Engine lessors speaking at Airline Economics’ Growth Frontiers London 2024 conference agreed that MRO presents a key driver as well as a challenge to engine leasing.
One panellist said: “If you own a PW4000 with green time right now, you’re going to make a lot of money on it. But if you have to put that same engine through the shop, it’ll take 12 months and cost you $10 million… you’re going to lose all the money you make.”
He said the MRO environment is a “key driver” on engine demand.
Panellists also agreed that there is a grey area surrounding engine shop visit costs. For instance, there is a lack of knowledge around the cost of a high-pressure turbine (HPT) blade on a LEAP engine.
It was noted that engine lease rates have normalised as more engines have become available on the market. One added that the engine platforms like the GTF and LEAP are going to be “great” platforms to be invested in over the long term.
One panellist said he believes the supply and demand gap to disappear by 2029 in regards to Airbus and Boeing deliveries. He pointed to airlines reporting a softening of yields. “That means they have overcapacity,” he said. With that, the overcapacity will “pour up lack of supply”. In turn, this will result in the normalisation of lease rates.
The panellists also shared that despite the normalisation of lease rates, the engine leasing market continues to be active.
In a separate panel, mba Aviation director valuations Europe David Archer said the lease rates and values for new generation engines like the GTF and LEAP have increased around 8% and values up 5% over last year. He said the high competition in the market and slower shop visits are exacerbating engine lease rates, but recovery is expected around 2026 and 2027, with stability improving through 2025.