Airlines find the grass isn't always greener with new engines

RIO DE JANEIRO — Airplane engine makers have fallen short of what they promised airlines, major carriers’ CEOs say, a problem vexing an industry that has struggled for years with aircraft shortages and more recently, a doubling of fuel prices.

It’s a paradox: Engine makers dazzled carriers with more fuel-efficient options for new planes from Boeing and Airbus. But production shortfalls and disappointing reliability with those engines are becoming costly problems, CEOs said in interviews at the industry’s largest annual gathering here.

Airline executives said they’re being forced to remove engines and take them for maintenance into crowded shops earlier than expected, which is driving up costs and sucking up the fuel savings they were supposed to get from the engines.

Airline leaders told CNBC this week that travel demand is still strong despite higher fares, so having aircraft on the ground means money left on the table, just as $100 billion higher fuel bill this year is slashing airline profit prospects.

Alexis von Hoensbroech, CEO of Canada’s WestJet, told CNBC in an interview ahead of the more than 370-airline International Air Transport Association’s annual assembly that the new engines promising fuel savings of around 15% or more compared with earlier models were “engineering marvels.”

“However, as you push the limits, it sometimes comes at the cost of reliability, and what we all are seeing is that those engines have to go into unscheduled maintenance far more frequently than prior engine generations,” he said.

Newer models of aircraft engines burn hotter, allowing them to use less fuel. That’s key since fuel is airlines’ biggest cost after labor. But that can also mean they wear out faster, which can ground planes, though carriers keep some spare engines.

Von Hoensbroech and other airline executives told CNBC that the new the engines have not reached the reliability that airlines need, through there have been improvements.

“That’s a big struggle, because it adds a lot of costs,” he said. “So a lot of the fuel savings are in fact eaten up by unplanned maintenance costs.”

For example, a CFM56 engine made by GE Aerospace and its French partner Safran that powers older Boeing 737s was going for $9.2 million at the start of the year, up 17% since 2019, according to IBA Group. A Pratt and Whitney PW1127 for newer Airbus narrow-body planes was up more than 57% over that time, according to the aviation intelligence and advisory company.

Engine overhaul and maintenance has become a more than $58 billion business.

Willie Walsh, the outgoing director general of IATA, told the conference in Rio de Janeiro that he is “deeply disappointed customers have not dented manufacturer finances,” and pointed to a jump in engine-supplier profits.

“My message to the engine [original equipment manufacturers] is simple: Stop gouging us and get back to making great engines that work and that last,” he said. “Allowing these failures to extend into the next decade is totally unacceptable to the customers.”

For its part, GE Aerospace, which makes engines for both Airbus narrow-body A320 planes and Boeing narrow-body and wide-body aircraft, said it has been working on improvements and has also increased output.

“We’ve made significant investments to enhance time-on-wing, reduce cost of ownership, and increase output and we will continue to invest to drive meaningful improvements,” the company said in a statement. “While there is more to do, we are making progress every day to continue to deliver long-term value for our customers.”

GE powers Boeing’s best-selling 737 Max with its CFM joint venture with France’s Safran. Those Leap engines are also options on the Airbus narrowbody A320 narrow-body planes, with Pratt & Whitney as the other. GE engines also are used on a majority of a 787 Dreamliner.

United Airlines CEO Scott Kirby praised GE for making improvements, but said there are still concerns for the industry.

“The biggest constraint for at least the next five years is going to be lack of engines,” Kirby said.

He pointed to a shortfall of parts like forgings and castings and said when it comes to smoothing out supply, “I don’t really think we’ve started yet.”

Pratt and some of its customers have the added problem of a manufacturing defect from several years ago. The issue forced airlines to ground planes with those engines, which was one of the biggest challenges that hit now-defunct Spirit Airlines. Pratt’s parent, RTX, didn’t immediately comment.

Rolls Royce, another manufacturer, said it is still working on efficiency. The company said it has invested 1 billion pounds ($1.33 billion) in its Trent engine fleet and a mode that “offers up to triple time on wing, resulting in improved fleet planning and a reduced maintenance burden for customers.”