Are Aero Engines a Robust Investment Opportunity?

Leading aviation consultancy, the International Bureau of Aviation (IBA Group) announce the release of Engine Values Book 2013. Published annually, it provides up to date information on market characteristics and operator distribution of the most commonly used families of aero engines.

During a difficult time for many investors and assets in the aviation industry, most aero engines are demonstrating a robust investment opportunity, and these are clearly reflected in the values contained within this year’s Engine Values Book. Introduced in 2003, IBA’s annual reference book provides operators, banks, leasing companies, MRO’s and manufacturers with a comprehensive information source on the current state of the global engine market.

Dr. Stuart Hatcher, Head of Valuations and Risk at IBA Group, comments, “With more aircraft parting-out and more money pumping into the spare engine leasing market, never before has it been so important to understand the differences between seemingly similar engines. The value profile of high thrust variants of current production engines remains strong, with GE90-115, GEnx-1B, CF34-10E, CFM56-7BE, CFM56-5B/3, V2500-A5 SelectOne, Trent 700/900/1000, and the GP7000 featuring at the very top.”

However, due to OEM domination in the widebody sector, investors are limited to just the four narrowbody programmes. At the bottom end, values remain under pressure but, providing there is enough green-time, leasing demand may be strong enough to reap strong rates. IBA Group is continually seeing this for engines such as the high thrust variants of the CFM56-3C1, Tay 650s, PW4000-94s and CF6-80C2s.

IBA Group has observed a major difference from last year in the value pressure of typically high-demand engines that have since been superseded by an upgrade. In particular, the lower thrust variants of the oldest CFM56-5B, 7B and V2500-A5 engines have lost momentum as host aircraft are no longer in daily operation and on-wing times reach a point that leasing demand has been fulfilled.

The part-out market has since been saturated with these types of engines, which has softened demand and pricing must drop in order for a deal to remain profitable.

Despite this, the engine leasing market will remain a resilient and dynamic battleground. As Dr. Hatcher continues, “Old, unserviceable engines will be broken for spares. The demand for current build IAE and CFMI engines will continue well past the introduction of the PW1000G and Leap X. Excess supply engines will be taken up by expected fleet dispersal activities. Outdated engine builds will be upgraded or parted-out (i.e. from DAC, or CF34-8C1), and provided aircraft fleets remain in service, demand will remain for even the least desirable.”

IBA Group is committed to providing the most professional and informed opinions on aircraft values to the industry. Established over twenty-five years, IBA Group has gained a wealth of independent experience on the true evolution of the market having witnessed a number of industry cycles in this time.

This year’s Engine Values Book provides IBA’s opinion and insight on nearly all modern and popular engine types including for all modern Airbus and Boeing aircraft.

Engine Values Book, IBA’s Aircraft Values Book, Lease Rate Digest and JetData which includes a selection of IBA’s values are available to purchase now.

For further information regarding this product or other IBA services, please contact Ben Jacques Commercial Manager