Leeham News and Analysis
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Leeham News and Analysis
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PW chief credited MRJ with ripple effect leading to CSeries, A320neo, 737 MAX and E-Jet E2
David Hess, former president of Pratt & Whitney, credits Mitsubishi with the ripple effect that led to new developments at Bombardier, Airbus, Boeing and Embraer. Photo via Google images.
Aug. 20, 2015, © Leeham Co.: Conventional wisdom credits Bombardier’s CSeries with being the disruptor that prompted Airbus to launch the A320neo, which in turn caused Boeing to launch the 737 MAX and Embraer to launch its E-Jet E2.
But an academic paper by John Slattery, chief commercial officer for Embraer, reveals that David Hess, the former president of Pratt & Whitney, credits Mitsubishi rather than Bombardier as the catalyst for the dramatic changes that followed.
In a paper entitled Resources & Rivalry, A Case Study of The Single-Aisle Commercial Jet Manufacturing Industry, Slattery interview present and former executives of the Big Four airframe manufactures, the former CEO of ILFC and officials of P&W.
The paper provides a chronicle of thinking leading to decisions to move ahead with new airplane projects, including re-engining the A320 and 737 rather than proceeding with new, clean-sheet designs.
The interviews debunk some of the conventional wisdom surrounding the variety of programs. We’ll periodically report the findings of Slattery’s paper, starting with PW and Mitsubishi.
Slattery interviewed Hess in October 2013, long after the launch of the Geared Turbo Fan that was intended to be PW’s big return to the single-aisle commercial jet engine market. PW had a virtual monopoly as the supplier of jet engines to Boeing and Douglas airplanes from the launch of the jet age. Rolls-Royce had a small presence on Boeing 707s and Douglas DC-8s and made big inroads on the Boeing 757. In an interview this writer did with PW years ago, it was with the 737 that PW
Mitsubishi MRJ90. Photo via Google images.
said it made the wrong bet, concluding that aircraft would be up-gauged to the 757 size. This led PW to forego a decision to re-engine the Boeing 737 from PW’s JT8D engine, PW told me. CFM won the exclusive deal to put the CFM56 on the 737. The decision led to PW’s downfall in the single-aisle sector.
Hess told Slattery that the decision to launch the GTF came before his tenure as CEO of PW, but the company “needed a strategy to try and get the engine inserted into the market place to start to rebuild their position….”
PW assessed the prospect of new airplane programs, including “refreshed” A320s and 737s and a belief that Embraer would have to update the E-Jet.
“There were a number of targets” for the GTF, but “it probably didn’t play out exactly as we had envisioned,” Hess said. “I think at the time the strategy was conducted, it was conventional wisdom or consensus…that Boeing and Airbus would probably soon launch a clean sheet aircraft….”
Instead, Hess said both were reluctant to do so because of program difficulties with the Boeing 787 and the Airbus A380.
John Slattery, chief commercial officer of Embraer, author of Resources & Rivalry.
“I think that those changes affected what we had envisioned to be the scenario and what it ultimately ended up to be. I think what started the whole ripple through the industry was really the [Mitsubishi] MRJ, which was the first program that we were able to get the geared turbo fan on. From that one opportunity we were successful in getting the GTF on the MRJ into the 70-90 passenger segments.”
Hess said this helped PW’s position with Bombardier. The MRJ launch gave PW “credibility” with Bombardier, “and possibly the launch of the MRJ provided some incentive or motivation for Bombardier to do something to refresh their fleet of regional jets. It helped us create an opportunity with Bombardier on the CSeries.”
Hess told Slattery that Airbus didn’t want to lose market share to CSeries, which triggered the launch of the A320neo. This prompted Boeing to launch the MAX and the “whole sequence of launches” prompted Embraer to proceed with the E-Jet E2, which has the GTF as the sole-source engine power.
