This was announced by US engine maker RTX, and alongside current severe staff shortages in the aviation industry, supply-chain issues for jets are primed for a worsening tug of war over engines between airplane factories and repair shops.

It is anticipated that around 650 jets are going to be sitting idle in the first half of 2024 due to these supply-chain woes. This is bringing about new players onto the aviation asset management field with the intent of filling the gap where other companies are not able to deliver.

The Engine Issue

The Airbus A320neo-family aircraft is having quality issues with its turbofan engines. RTX executives, which owns Pratt & Whitney (P&W) said initially 350 A320neo-family plans will be grounded to inspect and repair the turbofan engine. By the first 6 months of 2024, half of the A320neo-family fleet will be grounded – that’s up to 650 of the 1,360 aircraft.

To do the repair, the engines must be removed from the wings. While most repairs will be completed in 2024, the issue will likely result in repairs running through to 2026. RTX has stated that its initial projection of 1,200 engine needing to be inspected will be closer to 3,000 engines of which 600 to 700 will probably need to be repaired.

For some airlines, like European discounter Wizz Air, which operates an all-Airbus narrowbody fleet, the airlines will have to cut its capacity growth forecast by 10 percentage points for the 6 months ending next March. JetBlue Airways, Spirit Airlines, Frontier Airlines, Hawaiian Airlines, and IndiGo have all previously said these turbofan engine inspections are going to affect them this year and next.

For larger airlines like Lufthansa the airline plans to backfill lost capacity by extending the lives of older A320ceo aircraft, as well as wet-leasing narrowbody planes from other airlines.

Huge Shift in Aviation Financing

One option to fill the need for aircraft is through leasing with the sector expected to reach US$291 billion by 2032. With an anticipated 4.35 billion people planning to travel this year, airline industry net profits are poised to reach US$9.8 billion in 2023 – that is more than double what was originally forecasted.

More and more airlines are going the lease and sale-leaseback route for airplanes instead of outright purchasing aircraft.

This mitigates financial risks which enables growth that is normally dominated by legacy carriers. This also creates a profitable investment opportunity for private equity firms where banks have dominated the aviation financing world.

It is a boon for these private equity firms as well as alternative investment platforms to enter the aircraft purchasing arena of new plane buying. In a recent report published by Spherical Insights LLP, the global aviation asset management market is expected to grow from US$177.79 billion in 2022 to US$288.34 billion by 2032.

The Airbus Grounding Plague

Airbus has been plagued with groundings in recent years. In 2020, 237 of the company’s A380s were grounded. This was not, however, due to manufacturing flaws, but was instead a direct result of lack of passenger demand due to the COVID-19 pandemic. With people not flying, these double-decker wonders were parked in the desert along with other aircraft until the abating coronavirus would grant them airtime once again.

In early 2022, a dispute between Qatar Airways and Airbus led to the airline grounding 21 planes out of its 53 A350 aircraft due to what it considered serious safety concerns. Qatar said paint deterioration and anti-lightning protection on the long-haul aircraft were faulty.

An investigation showed that at least 5 other airlines had reported A350 paint or skin flaws since 2016, well before Qatar raised concerns in November 2020 when an attempt to repaint a jet in World Cup livery exposed some 980 defects.

Airbus has said that it is looking at changing the design of anti-lightning mesh for future A350s but insists there is adequate backup lightning protection. It claimed Qatar was undermining global protocols by seeking leverage over safety. Although the aircraft manufacturer agreed that this issue brought up by Qatar needed attention, it denied that it was a safety risk.