Jet Engine Maintenance: Challenges and Market Dynamics

The booming jet engine maintenance market faces challenges from supply chain issues and rising costs, impacting overhaul timelines and efficiency.

### The Booming Jet Engine Overhaul Market: Challenges and Innovations
* ✈️  Jet engine repair has evolved into a **$58 billion industry**, with typical overhauls costing between **$4 million and $15 million** depending on the engine's condition.
* 🔧  The complex nature of commercial jet engines, made up of thousands of parts, necessitates **disassembly and replacement of worn components**, such as blades that can cost **up to $30,000 each**.
* ⏳  Engines typically need overhauls every 5 to 8 years, but the post-pandemic supply chain issues have extended overhaul times from **60-75 days to over 200 days** in some cases.
* 📈  As airlines are forced to operate older aircraft longer due to delays from Boeing and Airbus, the aftermarket for older engines has seen **significant growth**, with maintenance costs rising for aircraft in their **20s**.
* 🏢  American Airlines is ramping up its engine overhauls by **60% this year**, with a facility capable of servicing over **2,100 engines**, highlighting the **increasing demand for maintenance services**.
* 🔬  The overhaul process involves rigorous inspections and testing, using advanced techniques such as **ultrasound and fluorescent penetrant inspections** to ensure part integrity.
* 💰  Despite rising costs and supply chain challenges, engine manufacturers like GE Aerospace report that **over 70% of their revenue comes from parts and services**, indicating a **strong focus on maintenance**.
* 🔥  Newer engines, while designed for better fuel efficiency, require more frequent overhauls and maintenance due to their operation at **higher temperatures and pressures**, affecting all airlines with newer aircraft.

A jet engine is the most important part of a commercial airplane, and repairing them has become a $58 billion business. A typical overhaul could be 4 or 5 million at the lower end, but at the upper end, it could be north of $10 million, maybe as much as 15. A commercial jet engine is a complex, expensive machine made up of thousands of parts. The process of overhauling one means disassembling it and replacing all the worn or damaged parts like blades, which can cost up to $30,000 apiece. An engine could have, you know, 40 or 50 of these 60 blades in it, so these are very expensive parts. Engines typically stay in service for about 30 years and need to be taken off wing and overhauled roughly every 5 to 8 years while passengers are flying in record numbers. Manufacturing and supply chain problems have persisted post-pandemic.

Boeing and Airbus delays on new aircraft have forced some airlines to fly older planes longer to keep up with demand. They're keeping these older aircraft in service longer, and the maintenance costs tend to go up considerably on aircraft when they get into their 20s. So, what it means is that the overall market, or what they call the aftermarket, has been booming for older engines. Demand for old engines, coupled with an engine recall, has led to long delays in maintenance shops. Before the supply chain issues, a typical narrowbody engine took 60 to 75 days to overhaul. That time has gone up, in some cases to over 200 days. It's not sufficient spare parts nor labor to do this in the normal time. You cannot predict today how many days this engine would be in the shop before it returns. While hundreds of airlines use outside companies, legacy carriers like Delta and American perform engine maintenance in-house. It really helps us give control over our maintenance opportunities, ensuring that

We have enough capacity to provide engines and lift, if you will, for the airline. CNBC traveled to Tulsa, Oklahoma, to get an inside look at how American Airlines maintains its engines and explores the outlook for the market. Most of today's airliners are powered by turbofans. To understand what goes into maintaining one, let's take a look at how it works. Air is sucked through the large fan at the front. 80% bypasses the engine's core and flows out the back. The remaining air goes into the core. It is compressed through a series of blades, then combined with jet fuel and ignited, reaching up to 3000°F. The hot air pushes through the turbine, making it turn, which supplies power to the compressor and the fan. All the air forced out of the back pushes the plane forward, providing thrust. The engine has parts that are life-limited, so the safe operation of the engine is guaranteed up to 25,000, 30,000 cycles.

