One engine, $200,000 a month

We didn't board.

The screen still said on time, which is how you know it isn't. Then the agent picked up the phone and used the word airlines reach for when they would rather not explain. Engineering.

You've had that morning. I've had it twice this year.

The aircraft was fine. Somewhere, an engine was not.

A spare geared turbofan now rents for roughly $200,000 a month. That is one engine, on its own, with nothing attached to it.

A whole twelve-year-old Airbus A320 rents for about $220,000 a month, on IBA's numbers. Airframe, two engines, galleys, seats, the lot.

So one engine costs nearly as much as an entire airliner.

I should be fair about that comparison. A spare goes out on a short lease at a spot price. An aircraft goes out on a long lease at a term price. The spare has always been dearer per unit… never by this much.

And when a part is worth that, people come for it.

The aircraft is no longer the asset. The engines hanging under the wing are.

Lessors and airlines have started dismantling aircraft that are five years old. Not worn out. Five years old. The engines and the components sell for more than the aircraft earns by flying.

It began with the Pratt & Whitney-powered A320neos, because those are the engines in short supply. IBA now sees the same thing happening to Boeing 737 MAX aircraft.

These are the newest and most efficient jets ever built. They are being taken apart for their parts.

So the next time you sit at the gate and hear engineering, that is what you are sitting inside. A shortage that pays better broken up than whole.

It's the same setup as any squeeze. The scarce thing gets a price, and everything attached to it gets rearranged around that price. Including the aeroplane you were meant to be on.

This connects directly to what a shortage does to a machine made of sellable pieces. Work the arithmetic the way a lessor does.

An aircraft is an airframe, two engines, landing gear, avionics and a stack of rotable components. Each one has its own market. Normally the whole is worth more, because a flying aircraft earns rent and a pile of parts sits in a warehouse.

That has flipped. A V2500 engine fresh from overhaul, with new life-limited parts, trades between $11 million and $13 million, on IBA's survey.

Two of those hang under one narrowbody wing.

So the teardowns started. Azorra agreed with Delta Material Services to dismantle A220-300s that had flown for Egyptair, and the units averaged about five years old. AerFin and Unical bought A320neos to break up.

IBA says lease rates for five-year-old new-generation narrowbodies are now softening faster than for older ones, because engine and component values dominate the economics.

Read that again. The newer aircraft rents for less because its parts are worth more. That is a market telling owners to stop flying and start selling.

And here's where it spreads. The metal is appreciating. The people flying it are not.

Jet fuel went up with the war, and carriers with routes through the Middle East took it hardest. In June, AirAsia fell behind on supplier payments and asked leasing firms to push back rent on more than 16 aircraft. Rolls-Royce told the airline it had missed payments on the contract that maintains its engines.

Spirit Airlines went further. All-Airbus, all geared turbofan, with 39 of its A320neos sitting on the ground in July last year. It filed for Chapter 11 in November 2024, filed again, and stopped flying altogether on May 2 this year.

Now look at what that did to prices.

IBA reports V2500 engine prices falling, because feedstock is finally entering the market. The reasons it gives are softness in the wet-lease business and the Spirit bankruptcy.

In other words, the engine shortage eases when a carrier stops flying and its fleet comes onto the market.

Lessors sit beside an airline's capital structure rather than inside it. They own the hardware and can move it. The airline owns the schedule, the fuel bill and the passengers. I find that split more interesting than any fare war.

Meanwhile, the cause of all this sits in a manufacturing process.

Contaminated powder metal turned up in certain engine components. Regulators cut the inspection intervals sharply, which pushed hundreds of engines into the shops at the same moment, and inspections that used to take a couple of months started taking most of a year.

Pratt & Whitney's own guidance has groundings averaging around 350 aircraft a day through the end of this year.

It is not only one engine family. On the LEAP, fuel nozzle coking remains an issue across the fleet. On the turboprop side, the engine that powers the ATR 72 is held up by bearing and vane shortages, with turnarounds running beyond six months and engines fresh from inspection trading near $2.4 million.

Airbus and Embraer have set themselves a target of zero aircraft on the ground by the end of 2026. Setting that target tells you where the number sits today.

And the order book keeps growing. The geared turbofan passed 2,700 deliveries by the first quarter of this year, and more than 800 further orders and commitments were announced in the first seven months. Airlines are buying the thing that keeps them at the gate, because when it works it burns less fuel than anything else on the wing.

Three more things worth keeping track of.

The European Central Bank raised its deposit rate to 2.50% on September 10, its second increase of the year after a first in June. Euro area inflation ran at 3.3% in August, and the energy component alone was up 14.3% on the year. A central bank is tightening into a supply shock it cannot affect, and futures markets price almost two more moves by the summer of 2027. Textbooks say you look through a shock like that. Central banks that lived through 2022 apparently do not.

Emerging markets are up about 24.6% this year on the MSCI index. Underneath that number, China is down 10.9% and India down 11.6%. The two largest economies in the group are among the worst-performing markets in the world, and both import their energy through the same waterway. The index return belongs almost entirely to the commodity exporters on the other side of the trade.

American payrolls rose 162,000 in August with unemployment steady at 4.1%. Meanwhile real GDP grew at a 1.8% annual rate over the first half, while private domestic final purchases grew at 3.0%. Demand is running faster than output and hiring is running behind both. Businesses are producing more without adding people, which is either a productivity story or a hoarding story, and the difference matters enormously for next year. We'll see.

Tony Ryan put in $5,000.

That bought him a tenth of a new company founded in 1975 at Shannon, in the west of Ireland, alongside Aer Lingus and a London merchant bank. They called it Guinness Peat Aviation. Ryan had been a dispatcher at the airport.

By the 1980s it was the largest commercial aircraft lessor on earth. The board held a former Irish taoiseach, a former British chancellor of the exchequer and the former chairman of ICI.

At its peak the company was valued at $4 billion. It earned $265 million in the year to March 1992.

In June 1992 it went to the market with $850 million of shares.

The institutions refused to buy. The offer was pulled at the last minute, and the shares never traded once.

The aeroplanes were never the problem. The company holding them was.

Then everyone looked at the debt, which came to around $10 billion. Airlines were merging or failing after the Gulf War, so the company had aircraft it could not place and orders it could not cancel.

In November 1993 it sold aircraft to GE Capital, which took over managing the fleet and most of the technical staff. GE also took an option to buy 90% of the ordinary shares at a low price. Ryan moved across with them.

Here is the part that stays with me. The aircraft were fine. Most of them flew for another twenty years, and the business built around them became the most profitable leasing operation in the world.

The hardware was never in question. The balance sheet under it was.

Ryan had already started a small airline in 1984, with his son and a fifteen-seat turboprop. That one worked out. It is called Ryanair.

Good assets do not save bad funding. We'll see.