BRUSSELS (Reuters) -French jet engine maker Safran (EPA:SAF) set out plans on Tuesday to invest more than 1 billion euros ($1.1 billion) and hire 4,000 people worldwide to “radically scale up” its maintenance network as the aviation industry tackles congested repair shops.
The plan follows strong demand for LEAP jet engines that Safran co-produces for Airbus and Boeing (NYSE:BA) with GE Aerospace and is expected to boost Safran’s share of the aftermarket, where engine makers make much of their income.
Safran and GE Aerospace produce the engines through co-owned venture CFM International, the world’s largest engine maker by number of units sold, which is celebrating its 50th anniversary.
Engine maintenance has become a major industry headache as efforts to boost fuel efficiency increased the wear and tear on engines in certain climates and engine makers struggled to bring on new capacity fast enough to keep pace with a boom in demand.
Analysts say that has meant longer waiting times at repair shops, exacerbating aircraft shortages and putting pressure on engine makers to accelerate their capacity expansion plans.
Jean-Paul Alary, president of Safran Aircraft Engines, said Safran aimed to quadruple its in-house capacity to 1,200 shop visits per year by 2028. “It’s a sprint,” he told reporters.
Safran unveiled its strategy at a recently inaugurated engine service centre outside Brussels, the first of six new or expanded sites due to add capacity by 2026.
As part of the expansion, French President Emmanuel Macron signed an agreement expanding Safran’s presence in Casablanca during a visit to Morocco late on Monday, one of a number of business deals boosting ties following diplomatic tensions.
CFM’s LEAP engines exclusively power the Boeing 737 series and are available as a choice on the Airbus A320neo in competition with Pratt & Whitney’s Geared Turbofan.
‘QUICK TURN’
Jet engines are typically sold for little or no profit at the outset, or even at a loss, with manufacturers making most of their profit in services spread over the life of the engine.
The LEAP engine, introduced in 2016, has only just started to generate major overhauls that take place every 6-8 years.
But Safran’s Brussels plant is busy handling “quick turn” visits to address the harsh climate issues, ahead of the upgrade of a key engine component designed to improve durability.
CFM competes for maintenance contracts with airlines and a network of 14 independent repair shops including five key players.
It aims over time to supply about half the market for LEAP repair services, expected to reach a total of 5,000 engine visits a year by 2040, Safran said.
Services made up 65% of Safran’s core propulsion revenues in the third quarter.
The latest maintenance expansion in repair shops comes as CFM and other engine makers are struggling to keep up with demand for new engines amid kinks in the global supply chain.
Airbus earlier this month singled out CFM as a “bottleneck” delaying jet deliveries, but Safran insists its services growth will not distract attention from ramp-up plans for new engines.
“There is no (services) investment that would jump ahead of the investments we make for new engine production,” Alary said, adding Safran would continue to invest heavily in its factories.
While Airbus is clamouring for engines, Boeing is having to balance its intake with the crippling effects of a strike.
Alary said Boeing continued to take LEAP engines for its 737 assembly line to help keep a cornerstone of its supply chain in fit condition, but was doing so at a “relatively reduced rate”.
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Source: Economy - investing.com
