IBA Commentary - More woes for the GTF

The recent sudden announcement by RTX to upgrade its earlier statement to inspect 1,200 GTF engines to rectify metal powder contamination that could lead to the cracking of HPT disks impacts up to 3,000 engines. Already last month, the FAA issued a mandate to inspect the first and second-stage high-pressure turbine disks of certain engines within 30 days. With the new announcement, RTX estimates that an additional 600-700 engines will require a lengthy visit to the shop over and above those already scheduled for shop visits between 2023 and 2026. The concerning part is that the initial estimate of 60 days has been shifted to 300 days.

As a result, RTX expects there to be a high number of grounded aircraft from now until the end of the first half of next year. This comes as a significant blow to both Pratt & Whitney and operators who have already been experiencing reliability issues on top of supply chain problems. Both Wizz and Lufthansa have voiced their reaction to the situation by announcing capacity reductions and the higher use of existing Airbus A320 family CEO aircraft. RTX has consequently estimated the profit impact for themselves at $3-3.5bn whilst their program partners will face a similar impact over the next three years.

What IBA finds surprising is that both RTX and Airbus continue to remain firm on the ramp-up plan. We’ve already seen problems with the provision of spare engines to support the current AOG situation to maintain new deliveries, but surely if we end up with the situation whereby circa 650 aircraft ended up grounded for an extended period, the pressure to take engines from the line to support the in-service fleet will reach epic proportions. That also assumes that the problem remains limited to what they have announced so far. RTX remain firm that sales are not expected to be impacted which we feel is optimistic given operators have a choice, although it’s not as if CFM have any short-term gaps in production this side of 2030.

On the positive side, the already high demand for serviceable narrowbody aircraft will take a further jump. This will speed up the re-entry into service where possible of the remaining 250 A319/A320/A321s in storage that were parked up between 2020-2022, which ignore those that have been in storage for over three years, those already in between leases, and those stuck in Russia. Well, at least for a few more years anyway. Any short-term thoughts of retirements could certainly go out of the window for the time being as lease rates shift upwards.

Part-outs remain at an industry low point since the peak in 2013. That said, the A320ceo family peaked in 2021 and makes up the bulk of the current part-out activity for narrowbodies. Whilst we were forecasting a resurgence of A320 part-out activity from 2025 onwards to coincide with production ramp-ups and the rectification of known issues, it may need to be pushed further out. The economics of what drives a part-out versus maintaining its serviceability for a few years more will certainly be tested.