Recent analysis by aviation market intelligence and consultancy firm IBA has revealed that engine lease prices and market values are increasing, making it a good “lessors’ market”. According to IBA analysis, engine rental activity has grown significantly, with operators preferring to extend rental contracts to guarantee engine availability.
IBA experts emphasized that amid supply chain issues and shortages of parts and raw materials, approximately 2,500 visits to engine shops are expected in 2024 for CFM56-5B, CFM56-7B, V2500-A5 engines , CFM LEAP-1A, CFM LEAP-1B and PW1100G (excluding additional workshop visits due to problems with GTF engines). The IBA predicts a significant increase to 3,500 visits by 2025, representing a 40% increase.
However, between 2025 and 2027, a slight plateau is expected at around 3,800 annual visits, before peaking at over 4,000 visits in 2028. With labor shortages in maintenance and repair facilities (MRO ) and difficulties faced by original equipment manufacturers (OEMs) with the supply chain and limited workshop visit times, operators continue to extend existing engine lease contracts to deal with maintenance times and uncertainty regarding the reliability of new generation engines.
Although quality problems still affect aircraft fleets narrowbody new generation, market values remain stable. Driven by workshop visit events, the biggest movements in market values can be observed in the current generation fleet. The CFM56-7B showed the biggest change in market values, with an increase of around 20% between 2023 and 2024. Due to the suspension of flights of the GTF engines and the increase in workshop visit activity, the values of the A320ceo engines also increased.
As the engine market recovers, rental rates for engines narrowbody Current and next-generation revenues have increased beyond pre-pandemic levels.
Due to lower supply and higher demand, lease rates for the V2500-A5 are slightly above those of the CFM56-5B in 2024. However, monthly lease rates for the CFM56-7B have increased more, from around $75,000 in 2019 to $100,000 by 2024. In the engine leasing space for narrowbody new-generation A320neo engine groundings have led to increases in monthly rental rates, with the LEAP-1A26 rising from a value of US$110,000 in 2023 to above US$125,000 in 2024.
The rise in lease rates can also be attributed to the rise in engine lease contract extensions, as this option helps avoid transition costs and has become the most cost-effective option for lessors.
While the freighter market remains strong, there has been a spike in demand. However, ideal candidates for conversion into freighters widebody, such as the A330-300 and 777-300ER, are in high demand for passenger transport, due to delays in new aircraft deliveries. Despite the increase in engine values for widebody new generation, the relationship between market values and basic values has stabilized, with changes of just 5%.
With a shortage of spare parts and long maintenance times in workshops, turboprop engines.
