Pre-Covid, IBA forecast strong growth across the entire aftermarket: narrowbodies, widebodies and regional aircraft. There was an expanding fleet, heightened utilisation and increased demand for shop visits. The situation has evidently altered enormously and the most vulnerable assets, mature widebodies, will be the first to be withdrawn from shop visits.
The most pertinent question is how many of the shop visits we are going to see will involve full overhauls or LLP replacement? With no clear projection of how long we'll have to wait before utilisation increases, it is difficult to accurately forecast when a consequent recovery in demand for shop visits will occur.
There is uncertainty over whether today's offset shop visits will create a pressure which can't be met, causing delays and long slot lead times. What is clear is that demand will be driven by asset maturity and whether an aircraft is narrowbody or widebody. A significant proportion of the forecasted shop visits were for engines in their twilight years, which will be most vulnerable to part out pressure with diminishing chances of further maintenance investment. This undoubtedly means a reduction in shop visit demand expectations for some time to come.
The chart below shows IBA's pre and post Covid forecast, presenting a range of potential impacts on the shop visit market, each scenario shows an increasingly pessimistic outcome. The scenarios consider the severity of the downturn, rate of recovery of demand, rate of recovery of capacity and the number of shop visits lost entirely due to changes in expected fleet retirement plans.
The key point of comparison here is the blue area which represents IBA's view of shop visit demand prior to Covid which shows the sharp contrast of pre and post Covid expectations.
For more information about shop visit forecasts or to discuss engine advisory or valuation projects, please get in touch with David Archer, Senior Engine Analyst, using the button below.
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IBA's Engine Market Update is designed specifically around the business needs of Investors, Lessors, Operators and Financiers looking to understand the performance of the Engine market and the flight path to recovery. This session provides valuable insight to help the aviation community identify market opportunities, structure deals and mitigate risk in the wake of COVID-19. IBA's Phil Seymour, President and Head of Advisory, David Archer, Senior Engine Analyst and Jamie Davey, Engine Analyst, share their insight on: Engine value resilience and the flight path to recovery Shop Visit Forecast modelling and the impact on the aftermarket, values and lease rates How have OEMs been supporting the industry Fleet trends of the most popular engine types during COVID-19 Engine performance - Value and Lease Rate update The slide deck is available to download here. If you have further questions please contact: David Archer