Safran is holding to its projection of 25-30% civil engine aftermarket growth in 2022 as higher-than-projected spare parts revenue outweighs lower-than-expected CFM56 shop visit volume, the company said.
Spare parts activity picked up beginning in September as customers moved to stock up before the company’s annual price hike kicked in on Nov. 1, CEO Olivier Andries said on a recent earnings call. Spare parts at CFM International, the Safran and GE Aerospace joint venture, went up “about 10%,” Andries said. The figure is higher than historical norms—one of the many ramifications of rising costs. A similar hike last year prompted significant advanced buying, lifting the company’s fourth-quarter (Q4) revenues in the process.
“Our guidance assumes a Q4 2022 flattish versus Q4 2021,” Andries said. “The reason being that Q4 2021 has been very strong with a lot of pre-buying of spare parts just in anticipation of the catalog price increase ....Now, that may appear a little bit conservative. We’ll see. We still remain in the 25% to 30% band for the civil aftermarket revenue growth in 2022 versus 2021, but I can say we’ll be in the mid- to high-range of these bands.”
CFM56 shop visit volume has been running below Safran’s expectations primarily due to China’s uneven recovery. Nearly 20% of the so-called second generation CFM56s—the -5Bs and -7Bs—are in China, Andries said. Add in the loss of business in Russia, and volumes have not met expectations set at the beginning of the year.
“The volume of shop visits will be lower [than projected],” Andries said. But the good news is that the revenue per shop visit is going to be higher than what we expected initially ... the work scope is increasing again, which is good news. This is an effect ... that is going to last obviously [into] next year.”
Worldwide CFM56 shop visits topped out at about 2,100 before the pandemic before being cut in half the last two years. Safran’s most recent long-term projection, made at its December 2021 Capital Markets Day, has them recovering to pre-pandemic levels somewhere around mid-decade, and then gradually dropping through 2030. By then, however, a surge in CFM Leap shop visits means total CFM family aftermarket activity will nearly double compared to its 2019 peak.
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