Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- China bans Boeing, US parts imports in tariff war April 15, 2025
- Boeing welcomes COMAC competition as Asia-Pacific demand soars April 15, 2025
- How good is the C929? April 14, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 17. April 11, 2025
- Uncertainty plagues airline, aerospace, lessor industries over tariffs April 10, 2025
GTF engine issues knock MTU off course
By Tom Batchelor
February 29, 2024, © Leeham News: Problems affecting Pratt & Whitney’s Geared Turbofan (GTF) weighed on MTU Aero Engines last year but the German manufacturer still reported a solid performance in its earnings announcement on Thursday.
CEO Lars Wagner acknowledged 2023 had been a “year of contrasts,” with the “enormous financial burden” of the GTF fleet management plan balanced against higher revenues in its OEM and MRO businesses.
Analysts said the results were broadly in line with expectations with the GTF fleet inspection program remaining on track.
MTU revealed last year that it would take an estimated €1bn knock from disruption caused by powder metal issues with partner Pratt & Whitney’s PW1100G-JM GTF. That figure was confirmed by MTU today.
Breaking records
In 2023, MTU generated reported revenue of €5.4bn, reported EBIT of €-161m and a reported net loss of €97m.
With the GTF program removed as a one-time special item, MTU generated adjusted revenue of €6.3bn, an increase of 19% compared with 2022, while EBIT increased by 25% from €655m to €818m and adjusted net income was 25% higher at €594m (2022: €476m).
The group order book increased by 10% to €24.4bn – equivalent to more than three years’ capacity.
“MTU’s reported earnings figures were negative for the first time in its 90-year history,” Wagner said.
“On the other hand, our adjusted results once again demonstrated MTU’s operational strength and fully met our ambitious targets. In other words, without the special item outlined above, MTU could announce record results for 2023.”
Glass half full
Stripping away the impact of the GTF, MTU grew revenue in both the OEM business and the MRO business last year.
In the OEM business, adjusted revenue increased by 21% to €2.2bn (2022: €1.8bn). The highest revenue growth came from MTU’s commercial engine business, where adjusted revenue climbed 25% from €1.3bn to €1.7bn.
Revenue from commercial maintenance also rose, by 17% to €4.2bn (2022: €3.6bn). GTF maintenance accounted for about 35% of revenue.
The main revenue drivers in this business were the PW1100G-JM engine for the A320neo and the V2500, which is used in the classic A320.
Glass half empty
Still, MTU is being buffeted by a number of factors, not least the GTF.
RTX Corp, the parent company of Pratt & Whitney, previously said the GTF inspection program would result in 600 to 700 additional shop visits for its PW1100G-JM engines with an average of 350 aircraft on ground (AOG) between 2024 and 2026.
Wagner told analysts that he saw a “reduction of the peak that was previously anticipated to be 600-650”, but that the challenge was “still ongoing to find significant shop visit capacity to induct all these engines”.
He said proactive fleet management by airline customers was helping to alleviate the issue but that MTU was now focussed on ramping up MRO capacity and at the same time reducing shop turnaround times.
“It is our ambition to drive down the turnaround time,” Wagner said. “That comes down to capacity and new engineering methods and new methods of disassembling and assembling. We have ideas for both of them, we are in discussion with our partner Pratt & Whitney.”
The industry-wide issue of supply chain constraints is also being felt.
“That was the reason that our spare parts performance in 2023 was in the lower part of our guidance range,” he said.
GTF Advantage
The launch of Pratt & Whitney’s GTF Advantage, which promises improved fuel burn and durability versus the existing PW1100G engine, is progressing – albeit delayed from its original entry-into-service date of January 2024.
Within the Advantage program, MTU is involved in optimising the high-pressure compressor and high-speed low-pressure turbine.
Speaking during the investor call, Wagner said: “GTF Advantage is our next program; so far we are in line towards certification and entry into service in the beginning of next year.
“This program should incorporate … the lessons learned from what we have seen with the GTF program. It should be a super performing engine starting next year.”
2024 outlook
MTU is clear that the GTF fleet management plan will impact free cash flow in 2024 and for several years to come. But geared turbofan woes aside, guidance for the coming 12 months was upbeat.
MTU is targeting revenue of between €7.3 and €7.5 billion in 2024, with all business areas contributing to the growth, and an operating profit of €1 billion by 2025.
“MTU remains a high-performing company and our prospects are very positive. We want to continue our consistent growth in 2024,” said Wagner.
The PW1100G was initially designed to be a geared fan coupled to a lower pressure/temp core engine for reliability/cost of ownership. Requirement creep to stay ahead of CFMI LEAP -1A engines made it running at higher pressures and hotter. P&W should have learned from the PW2000 that a narrowbody engine should not be running that hot but a trade off with core engine flow is needed to get the life on wing as desired. Still you need to be competetive in fuel burn, so you need to pour in high tech solutions without breaking the bank or aim for highest thrust and sacrifice SFC. Now hopefully is the Advantage build standard the solution for all its A320neo customers problems.
I think its more accurate to say P&W changed the GTF to achieve the re-engine moves by both Airbus and Boeing (and did not get Boeing business)
They also took out a variable nozzle as I recall (vanes maybe).
One P&W Advantage (pun) is that they can heat the engine up as they did not go exotic materials to the degree CFM did to get the performance out of the LEAP.
The GTF can get hotter over time, the LEAP is at the limits.
Its another arrow in the GTF quiver as it has inherent advantages already SFC wise, and in theory less costly maint.
The P&W 800 is a spin off the core and seems to be doing well.
As for the P&W 2000, corporate memory is a perishable thing and the P&W 4000 had its issues as well.
It should be kept in context, P&W has a lot of military jet engine experience and the F-35 engine has been pushed an incredible amount pretty successfully.
In a vote of confidence, IslandAir has selected the GTF for its latest order of A320 Series NEO.
The obviously will get the GTA-A and all the improvements rolled into that.
They took a Maint Contract on those as well.
GTF Advantage: If the sfc gain over the Leap is confirmed, the vast majority of XLR operators will opt for this engine. Airbus, which should have the results of the flight tests, is silent on the subject. Icelandair opts recently for PW/MTU.