By Bjorn Fehrm
October 13, 2016, ©. Leeham Co: The airline engine industry is like a ticking bomb. Over the years, a business practice of selling the engines under manufacturing cost and planning to recover costs and make a profit on the aftermarket developed. This goes back decades.
The practice was fostered by fierce competition over the engine contracts for aircraft which offered alternative engines. The losses of the engine sales could be made up later by selling spare parts and services at high margins.
These "jam tomorrow" practices have several implications. The engine industry is now confronted with these and wonder how it could put itself in such a bind. How to handle these and what is the way back?