A jet engine is the most important part of a commercial
airplane, and repairing them has become a $58 billion business. A typical overhaul it 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 which 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 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 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 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 is 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.
