By Tim Hepher and Allison Lampert
CASTELLON DE LA PLANA, Spain (Reuters) -At Castellon airport in eastern Spain, workers in hazmat suits wriggle through hatches of a nearly new Airbus jet, stripping out parts as if gutting a mechanical whale. Once a semi-deserted airport, Castellon has become a graveyard for aircraft caught in a global engine crisis.
Despite booming demand for planes, a severe shortage of next-generation fuel-efficient engines has flipped market economics: in some cases, the engines are now worth more than the aircraft they power when offered as spares.
The imbalance has led to more than a dozen Airbus jets being dismantled for parts after only a few years in service, with dozens more awaiting their fate, according to industry insiders.
AIRBUS JET SCRAPPED AFTER SIX YEARS
The unusual trend, driven by delays in Pratt & Whitney GTF engine production and maintenance, has sounded the death knell for jets like the six-year-old A321neo being broken up in Castellon. The A321neo is part of the A320 family, which this month ousted Boeing’s 737 as the most-delivered jetliner.
The Spanish airport, for years blighted by a lack of passengers, is the growing hub for a lucrative financial trade as UK-based eCube harvests parts from almost-new jets for investor clients.
“I can’t say I remember it happening on this scale before, because we’ve never had an issue like this on such a popular engine,” said Lee McConnellogue, CEO of the company, which says it can release usable parts or recycle virtually the whole jet.
Skilled workers strip out avionics, wheels and wing parts.
Engine housings sit on the wings like empty husks, with their precious powerplants wrapped in blue covers to become spares worth up to $20 million. They are urgently needed by airlines forced to ground jets because of queues for engine repairs.
The problem worsened in 2023 when Pratt & Whitney disclosed a rare powder-metal defect that could cause cracking, prompting calls for inspections of 600-700 GTF engines through 2026.
According to Cirium data, one-third of the GTF-powered Airbus fleet or 636 jets are grounded or in storage. The equivalent percentage for planes with engines from competitor CFM is 4%.
Pratt & Whitney and Airbus had no immediate comment.
‘SOMETHING WRONG’
The jet engine squeeze is disrupting airline operations worldwide, as carriers struggle to meet passenger demand and unlock the promised 15% fuel savings of new aircraft.
Most airlines say they are short of jets after years of delivery delays and are keeping older planes flying longer.
But in some cases, financial owners can earn more by stripping engines than by leasing out the jet itself.
For example, the engines can be rented out as spares for some $200,000 a month each, according to UK-based Cirium. That is at least as much as a whole plane with engines. Add to the pot revenue from breaking up the rest and the deal makes sense.
“It’s a paradox where there’s so much demand, why on earth would people be parting out aircraft,” said Austin Willis, CEO of Willis Lease, which bought some of the engines.
The engine bubble overshadowed a recent meeting of the International Society of Transport Aircraft Trading (ISTAT), a teeming ecosystem of aircraft traders and lessors who buy, sell or finance almost every aspect of a jet from nose to tail.
“It’s a financial play … There have been billions of dollars of private equity capital bidding for aircraft and engines to part out in recent years,” Naveo consultant Richard Brown said.
“It shows aviation has become a super-efficient marketplace,” he added in a telephone interview.
But airline leaders question how aircraft built to fly for more than 20 years and save millions of gallons of fuel are being dismantled so quickly.
“It tells you something is seriously wrong,” said Willie Walsh, head of the International Air Transport Association, which last week predicted $11 billion in costs from supply disruption this year including $2.6 billion in engines alone.
Critics say the crisis has its roots in an overreaction to high oil prices above $140 a barrel at around the time engine makers were designing current models. Engine design involves a balancing act between optimising efficiency or durability.
“They went too fast and the engines had great improvements in efficiency but they failed on maintenance,” leading aviation economist Adam Pilarski told Reuters during the ISTAT event.
Engine executives argue the fuel savings benefit airlines on every mile flown, while maintenance delays are temporary. Even so, Pratt admits it will take years to end bottlenecks.
Chris Calio, CEO of Pratt & Whitney parent RTX, said last month that groundings had stabilised and would fall, but that “clearly we have more work to do.”
Now some are eyeing the fate of Airbus planes discarded by Spirit Airlines as the U.S. carrier faces bankruptcy.
“I don’t think the die is completely cast on what’s going to happen to Spirit, but it’s inevitable that some of those aircraft will (be broken up),” eCube’s McConnellogue said.
(Reporting by Tim Hepher in Paris, Allison Lampert in Montreal and Eva Manez in Castellon de la Plana, Spain; Editing by Joe Brock and Matthew Lewis)
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