John Slattery: “Hess [s]aid this helped PW’s position with Bombardier. The MRJ launch gave PW “credibility” with Bombardier, “and possibly the launch of the MRJ provided some incentive or motivation for Bombardier to do something to refresh their fleet of regional jets. It helped us create an opportunity with Bombardier on the CSeries.”
That is not the way I view this story and I believe Hess is off-base. I always knew that Mitsubishi was the first to select the GTF and was surprised when people started to say that the C Series was the first (it was the first though to fly with the GTF). There is a more mundane explanation for this situation.
First we have to understand that only a few months separate the re-launch of the C Series and the launch of the MRJ. The C Series had already suffered a miscarriage in 2004. Bombardier were desperate to find an engine that would make the C Series more attractive, and the GTF was exactly what they were looking for. The fact that one was launched earlier than the other probably reflects a corporate internal decision process more than anything else. The C Series was a much more involved and risky project than the MRJ. The latter quickly abandoned its initial composite wing design and was proceeding at a somewhat reduced pace compared to the C Series. The MRJ is also a much smaller aircraft. When we add all this to the fact that Bombardier was already a well established player as the third largest civilian aircraft manufacturer, and with a much more ambitious project, we can easily understand how the C Series became falsely recognized as the GTF’s first customer. Anyway, we quickly realized that the C Series would hit the market much earlier than the MRJ even though it was launched after. And what did not help Mitsubishi is that they were making a comeback from zero (no pun intended) and many observers did not give them much of a chance to succeed. And of course since the C Series had the potential to take on the the A320 and 737 attracted all the attention. But I do not believe the Mitsubishi decision had any influence whatsoever on Bombardier’s own decision. Mitsubishi or not the C Series was going to be offered with the GTF as soon as the Board would re-approve it. For the C Series was begging for the GTF more than the other way around. And without the GTF the C Series was going nowhere. Just ask Gary Scott.
Lets see, the MRJ is trying to compete in an already well supplied market (Bombardier and Embraer with both older and newer offerings, ie highly comeptivie).
Mitsubishi has not supplied an aircraft nor supported one in 30 years or longer?
Practically Embraer can upgrade aircraft far less expensively and sell said aircraft for less than an MRJ.
The MRJ is too big and heavy to fit under current scope clauses which have not gone away.
Ergo, which is more risky? I think MRJ, C series is shooting for a unserved slot as well as the bottom end of a known slot that has been abandoned in realty by B and A.
Both are risky, MRJ by some magnitude more so.
You have a point. But what I had in mind when I said the C Series was more risky is that Bombardier would have to face Airbus and Boeing, which is considerably more dangerous than for Mitsubishi to have to face Embraer and Bombardier. And Mitsubishi had little to loose compared to Bombardier. One reason is the relative scale of the projects; and the other is the fact that Mitsubishi were starting from scratch. In other words they had nothing to loose because they had nothing to start with. Except of course a big pile of money. The C Series may have a better chance to succeed but that doesn’t make it any less risky. For the level of risk is not inversely proportional to the probability of success. In this case the level of risk is determined by what’s at stake and the arena in which it is disputed; i.e., dominance in the ultra competitive and highly lucrative narrowbody market.
Normand:
Huh?
Have you considered running for office? Democratic side is less crowded.
I think in the end what it means is survival of the company.
Bombardier has more riding on that in terms of money and survival, Mitsubishi not so much.
“Bombardier has more riding on that in terms of money and survival, Mitsubishi not so much.”
That is exactly what I meant.
“Have you considered running for office?”
I will leave that to Scott.
Hamilton for President!
If the Cseries program was abandoned it would not destroy BBD. It would take it a decade to recover, but it would survive. Mitsu is a MASSIVE company. Even bigger then Honda, and they can afford for the MRJ to become a hugely protracted affair like the Hondajet and it would not be a problem for Mitsu. Cseries and Global have the potential to turn BBD into a 35B company. There is a LOT riding on it, but not everything.
