maintenance shop in Tulsa, Oklahoma.
Erin Black | CNBC
High demand for engine repairs has been lucrative for engine suppliers, who make billions from maintaining the engines they sell with new planes.
GE Aerospace generated $11.7 billion from engine maintenance, repair and overhaul in the first half of 2024, making up 65% of its revenue.
“When it comes to motors, it’s a razor blade business,” Michaels said, describing how buying razors at a drugstore can mean repeating the business of replacing blades for years. “That’s how the money comes into the aftermarket for the motor industry.”
GE Aerospace, which became an independent company in April, said in July it would invest 1 billion dollars to upgrade its machine shops around the world over the next five years.
Do you have spare parts?
For many airlines, there are not many alternatives to expensive engine repairs with increasing demand for replacement engines, especially if the carrier has an aircraft type or model that has only one supplier.
An airplane engine in the American Airlines test cell in Tulsa, Oklahoma.
Leslie Josephs/CNBC
Rental prices for engines to fit both old and new planes have skyrocketed. For example, a CFM56 engine used in the Boeing 737-800 cost $96,000 a month, up from $78,000 in 2017, according to aviation data firm IBA.
Both the Pratt & Whitney and CFM engines powering the newest Airbus A320neo planes, meanwhile, have recorded lease rates of $127,000 a month, up from $80,000 and $85,000, respectively, in 2017, IBA said.
Leasing companies such as AerCap and Avolon have snapped up spare engines due to high demand.
However, it is still difficult to get into a machine shop.
Delta Air Lineslike American, it repairs, overhauls and maintains its own engines. It also works for other airlines, but CEO Ed Bastian says the store is full.
“If you don’t have an existing contract, you don’t get in,” he said in an interview in July. “It would be easier to get into a Taylor Swift concert.”
