Engine market values soar as supply lags demand

The freighter industry continues to struggle with building a sufficient supply of engines and components as global demand drives soaring market values. “We’re seeing engine values go up something like 50%,” David Ellis, chief commercial officer of leasing, investments, finance and trading at GA Telesis, said this week during the Cargo Facts webinar, “Full thrust: Navigating engine challenges in the freighter segment.” Watch the full webinar here. [caption id="attachment_57293512" align="aligncenter" width="1080"] CFM56 engines are in high demand. (Courtesy/GA Telesis)[/caption] “A midlife narrowbody engine that might have traded $4 million to $6 million two years ago, for that to be $6 million to $9 million is not unusual,” Ellis said. “We’re seeing narrowbody engines trading in the double digits pretty consistently. Two years ago, we were never talking about used, continued-time narrowbody engines trading in double-digit numbers.” The reliability of new aircraft and the cost to operate them, along with the delay in deliveries from the original equipment manufacturers (OEMs), has kept passenger operators active in the narrowbody engine sector, Les Cronin, vice president of sales and marketing at MTU Aero Engines North America, said during the webinar. “Demand for that market is pent-up at the moment,” Cronin said. MTU has about 150 narrowbody and widebody engines in its lease portfolio that have increased in value over the past two years, he said. “Values keep on increasing every month as well, mostly driven by the passenger fleets as well as the cargo side for the narrowbodies,” Cronin said. Last year, Boeing projected the rate of narrowbody conversions would grow in 2026 as production deliveries ramp up, releasing more current-generation engines to the freighter market. Shop visit costs In addition to new production delays, the slow post-pandemic recovery still underway is decreasing engine availability because it is much easier to shut down MRO facilities and the supply chain than it is to get them operational again, GA Telesis’ Ellis said. The rise in shop visit costs stemming from labor rates, inflation and materials will have a permanent effect on future engine repair prices, he said. “The cost of the shop visit directly impacts the value of a used engine; what we call the shop visit avoidance rate,” Ellis said, adding that the cost of an overhaul has a direct effect on the lease rate. Turnaround times need to improve and more used serviceable material from part-outs must become available for shop visit costs to stabilize, he said. “ Will [prices] keep increasing at the current high rates? I don ’ t think that happens, ” he said . “ I think we ’ ll see some stabilization this year, but it is stabilizing at a relatively high price point, both in lease rates and engine overall cost. ” Cargo Facts LATAM 2026, the essential event for stakeholders in Latin America, will take place Feb. 10-12 at the Marquis Reforma in Mexico City. Learn more and register by Dec. 26 to take advantage of early-bird pricing. Cargo Facts Asia 2026, the indispensable event for Asia-Pacific stakeholders, will take place March 23-25 at the W Shanghai. Learn more and register by Feb. 6 to take advantage of early-bird pricing. The inaugural Cargo Facts Routes and Airport Conference will take place April 27-28 at the Marriott Al Forsan Abu Dhabi. Learn more and register by March 13 to take advantage of early-bird pricing.

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