New UTC CEO throws cold water on PW GTF growth

The new chief executive officer of United Technologies Corp., Gregory Hayes, threw cold water on hopes and dreams of Pratt & Whitney, a subsidiary, that the successful small- and medium-sized Geared Turbo Fan will grow into the wide-body market.

Aviation Week just published an article in which all three engine OEMs were reported to be looking at a 40,000 lb engine that would be needed to power a replacement in the category of the Boeing 757 and small 767. Hayes did not specifically rule out a 40,000 lb engine, leaving PW’s potential to compete for this business unclear.

Hayes has been CEO for two weeks. He was previously CFO. He made his remarks in a UTC investors event last night. The Hartford Courant has this report.

Hayes’ remarks were in response to a question from an analyst about research and development expenses. Here is his reply, from a transcript of the event:

That is exactly the challenge that we have. We have to take E&D down. We have been in this investment cycle since 2007 on the GTF. The CSeries is going to go into production next year. You’re going to have the NEO in production next year.

You still got some additional follow-on development obviously on the Embraer and the Mitsubishi and the Irkut. You’re also going to see another year or so the G500, 600 will go into production. The fact is [R]&D should come down.

Like all organizations, however, there’s an insatiable appetite to do more, right? What we need to do is figure out a way to do more with less because we cannot continue to afford to invest at these levels. We had $1.1 billion of [R]&D at Pratt, $800 million at the Aerospace Systems.

That’s not sustainable for us at that level. It’s got to come down closer to 4% or 5% of sales than what it is today. So we’re working on this. Not a surprise, this is one of Alain’s biggest challenges out there. But we’re not going to make some investments. I think, again, we’re not in the wide-body space, right? We’re not going to build a new engine in the wide-body space. Customers would love to take the GTF and scale it up. We’re not going to do that, right?

“Alain” is Alain M. Bellemare, Chief Executive Officer and President of UTC Propulsion & Aerospace Systems, who agreed that there will be no new large engine.

The GTF is on five platforms: the Airbus A320neo, E-Jet E2, Irkut MC-21, Mitsubishi MRJ and CSeries. Still, rival CFM has a lopsided domination of the engine market share due to its exclusivity on the Boeing 737 MAX and 50% share (so far) of the A320neo. It’s also the exclusive engine on the COMAC C919.

If Hayes is essentially ruling out growth of the GTF into the 40,000 lb sector that would be served by a 757/767 replacement, this leaves Rolls-Royce and CFM (GE) for this sector and above.

One aerospace analyst in attendance told us that before landing at UTC, Hayes worked for Harry Stonecipher, former CEO of McDonnell Douglas and Boeing, where shareholder value was the priority and research and development funding suffered.

44 Comments on “New UTC CEO throws cold water on PW GTF growth

  1. If Hayes operates like Harry Stonecipher did with McDonnell and Boeing, P&W is in for trouble. All Harry cared about was short term profits and that is why Boeing developed the 787 later in the cycle than they would have had Harry not been in charge at Boeing. McDonnel Dougles seemed to have a very short term focus on profit where Boeing and Rockwell (part that Boeing bought) tend to look more long term. I think most Boeing people couldn’t wait until Stonecipher left the company.

  2. Great, McBoeing’s reign of terror continues. This is what you get for promoting a CFO to CEO.

    why is it that senior management of technology product companies fundamentally fail to grok that R&D is the only reason they have products to sell. If you defund R&D you make your short term numbers look good but cripple your future prospects.

  3. It is indeed terrible to the observe the thinking that R&D is a cost instead of an investment in future revenues.

  4. When Louis Chênevert left the company the GTF lost its greatest supporter. For LC was at the helm of P&W when the decision was made about twenty years ago to launch this audacious technology in order to try to repair the damage done before by not supporting the development of a new engine to replace the JT8D.

    Chênevert is widely recognized as the driving force behind the GTF. My understanding is that he sold it to the head of UTC. And because of its eventual success it opened the door for Chênevert to become CEO of UTC in due time. His departure is certainly a great lost not only for the GTF, but for UTC as well, and for Pratt & Whitney in particular.

  5. United Technologies Co. that does not invest in NEW technology!!!!
    Without the huge investment in GTF, nothing to sell today. But maybe, the new CEO is more interested in his “package”, or pocket. No long term planning.

  6. Gentlemen: Keep in mind that it is not at all clear that installed, larger diameter geared fan engines can beat installed GE and RR direct drive TF’s on medium to long range airplanes cruising at .85 Mach. PW has got to be concerned about that.

