January 24, 2014
Credit: Pratt & Whitney
Reports from United Technologies (UTC) of increasing spares sales continued in the fourth quarter, but the company’s Pratt & Whitney (P&W) subsidiary delivered even more encouraging news for those awaiting an upswing in heavy engine overhaul visits.
P&W spares sales were up about 20% year-over-year in the quarter, UTC CFO Greg Hayes told analysts on a Jan. 22 earnings call, roughly matching the third-quarter increase. However, engine services sales were up 40%, indicating increased investment in heavier checks that many airlines have been putting off.
“We...finally started to see the airlines switch from these light overhauls we’ve been talking about for the last couple of years to more heavy overhauls,” Hayes says. “That really drove the tremendous amount of volume in the shops and then drove the order rates as well.”
While it is too early to declare an industry-wide upswing, the news is both encouraging and supportive of what some industry observers are projecting. A recent survey of maintenance, repair, and overhaul (MRO) players by Canaccord Genuity found increasing confidence in narrowbody engine overhaul demand in 2014.
“One of the important stories in 2013 was the delay in this narrowbody engine recovery,” notes the Canaccord report, which collected data from about 65 companies late in the fourth quarter and in early January. “While the outlook is improving, the pacing of the recovery is still uncertain, and some MROs that we spoke with are not yet seeing any tangible signs that the narrowbody engine MRO market is materially improving.”
While spares sales have historically been a solid indicator of near-term overhaul demand, the engine market’s increased reliance on surplus parts has muddied the parts provisioning waters, making actual engine service sales numbers a significantly more dependable metric. The Canaccord survey concluded that engine overhaul shops are expecting the strongest growth in the next six months than at any time since 2011, though parts purchasing trends suggest otherwise.
“We believe MROs remain cautious, which is partly reflected in their parts purchasing intentions,” the Canaccord report notes. “However, if we do continue to see strong demand, we do expect a catch-up in engine and component parts purchasing” in the first half of the year, “considering the still-strong fundamentals, and the current disconnect between parts purchasing and the MRO sales outlook.”
Canaccord is projecting an 8%-10% increase in narrowbody shop visits in 2014, or about 3,500 inductions. About 1,020 of these will be for CFM56-7Bs, with the -5B and V2500-A5 combining to split another 1,200 overhauls.
The widebody engine overhaul market is more challenging to pin down. Canaccord notes hints of “softness” in the widebody market, with the GE90 being a notable exception.