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Service Economy: New $1 Billion Deal Highlights Commercial Aviation’s Asia Growth

Mamas and papas, it might be high time to let your babies grow up to be pilots, or at least aircraft mechanics.

The aviation industry has been in a steep climb since the early 1970s, and aircraft makers see no signs of it slowing down. For example, Airbus, in an industry survey released in September, forecast the need for more than 39,000 new passenger and cargo planes, nearly doubling the existing global fleet of 28,000 aircraft to 48,000 by 2038. Airbus estimates that along the way, the industry will also hire 550,000 new pilots and 640,000 new technicians to help keep the jets on time, passengers happy and carriers profitable.

These projections are good news for jet engine makers like GE Aviation and CFM International, its 50-50 joint venture with Safran Aircraft Engines of France founded in 1974. To date, more than 34,000 CFM engines have been delivered to more than 600 operators around the world. In fact, every two seconds of every day, a CFM-powered aircraft takes off somewhere in the world.

That’s possible in part due to a global network of service centers and agreements with aircraft lessors and airlines that GE and CFM have built up over the years. The latest example is China’s Colorful Guizhou Airlines, which just signed an agreement with CFM valued at $1 billion at U.S. list price to service its fleet of LEAP-1A engines that will power as many as 35 Airbus A320neo jets. In June, the airline agreed to lease its first four jets from GE Aviation Capital Services (GECAS).

GE Aviation reported $19.1 billion in services revenue in 2018, a 13.6% increase compared with the previous year. Services accounted for 62.4% of the GE unit’s total revenues of $30.6 billion. Airbus expects the commercial aircraft services market to deliver a “cumulative” $4.9 trillion over the next year, with the rapidly growing Asia-Pacific segment being by far the largest player.

Top image credit: Colorful Guizhou Airlines.

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