And then, by law and by the certification rules, you simply have to exchange the parts in order to guarantee a safe, continued operation of the engine. One flight cycle is starting the engine, taking off, landing, and turning the engine off. If it's a single aisle, it's probably going to be in the 4 to 5 year range. But for a twin aisle aircraft, you fly these really long flights, but you do not have as many starts and stops on the engine. You might be looking at 6 or 7 years, maybe eight years between overhauls. When it comes to jet engine manufacturing, the market is dominated by a few key players: GE Aerospace, Pratt and Whitney, and Rolls-Royce. GE dominates the space when combined with its joint venture with Safran, CFM International. Engines generally have a much longer lifespan than a commercial aircraft, mainly as engines can be replaced; they can switch and go to different aircraft.

They can then be held as spares. It's a razor-razor blade business. It's difficult in that you have to invest several billion dollars in a new engine, and the payback on a brand new jet engine just to get to break-even point 15 to 20 years is a pretty good rule of thumb these days. Engine manufacturers also provide maintenance to customers. More than 70% of GE's commercial engine revenue comes from parts and services, GE said in July. It's investing $1 billion on upgrades for its engine repair shops in the first two quarters of 2024. GE reported over $15 billion in MRO revenue versus $8 billion for new engines. Supply chain issues are also affecting new engine maintenance. It's been very, very difficult to get parts. That's one issue. Number two is there have been configuration issues with new generation engines, which are running at these higher temperatures and pressures and have new configurations.

in them and have had quality problems. Despite these issues and delays getting into repair shops, stock prices for engine makers have been faring much better than Boeing and Airbus so far this year. Shops are really, really full now the market is back and everyone is screaming for capacity and competence. In the U.S. alone, there are over 3,000 aircraft repair shops, an increase of 2.8% since 2022. We see growth rates in the engine service business of about 2.7% year over year. So currently this year, we will see in the market about 10,000 shop visits in 2024. Overflowing repair shops have left airlines like American to take matters into its own hands. It said it's on track to increase engine overhauls by 60% compared to last year. American Airlines has over 950 planes in its fleet, and 400 of them come through this facility for maintenance and engine overhauls.

When you factor in two engines per airplane, along with spare engines that we need to support as we manage through the normal cycle of engines. So it's probably north of 2100, 2200 total engines. The facility is one of the biggest of its kind in the world, at 3.3 million square feet. It's been in operation since 1946. At that time, engine manufacturers weren't big into actually doing the work, but it's something that we've kept core and certain fleet types to be able to do that business. Many planes in its fleet use a variant of the CFM56, one of the world's most commonly flown engines. What we found is we had almost 80, 85% part commonality between both of those engine variants. So we have a lot of reuse capability. And when you bring those two fleets together, it's about 960 engines that we could run out of the shop.

A repair shop that may be fixing the same type of engine for two different airlines can't mix and match parts. And when you see the inner workings of these engines, you understand just how complex they are. So an overhaul, I think we've counted them up one time. It's like 1,200 parts. It's all complicated. It's all very complicated. There's nothing easy about it. It's a very custom fit, very measured. It's a process. On the day we visited, we saw the many stages of overhauling an engine. We'll break the major flange, and then it'll be separated into the cold and the hot section. From there, they're broken down into piece parts. Thousands of parts are cleaned and inspected. The testing also sounds like a hospital visit using ultrasound, x-ray, magnetic inspections, and fluorescent penetrant. Or fluorescent penetrant inspection. We spray these parts with a lime green fluorescent penetrant, and it seeps

into the surface of the parts and any subsurface defects. They use a black light for the fluorescence to be a little more brilliant and help signify where some of those defects are located. Parts are slowly moved around the facility, understandably, as some of the smallest parts come with very high price tags. You can pay north of 10, 20, $30,000 a blade. And some of these, you know, some of these blades, you know, an engine could have, you know, 40 or 50 of these 60 blades in it. So these are very expensive parts. Some workers focus on smaller, more intricate sections, while others use big cranes to move the several thousand-pound pieces together. In an engine. Let's say that has a list price of $10 million. It might cost you 5 or $6 million, possibly more, for that overhaul. The majority of the costs of the engine overhaul is in its parts, but American says doing all this work