I don’t think BBD has ambitions to dominate the single aisle market, it wants to be a player, but you can bet that if BBD starts to get into 25-30/month production rates, Boeing and Airbus will resort to clean sheet designs that will put pressure on BBD. BBD needs partners like KAI to keep moving up.
“What’s at stake and the arena in which it is disputed; i.e., dominance in the ultra competitive and highly lucrative narrowbody market.”
When I wrote that sentence I had Boeing and Airbus in mind, not Bombardier. What I was trying to say is that BBD has to face Boeing and Airbus whereas Mitsubishi only has to face Bombardier and Embraer. BBD is this junior guy playing for the first time in a major league where the players are bigger, faster and more experienced. And they can hit very hard! That is why at Farnborough in 2008 John Leahy said that Bombardier were very brave…
The MRJ may well have been the tiny pebble that started the ripple effect but it never was – nor will it ever be – a threat to the A320 and 737 (or C Series for that matter).
The C Series WAS and IS a threat to the Airbus/Boeing duopoly in this market segment. When Bombardier announced that they were going with the P&W GTF that decision was a REAL game changer and the rest is history.
Airbus has been waiting / testing the Pratt GTF for more then a decade before they selected it. Originally for the A340 and from 1998 for the A320NEO.
http://articles.courant.com/1998-09-08/news/9809080048_1_pratt-whitney-chief-executive-noel-forgeard-airbus-industrie
PW is the reason the GTF becomes a success. It has been more of a push than pull development.
Where is the link to the original paper? Leeham needs to take a clue from The Economist, which always provides links to the papers and studies it reports on.
We only have the hard copy.
Heres a paper ( masters thesis MIT) from 2011 for you to chew on.
Game Theory Analysis of Aircraft Manufacturer Innovation Strategies in the Face of Increasing Airline Fuel Costs
http://dspace.mit.edu/bitstream/handle/1721.1/62856/Morrison-ICAT-2011-4.pdf?sequence=1.
Another factor to take into consideration in Bombardier’s decision is the fact that the main driving force behind the GTF engine was Louis Chênevert, who was at the time President of Pratt & Whitney. I think it is fair to say that without him there might not be a GTF today. For he was the one who finally convinced the UTC board to go ahead. And one of his closest collaborator and most ardent GTF supporter at the time was Alain Bellemare, who was President of Pratt & Whitney Canada. It is interesting to note that Bellemare is now CEO of Bombardier. Beaudoin, Bellemare and Chênevert all knew each other very well because they all come from the same place, are all more or less the same age, and all worked in aerospace. This is part of the human factor which I think played a key role in Bombardier’s early involvement with the GTF. But most importantly, the GTF and C Series were meant for each other, and the two together is what we call a marriage in heaven.
Isn’t this by far the more risky marriage per your previous post?
Not exactly my definition of made in heaven.
Certainly the perfect set of conditions to get the offering more than competitive. P&W is the clear winner here as they leveraged that into the guaranteed successfully A320NEO
When I said marriage in heaven I meant on technical grounds. In other words a marriage of love, not a social marriage of convenience. 😉
Ah the Montreal Mafia. Trouble was PWC didnt handle the GTF and the P&W large engine business knew it was a program that was essential to their future.
Meanwhile BBD had other aviation centers in Toronto and Witchta and a (whole slew of unrelated businesses) and lost their focus and tried to do too much with the money they had and that has cost them dearly.
Yes for sure, they took on 3 major jet programs and screwed one up totally, and suffered major delays on 2. Not a great track record in development. But the C looks like a peach of an aeroplane.
Great Article. Thanks for the info. Does anyone know where I can find a Boeing Change form?
Yeah. At Boeing in Seattle.
Has John Leahy ever credited Boeing with anything?
Why would Embraer credit their primary competition with being an innovator?
Yeah right, and Airbus reacted with the NEO because of competitive pressure from a 90 seat regional jet? How did this guy get to be an exec with P&W? Is his daddy on the board? Good lord.