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Strong Demand, Supply-chain

Issues Pull Aircraft From Storage

IATA figures show the number of aircraft coming out of stage in April was at a four-year high.

Sean Broderick | Jun 13, 2018

Aircraft returning from storage in April reached a four-year high, IATA figures show, suggesting that operators are scrambling to support sustained demand for lift and perhaps offset the effects of delivery delays and in-service issues delays on several key aircraft programs.

Aircraft returning from storage to the active fleet totaled 132 in April, while 51 aircraft were removed and put into storage, IATA reported. The net gain of 81 aircraft from storage is the largest in at least four years, and the second consecutive month of a net fleet increase from parked aircraft after eight straight months of decline.

The most obvious explanation for the shift is sustained demand for lift. Revenue passenger kilometers were up 7% in the first four months of the year, IATA figures show, including a 9.7% spike in March. Freight is also performing well, with freight-ton kilometers up 5.1% year-over-year through April 30.

Strong, sustained passenger and freight demand and the related drop in fuel prices starting in mid-2014 have made it easy for airlines to justify keeping some older, less fuel-efficient aircraft around longer than anticipated just a few years ago. But pressure in the new-aircraft supply chain has forced their hand as well.

New aircraft deliveries fell slightly in the first four months of the year, to 448 from 454, IATA said. While monthly delivery rates often vary, the annual trend for the last several years has seen total deliveries increase, and production ramp-ups on several new programs, including the Boeing 737 Max, Airbus A320neo and A350, and Bombardier CSeries should ensure that trend continues. However, delivery figures are being hit by supply-chain issues. For instance, engine-related delays with both the Pratt & Whitney Geared Turbofan and CFM International Leap mean that nearly 100 A320neos are expected to be awaiting engines, and delivery to their customers, by July 1. In-service issues, such as the compressor-blade wear issues that are grounding many Trent 1000-powered 787s, are adding to airline woes. The number of 787s on the ground due to engine maintenance issues is approaching 50. Several operators have leased short-term lift to help compensate while Rolls-Royce deals with shortages of both spare parts and engine-shop capacity needed to fix problem engines.

While most operators facing late deliveries and unplanned groundings aren't compensating by pulling aircraft from storage, their moves--leasing aircraft or keeping some older models in service through another heavy check--have a cascading effect.

"Through April, retirements were still running down 8% compared to last year, and utilization was [up] 2%," Canaccord Genuity analyst Ken Herbert said.

The situation is presenting some challenges for some aftermarket suppliers. Demand for used aircraft and engines drives their values up, often meaning they are too expensive to part out. This puts a squeeze on used parts for popular models. Meanwhile, MRO shops setting themselves up for future business by transitioning to newer models are seeing unexpected demand for some legacy products. Canaccord's research noted a lack of capacity for Pratt & Whitney PW4000 and GE CF6 work, caused by rising demand and moves by MRO shops to shift their focus to newer engines. Expected high demand for work on newer engines, such as the CFM International CFM56, IAE V2500, and GE Aviation GE90, only adds pressure to the supply chain.

"We continue to hear about the lack of focus on the aftermarket from the engine OEMs, which is contributing to part availability issues and extending turnaround times," Herbert wrote.