    • upscaled GTF is a question of when. .. a reliable gearbox for the required powerlevels can be manufactured.
      No idea if the design advantages of tripple spools will persist.
      Blade tip mach numbers invariably will require an LP turbine diameter in the same ballpark order of the fan. Obviously one size smaller than the fan but dimensionally hard linked.

      • In a large GTF engine the LP Turbine would turn about four times the speed of the Fan. This very high speed commands a much smaller diameter. Also, in a GTF engine the fan turns much slower than a conventional engine and can therefore have a larger diameter.

        • Will there be a need for a Variable Area Fan Nozzle as thrust increases for A321neoLR and future twin aisle applications and will certificating a VAFN introduce integrated nacelle complications? (I posted this erlier, but evidently not in the correct thread.)

          • On the smaller variant of the GTF engine the VAFN was discarded after flight testing showed the benefits were too small. My understanding is that the larger the engine is the more interesting the VAFN becomes.

  7. Nobody has thought about the simplest solution of all…

    The fastest, easiest, most economical way to have GTF efficiency on a wide-body airplane is to put four of the existing engines under the wings…

    And think about the benefits of not worrying about ETOPS rules.

    Unthinkable, I know.

      • Nice image, Uwe. Do you know the story behind this picture? The filepath has “jamesbond” in it. Is it from a movie?

        … and on third thought, the largest current GTF ( 35,000 lbf ) could even be used in a nicely sized tri-jet…

      • Airbus has already flown an A340 with one GTF and three CFMs. So I can only assume that they have already figured out what it would be like with four GTF engines. I suppose the improved efficiencies would not compensate for the additional maintenance costs. Plus the development and certifications costs incurred by both manufacturers of the aircraft and the engine.

          • would it actually still be possible to build A340-300 frames ( obviously this is a clown for breakfast idea, but nonetheless 😉

          • @MHalbaub, You make me realize that I had completely forgotten that the testbed was actually an A340-600, not a “-300” as I was assuming in my post. And since the Airbus testbed was quieter than their own testbed we can assume that P&W must have benefitted from the data supplied by Airbus when they tested their GTF engine.

            @Uwe, I believe it would be relatively easy to restart production of the A340 because it always used the same production line as the A330, which has gone uninterrupted for about twenty years now. My understanding is that the decision to produce an A330 or an A340 can still be made in the final stages of assembly. For the wing is designed in such a way that only a minor reconfiguration is required to accept four engines instead of two.

          • @Normand Hamel
            The A330MRTT is build with an A340 wing. The outer engine is replaced by an refueling pod.

            All A340 built had a higher MTOW > 275 t than latest A330 @ 242 t. Therefore all A340 variants did have an additional center line main landing gear. A340-500 and -600 even have a center line four-wheel bogie.

            I can see another interesting A330/A340 mixture for the future:
            A330-400NEO / A330-1000 with A340-600 fuselage length.

            I can imagine a replacement chain. Lufthansa might replace their rather big fleet of 38 A340-300 (incl. SWISS) with GTF and US Air Force then could replace B-52’s old/ancient TF-33 with second hand CFM-56 by Lufthansa Technik. There are just 72 B-52 left so just a few other airlines may join.

          • How could there be an A330-400 “neo” if there is no basic A330-400? 😉 What would be the difference between an A330-400 and an A340-1000? Please tell us more about these two projects, I am intrigued. 🙂

          • The A330-400 would be a NEO because the engine is new to all A330.

            I made a mistake.
            According to length the A330 with a A340-600 fuselage length would rather be an A330-1100 than an A330-1000 with e.g. A340-500 fuselage length.

            “Difference between an A330-400 and an A340-1000?”
            Two engines.

          • I made a typo. I meant the difference between A330-400 and A330-1000 (or A330-1100 I should say).

  8. Previous comments were that the GTF would scale up just fine to twin aisle size.

    • On a larger GTF the gear ratio would actually be increased to make it even more efficient.

  9. Hmm so how did McD’s reduction in R&D work out. I guess UTC will be a Chinese owned company in the future. RR will perfect its own GTF tech on Widebody, and then guess what? They will scale it down and take over the single aisle from P&W

  10. This appears so incredibly short-sighted it’s not even funny.
    So they spend all that money on developing the GTF, laying the foundations, coming up with the basic design of how to make the approach work… you know, the really expensive part of development.
    And then, despite customer interest (“Customers would love to take the GTF and scale it up“), they decide to just leave it at that instead.
    All of this at a point where P&W – who were on the brink of exiting the commercial engine market altogether in the last decade – finally has a competitive, exciting product again that has some momentum going for it.

    why is it that senior management of technology product companies fundamentally fail to grok that R&D is the only reason they have products to sell. If you defund R&D you make your short term numbers look good but cripple your future prospects.

