Zhongtai: The global pre-installed and aftermarket is experiencing high prosperity; domestic commercial aircraft engine production is continuously accelerating.

Zhongtai has released a research report stating that the global commercial aviation engine front-mounted market exhibits three characteristics: the LEAP series, representing single-aisle models, continues to drive the increase in new aircraft deliveries; significant supply and demand gap issues in the global commercial aviation sector; leading overseas component suppliers face tight capacity, providing opportunities for diversification in the global commercial aviation supply chain. China's commercial aviation engines have not yet achieved independent and controllable development, with the new market scale for Chinese commercial aviation expected to exceed $360 billion over the next 20 years, and the demand for the 14th Five-Year Plan possibly exceeding 1,000 units per year. It is recommended to focus on domestic core suppliers of commercial aviation engines and the opportunities for domestic components to go global. Zhongtai's main viewpoints are as follows: Global commercial aviation OEM deliveries are increasing, but the supply-demand gap continues to widen. The current global commercial aviation engine front-mounted market exhibits three characteristics: The LEAP series, as a representative of single-aisle aircraft, drives an ongoing increase in new aircraft deliveries. In terms of fleet size, the total global civil aviation fleet is projected to steadily grow from 30,000 aircraft in 2026 to 41,100 aircraft by 2036, with a CAGR of 3.2%. Among these, narrow-body aircraft (CAGR 4.2%) will be the core driving force for growth. In terms of new engine deliveries, benefiting from the demand for single-aisle aircraft, the LEAP series and PW1000G series engines are expected to become the main models from 2025 to 2034, with the LEAP series projected to deliver 24,500 units. Regarding wide-body aircraft, as the B787 and A350 fleets continue to grow, the TRENT series engines are expected to deliver 3,342 units, and the GENX series engines 2,328 units. From the perspective of model demand structure, the next decade will see a major model iteration and expansion in the maintenance and overhaul market for global commercial aviation engines. By 2034, the LEAP series is expected to increase its share of in-service engines from 11% in 2025 to 36%, becoming the core power source for single-aisle trunk passenger aircraft; meanwhile, the share of CFM56 is expected to significantly decrease to 15%, while PW1000Gs share will rise to 16%, with V2500 and CF34 maintaining shares of 3% and 5%, respectively. The global commercial aviation supply-demand gap is prominent. As the main single-aisle aircraft model, the LEAP series is expected to deliver 1,802 units in 2025, with deliveries projected to climb to 2,500 units by 2028, continuing to lead the narrow-body power market. As of 2025, the global backlog of commercial aircraft orders has exceeded 17,000 units. In recent years, the supply-demand gap has continually widened, and engine capacity remains a core bottleneck constraining aircraft deliveries. The tightened capacity of leading overseas component suppliers provides opportunities for diversification in the global commercial aviation supply chain. Howmet Aerospace, as one of the world's largest suppliers of aerospace forgings and fasteners, has core products including engine fasteners, quick-release fasteners, structural fasteners, and castings and forgings for aerospace. After its separation in 2020, the company experienced a significant decline in fixed assets; however, recovery in growth is expected gradually starting in 2024. From a capital expenditure perspective, Howmet's capital expenditure has remained at historical lows since 2020. The MRO demand for global commercial aviation is booming, with the aftermarket for the new generation of engines entering a golden cycle. The global aviation engine maintenance market is expected to grow beyond $600 billion over the next decade. According to RR announcements, typical maintenance revenue for aviation engine projects is at least four times that of new aircraft purchase revenue. It is anticipated that from 2025 to 2034, the global demand for engine MRO is expected to reach $689 billion, with CFM International, GE Aviation, and RR accounting for market shares of 36%, 29%, and 16%, respectively. According to the "Aircraft Maintenance Handbook for Financiers," the typical cost composition of aviation engine maintenance includes approximately 20% for the fan and booster stages, about 20% for the high-pressure compressor, roughly 45% for the combustion chamber and high-pressure turbine, and around 15% for the low-pressure turbine. Notably, blade costs account for approximately 49% of maintenance expenses, making it the highest cost component. The MRO demand is surging, and the aftermarket for new-generation engines is entering a golden cycle. The unexpected surge in MRO demand for commercial aviation in 2025 is due to: (1) the durability performance of the new generation of engines (such as LEAP and GTF series) falling below expectations; and (2) the continued shortage of key components (including forgings, castings, high-pressure turbine discs, etc.), which impacts new aircraft production delivery while also limiting the maintenance capacity of MRO enterprises. From 2025 to 2034, global commercial aviation MRO demand will accelerate the transition from older models to newer models, with the LEAP series expected to increase its share from 4% to 24%, becoming the largest source of incremental growth in the MRO market. Meanwhile, new-generation engines feature high technological barriers and high supply chain concentration, making it difficult for existing maintenance capabilities to match the rapidly growing overhaul demand, leading to increasingly prominent MRO capacity bottlenecks. Indigenous research and development and airworthiness certification of domestic commercial aviation engines continue to advance, with broad substitutes potential. China's commercial aviation engines have not yet achieved independent and controllable development, and the new market scale for Chinese commercial aviation is expected to exceed $360 billion over the next 20 years, with the "14th Five-Year Plan" demand potentially surpassing 1,000 units per year. The global commercial aviation engine market is characterized by a high oligopolistic structure dominated by four key players: CFM, GE Aviation, Pratt & Whitney, and Rolls-Royce. China Aviation Engine Group Co., Ltd. is the main designer and general producer of high bypass ratio turbofan engines in China. The group is primarily planning to develop the CJ1000 and CJ2000 product series. The domestic commercial aviation engine CJ-1000A has completed several key tests and entered the airworthiness certification stage, with certification progress expected to accelerate. This organization anticipates that the CJ-1000A may obtain its Type Certificate by 2027 and enter the batch production stage by 2030. It is recommended to focus on domestic core suppliers of commercial aviation engines and the opportunities for domestic components to go global. By component breakdown, due to the comparison that commercial engines are larger than military engines and lack afterburners, with reference to the TF39 high bypass ratio turbofan engine, the value proportion of the fan and the outer casing is high, reaching 19.4% and 15.9%, respectively. Other core components such as the high-pressure turbine (11.8%) and low-pressure turbine (23.2%) also have relatively high value proportions, standing at 11.8% and 23.2%, respectively. By component breakdown, in large turbofan engines, blades, disc shaft components, and casings account for considerable proportions, reaching 29%, 16%, and 14%, respectively. Risk warnings: The risk that the development of domestic commercial engines does not meet expectations, the risk that the certification of domestic supporting components for overseas markets does not meet expectations, the risk of deviations in forecast demand for the aviation engine market, and the risk of technology and quality control within the industry chain.