in-house isn't necessarily cheaper. A lot of the value is not having to go out and lease or buy additional spare engines. You know, as I've told CFM, while we don't contract with them to do our work, we're one of their biggest shops. We just have one customer, and that's American Airlines doing our work. And so we buy parts from them. So it's a good offload of work that they don't have to do. But I can get these engines through the shop in less than 60 days versus shops nowadays or, you know, 120 to 150 days in some cases north of 200 days. Given some of the parts constraints that are out there in the industry. This engine has been in the shop for roughly 53 days and is ready to head to the test cell. The engine will spend several days here getting run through rigorous tests before it's approved to be sent

back into service. Whether it's an airline manufacturer or an MRO shop working on engines, supply chain issues are expected to persist for years to come. What you are seeing is that the engine overhaul shops don't want to bring the engine into the facility until they know they have all the parts available to support the overhaul. The parts you're talking about are engine blades. These are difficult to produce, and it's hard to just crank up that capacity, which I know all the manufacturers and the forgers are trying to increase their capacity. But the key on this one here is the part has to be just right. If there are any even slight imperfections or defects, it's going to fail the quality inspections that these parts go through. Experts say that even as newer engines enter the fleet, costs for maintenance will continue to rise. But some of it has to do with the reality that to get better fuel efficiency, which is going to save you a lot of money, you have to do things with the design that mean you're going to need to spend more

money on maintenance in the hottest part of a jet engine today. The temperature surrounding the turbine blade is several hundred degrees above the melting point of the material of the turbine blade, and the fact that these engines are running hotter and at higher pressures than their predecessors means that they will likely need to be overhauled more often, and maintenance costs are likely to be higher than for past generation engines. It's affecting basically everybody who has new aircraft today because the new engine technology, unfortunately, does not yet deliver the maturity level on the engine and therefore needs to go into the shop more often. Airbus and Boeing especially are behind on aircraft deliveries, so the pressure to fly older equipment is expected for years to come.

Why Airlines Like American Are Scrambling To Make Engines Last Longer

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Jet engine repair has become a $58 billion industry, with overhauls costing between $4 million and $15 million.

The complex engines, made up of thousands of parts, require frequent maintenance, leading to a booming aftermarket for older engines.

Post-pandemic manufacturing and supply chain issues have caused long delays in engine overhauls, with some taking over 200 days, while legacy carriers like Delta and American Airlines perform maintenance in-house to ensure control and capacity.

The Dynamics of Jet Engine Maintenance and Manufacturing

Jet engine parts must be exchanged regularly to ensure safe operation, with overhauls occurring every 4-8 years depending on the aircraft type.

The market is dominated by GE Aerospace, Pratt and Whitney, and Rolls-Royce, with GE leading through its joint venture with Safran.

Engine manufacturers provide maintenance services, with over 70% of GE's revenue coming from parts and services, and the industry is experiencing growth in engine service business and aircraft repair shops.

The facility, one of the largest in the world at 3.

3 million square feet, has been operating since 1946 and manages over 2,100 engines.

It specializes in the CFM56 engine variant, with 80-85% part commonality, allowing for significant reuse.

The complex overhaul process involves breaking down engines into thousands of parts, which are then cleaned, inspected, and tested using various methods, including ultrasound and x-ray.

The Process of Overhauling Aircraft Engines

The facility uses black light to identify surface and subsurface defects in expensive engine parts, which can cost up to $30,000 each.

Workers focus on different sections, using cranes to move heavy pieces together, while the engine overhaul can cost $5 to $6 million.

American Airlines' in-house operation aims to reduce engine downtime, with a turnaround of less than 60 days, compared to the industry standard of 120 to 200 days.

Persistent Supply Chain Issues in Engine Overhauls

Supply chain problems are expected to continue for years, causing engine overhaul shops to delay bringing in engines until all parts, especially difficult-to-produce engine blades, are available.

Newer engines, while offering better fuel efficiency, are running hotter and at higher pressures, leading to more frequent overhauls and higher maintenance costs.

The delay in aircraft deliveries from manufacturers like Airbus and Boeing is increasing the pressure to operate older equipment, prolonging the impact of these issues.