Joseph Adams: Yes, there’s a lot of room to grow, and as you’ve indicated, well, first of all, I would say there’s no churn in that. We’ve not lost any customers. Nobody has used the product has said to us or indicated that they wouldn’t use it again. So that’s a very good thing. And people like the product. And if you look at their total number of shop visits starting out, you’re talking about airlines that have potentially anywhere from 10 to 100 shop visits a year. And so that’s 30 to 300 modules per year. So we’re barely if you’re talking about doing four, going to eight, you’re still at a very small percentage of their total available shop capacities opportunities. So we think that number will continue to grow. We haven’t lost any customers.
We think people, once they use it, they will repeat it again. In particular, as shop visit time, and time in the shop keeps growing and getting longer, the more cost savings a module swap presents to the airline. So we think the advantage of using them will only continue to get better and grow in the coming years.
Frank Galanti: And just one clarifying question. You said 10 to 100 shop visits a year. Is that per customer or for the 29 customers in aggregate?
Joseph Adams: No, that’s per customer.
Operator: And our next question comes from David Zazula from Barclays.
David Zazula: Hey, thanks for taking my question. I guess first on the aerospace products business. I think a lot of the investors we talk to are concerned about a macro slowing. It’d be interested in your assessment of the sensitivity of those businesses to a slowdown in the macro. Do you think it would reduce or increase demand or how you think customers would respond?
Joseph Adams: We don’t think it’ll have much of an effect because one is because of COVID and the fact that airlines stopped doing shop visits for basically two years. Most green time has been burned off. So there’s very little available green time in fleets. As a matter of fact, in the last month we’ve had two or more airlines indicated that they need between 20 and 30 engines because they have nothing left. The tap is, the bucket is empty. So I think that mitigates any type of macro slowdown. And then secondly, you always hear that if there is a macro slowdown the focus on cost cutting accelerates. So more and more companies then go into a mode like what can I cut? What can I reduce? And we offer cost savings that is we’re very direct about. We can save you money on your shop visit, or you can even avoid a shop visit by doing a module swap. So we think that it’s a great product if airlines really need to hunker down and focus on cost cutting.
David Zazula: Great. And then additionally, CFM56, I think you guys have done very well there, a lot of life left in that project. But as you’re thinking long term, are you evaluating any other further generation engines, ecosystems to get into? How are you thinking about that? What would you think of for long term timing and how would you evaluate among the different potential projects as you look on down the line?
Joseph Adams: Yes, we are thinking that we have two engines that we’re particularly focused on right now, which we think are great candidates to do similar things that we’ve done on the CFM56. We see don’t, really, we see the sweet spot for the CFM56 really running from 2024 to 2030. It’s probably been extended out now because of delays in new aircraft delivery, difficulty with new engines staying on wing as long as people thought they would, supply chain disruptions, freighter conversions, all those factors are making the CFM56 life expectancy look longer and longer. So we don’t feel that we need to divert attention from the organization. But as I say, somebody in every company needs to be thinking five years ahead. And so we do have two engines that we’re working on. I’m not going to disclose what those are. But feel like those would be excellent candidates for us to consider adding when the time is right to do that.
Operator: And our next question comes from Hillary Cacanando from Equity Analyst.
Hillary Cacanando: Yes. Hi, Joe. Thanks for taking my question. So you had previously mentioned that you were looking at other maintenance related products to develop this year. And I think you mentioned something about repair in one of the industry conferences. Would you be able to talk a little bit more about that where you are in the process? And is this something that we can see happening this year?
Joseph Adams: Yes, that’s a great question. It is something that we’re very actively engaged and working on. I’m very excited about the repair market opportunity. It’s growing quite rapidly. It’s got a lot of support from both cost savings, where essentially, you could repair a part for 20% of the cost of a new part. So it’s a great product. And there’s a number of companies that are continuing to develop more and more repairs. So we love the repair market. It fits perfectly into our portfolio. It also plays well with on the ESG side and that you’re not making a new part, you’re saving the old one. It’s a recycling opportunity. So ESG is good. It’s very pro repair business. In terms of progress, we do have a couple, I’d say two or three specific opportunities which we’re running down. And as I said before, we hope that we can conclude do something material on the repair side this year in 2023.
Hillary Cacanando: Great. That’s great to hear. And then I had another question in your presentation you noticed that there’s strong backlog from airlines, lessors and MROs. I was wondering if you could provide a little more color regarding where you’re seeing the most demand. I would think there’s a strong demand coming from the airlines. But I was wondering if lessors are just as willing to use materials. And I guess related to that, when you do get all your PMA parts approved, do you think that lessors would be — there would be strong demand from the lessors as well? Because I would think that lessors may be a little more sensitive about using non-OEM parts since they have to market those products. Just wanted to get your thoughts.
Joseph Adams: Sure. So a few questions there. And on the last part, the PMA question and lessors, I do think there’s growing acceptance and there is actual evidence of that in the CF680 engine, which I’ve talked about is a great case study. And we have bought 80 of those engines. We put PMA in all of those engines. We’ve done over 100 leases, never had any operator not take that engine because of PMA. And we’ve sold 53 of them, or 54 now where the prices were very competitive or as good or better than if it was all OEM equipment. And ironically, many of the buyers of those engines were the leasing companies. And so sometimes you can go ask them if they have PMA in their engine and they will say no, but they actually do. It’s just they don’t know it.
So I think that the same fact pattern will play out in the CFM56 engine as well. So I do believe that there will be growing acceptance in that. In terms of where their activity, I mean, the good news is there’s growing activity from all three categories. You have airlines. As I mentioned, a number of airlines have used up all their green time and so they’re looking at summer schedules and then they’re deciding to keep their NGS and the CO fleets longer. So they need more engines, or they might be doing an airframe overhaul that they didn’t think they were going to do that. Now they need engines for the next five years. So airlines are clearly demand for engines is very strong. MROs as well because shops are filling up and sometimes shop turn times are slowing down or extending.
So they need more engines to be able to do the shop visits that they have in-house and want to bid for it. And then leasing companies. It’s really two different activities. One is we buy a fair amount of off lease assets from leasing companies. So a lot of leasing companies don’t have the ability to put a lot of assets out if they’re off lease, particularly engines. And so we’re a great buyer. And then we can solve end of lease return comp issues with module swaps, and we’re doing more and more of that. So at the end of a lease, if an airline owes a lot of money cash as a return compensation because the engine, they’re going to give back doesn’t have a certain number of hours in the cycles. We can help solve that by doing a module exchange for less than what the cash outlay would be otherwise.
So we have a lot of products and solutions that we can offer, and the leasing companies are sort of accepting of all those because they’re trying to get things done and move on.
