For the first time since November 2022, oil price per barrel has risen above $90, leading to a swathe of airline restating investor guidance for the third quarter.
As the largest cost, airlines profitability can be determined by swings in oil price but this time they are being hit with higher fuel cost at the same time as maintenance costs are rising. For some airlines, production delays and AOG’s caused by well publicised engine issues, have led to higher lease costs to ensure capacity levels meet demand and this is only expected to worsen into early next year.
This week, airlines impacted by the inspection process for the Pratt & Whitney PW1100 have been informing the market of their plans to counter the stress on capacity as inspections and shop visits ramp up as per the engine manufacturer fleet management plan announced on Monday. https://www.aviationnews-online.com/leasing/rtx-counts-the-cost-of-pw-gtf-manufacturing-issue-2/
Lufthansa has indicated that one solution would be to extend the service life of older A320 models and lease more aircraft.
A Lufthansa’s spokesperson confirmed to Airline Economics that a total of 73 A320neo and A321neo aircraft are currently flying in the Lufthansa Group. Of these, 64 are flying with this engine at Lufthansa Airlines, CityLine, Austrian Airlines and Swiss. This means that around 120 engines are affected within the Group. “We currently expect around 20 A320neo family aircraft to be unavailable every day in 2024,” says the spokesperson. “This represents less than one-third of the Lufthansa Group's A320neo fleet and less than five percent of the Group's total A320 fleet of more than 420 aircraft! We are already exploring various 'counter-measures', such as extending the service of existing A320 Family aircraft, wet lease arrangements and the procurement of additional spare engines.”
Other airlines are more impacted, however. This week Wizz Air said that it was currently assessing the impact on its fleet, with solutions to counter a potential reduction in capacity for the first half of 2024 by 10%. Wizz Air said that it aims to continue to work with Pratt & Whitney to “minimise the impact to its fleet plan and costs to the business”. The airline added that it continues to take “proactive action” to mitigate any financial and operational impact and will be seeking financial compensation from Pratt & Whitney.
Speaking yesterday, Delta Air Lines CFO Dan Janki, commented that although the impact of the required inspections to the airline would be minimal since its A321neos were later in the delivery cycle. However, he voiced concerns about the knock-on impact of the disruption to the production cycle for new engines and new aircraft deliveries considering the still fragile supply chain.
P&W will need to focus production on replacement discs for the impacted engines to minimise the AOG, which many experts expect will impact production of news engines. The next issue of Airline Economics, Issue 75, is published next week with the full story and comments from all industry experts. (Ensure you don’t miss the issue and secure a subscription today – click here https://www.aviationnews-online.com/airline-economics/