Regardless of tariff ambiguity, big engine suppliers are still not sensing demand changes that might jeopardize strong aftermarket activity projections.
RTX’s parent company and GE Aerospace admit that the previously described fast-moving microeconomic aspects, such as the economy’s and travel demand’s relationship with tariffs, are challenging short-term forecasting. However, signals from customers suggest that though airlines are reducing capacity, there will not appear to be large-scale shifts in utilization or retirement rates shortly.
“We’ve got people embedded with our airline customers, service reps,” RTX President Chris Calio said during the company’s Q1 earnings call on April 22. “Our customer-facing teams do bottom-up analysis with our customers and have a relied understanding of their assumptions on traffic, capacity, and their plans and the levers they’re thinking about pulling.”
“We’ll take action as necessary as we’re watching those buying patterns. We watch them on a daily basis and react quickly when we see shifts.”
Pratt reported a 28 percent increase in organic aftermarket sales for commercial aviation, while GE Aerospace reported a rise of 17 percent. However, all of this is changing as the economic outlook is shifting rapidly.
There remains a strong overall demand, but different regions and trade partnerships are more or less impacted due to the geopolitical climate. Take, for example, China. GE Aerospace has significantly lowered its forecast for sales of spare parts. Some of that material may end up with other customers, “but there will probably still be an impact,” GE Aerospace CFO Rahul Ghai stated during the earnings call on April 22.
Despite some challenges, GE Aerospace remains confident in the 2025 forecast, especially after a strong Q1, which makes the low double-digit growth estimate for spare parts sales throughout the year realistic.
“There is a healthy offset that is being seen globally when it comes to departures,” said GE Aerospace CEO Larry Culp. “I think we have a prudent approach towards the latter half of the year. While we expect to see softness in U.S. departures, other markets will likely experience some unannounced shifts. The planning is up to the airlines, we will leave that detail to them.”
A few months ago, Delta, Frontier, and United started drastically, slashing their expansion projections on capacity. Earlier this year, United announced they would speed up the scrapping of 21 IAE V2500-powered Airbus A320ceos: it’s a brutal axe in their FY24 capital budget of $100 million earmarked for engine overhauls to mid-life some of these aging airframes.
Even if the changes develop into a long-term pattern, overhaul shops won’t notice many changes for the next several quarters.
“When you look at past downturns, it has taken two, three, four s, sometimes longer for that departure slowdown to impact our activities,” Culp said. “The engines that are off wing today … either in our shops, waiting to come in the shop, or waiting to be delivered to us … would take us well into the fall.”
Some of that is Culp’s ascertained today’s slower turn times, which illustrates a strong aftermarket. “We do not like that we’ve got such delinquencies in place,” he declared. “We want to serve our customers better. But it does, I think, support the underpinning strength of the backlog.”
Delinquencies, by definition, in the current context, imply enormous service backlogs where there is routinely stable enduring demand for legacy engine work.
Estimations for CFM56 shop-visit growth stand in the mid-singles percent range increase for CFM56 under the GE Aerospace portion of the Aerospace division.
Cambridge remains in play with Pratt on a full-year outlook for worldwide IAE V2500 shop visits of 800, with expected visit trends for PW2000 and PW4000 shops.
As for Calio, “Aircraft utilization remains strong and supports aftermarket demand. However, consumer sentiment, especially during the summer travel season, requires close monitoring.”
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