    Indeed. That’s not a problem exclusive to UTC, unfortunately. A lot of companies – mostly US-based, but it’s something that’s spreading, I’m afraid – are very aggressively sales-driven, while everything outside sales/pre-sales is only seen as a cost factor that needs to be reduced to bare minimum. Consequences of this are ignored, because they don’t impact the current or even next quarter, but some quarter in 2018.
    Classic example is the 787, but in my own industry I’ve seen R&D staff go idle because internally, risk aversion and cost reduction were primary drivers… while significant amounts were then spent on acquiring companies to gain all the know-how that was needed but hadn’t been developed internally.

    It is indeed terrible to the observe the thinking that R&D is a cost instead of an investment in future revenues.


    Additionally, in that statement, Hayes effectively told RR and GE/CFM they’d have free reign over the engine market for pretty much any plane – new development or derivative – that is going to happen in the next 15-odd years at least.

  11. Will increased thrust or fan diameter require the return of the Variable Area Fan Nozzle with all of its attendant integrated nacelle certification drama? Is this a potential limitation to the growth of the GTF powered version of the A320neoLR even before considering twin aisle applications?

    • Apologies!

      That should be ‘A321neoLR’ in my previous post’. Just asking a couple of questions, not trying to start a new rumor.

      • No danger.
        The rumor mill has been taken apart due to unscheduled maintenance 😉

    • My question was about the need for the VAFN at some stage in the development of the A321neoLR or later twin aisle applications.

      • VAFN making sense is like going for complex or simple wingtip devices.
        IMU the balance currently is mostly on this side of not having them. With fuelcost vaporising there is good chance of this being “more so” 😉
        In any case VAFN is not a detail that makes or breaks the advantages of a GTF engine.

        • It’s seems unlikely that Pratt/Airbus would chance the certification complications of the VAFN for the small amount of fuel savings associated with optimally blending the fan airflow. It seems more likely that it had to do with maintaining fan stall/surge margins. That must have been accomplished by clever fan duct shaping or overboard bleeds or other means. The question is how much growth is left in that method before fan diameter or shaft speed or other factors require a new approach.

          • “It seems more likely that it had to do with maintaining fan stall/surge margins.” That is what I always thought.

    • “Significant wing mods” for A321neoLR could be folding wing tips.
      Airbus already filed a patent according to this aircraft size and folding wing tips.

  12. How very interesting: I wonder if the new CEO is even aware that he got 300 million last week from the Canadian government as part of a ‘1 billion dollar R and D investment to develop a new family of jet engines’.

  13. “4% or 5% of sales”, of what?

    Of current products? With pricing that already
    reflects their own sunk R&D investments?

    Or, “4% or 5% of sales” of future products
    that current R&D investments
    will add to future catalogs?

    Eddie Maddox
    Avid lurker

  14. Larger GTF,NSA,and a380neo,whatever the executives say doesn’t necessarily come to pass.Airbus,Boeing&RollsRoyce have made similar statements (and actions)about reducing R&D & engineering jobs.You don’t get to decide,the competition does.It doesn’t really matter what this 4%,5%,or90%R&D budget is about,just as long as you price accordingly.This is where I worry,not enough profit,oil prices & interests go up as well as down.Having invested a fortune in R&D &another fortune trying to ramp up production to meet enormous backlogs this could end very Messy.There is no substitute for strategy.

    • That’s certainly a bummer for Richard Aboulafia and to the one analyst who said the market would “puke” if Airbus proceeded with the expense of an A380ne0 — and even to those in the industry and blogosphere — who thought that this, somehow, was a well “deserved” vindication, but who amusingly forgot to count their chickens before they hatch. Quite a few of these people, apparently, seems to have been utterly convinced that Airbus’s decision to move forward with the A380 in the year 2000, was not based on a sound business practice, but rather on pure “unadulterated arrogance and jealousy” of the 747. However, many Airbus-bashers were seemingly “happy” that the A380 was launched, because they apparently believed that it would cripple Airbus financially and dilute their resources — and now, finally, the “subsidised” Airbus would succumb to their own folly, the A380 would be history in just a few years, and Boeing could once again reign supreme — and now, none of this will apparently happen. So yes, it’s a major bummer, indeed!

      Richard Aboulafia, vice president at the Teal Group and longtime critic of the plane, said the new large twin-engine planes coming to the market will be the death of the A380.

      “I don’t think it lasts more than a few years into the next decade,” he said of the A380. “The quicker they let go, the quicker they can devote themselves to marketing efforts on other products.”

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