Boom times leads to looming cash flow shortfall across OEMs

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Introduction

Dec. 16, 2014: There have been record aircraft orders year after year, swelling the backlogs of Airbus and Boeing to seven years on some product lines, Bombardier’s CSeries is sold out through 2016, Embraer has a good backlog and the engine makers are swamped with new development programs.

So it is with some irony that several Original Equipment Manufacturers (OEMs) are warning of cash flow squeezes in the coming years.

Summary

  • With so many development programs in the works, the prospect of new airplane and engine programs are being trimmed.
  • Most airframe and engine OEMs under pressure.
  • The full impact of the pending cash flow squeeze hasn’t been appreciated by the markets yet.

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MTU investors day: views of its engine programs, future airplane timelines; separately, Embraer COO interview

GTF Milestones Nov 2014

Figure 1. Technical milestones have been passed on PW GTF programs for the applications on Bombardier, Airbus, Mitsubishi and Irkut airplanes and are approaching for Embraer. Source: MTU Investors Day. Click to enlarge.

Nov. 30, 2014: MTU Investors Day: MTU is a major participant in engine development and supplies, participating on the GEnx, GTF and GEnx program. It’s also a member of the joint venture in International Aero Engines and it’s a major player in the aftermarket Maintenance, Repair and Overhaul (MRO) sector, providing a serious competitive alternative to the aftermarket contracts offered by the engine OEMs. Its held an investors day conference Nov. 25. Highlights included:

  • Milestones have been passed on the Pratt & Whitney Geared Turbo Fanengine for the Bombardier CSeries, Airbus A320neo family, the Mitsubishi MRJ and Irkut MC-21; and are on schedule for the Embraer E-Jet E2.
  • The success of the GTF is requiring huge production commitments.
  • The large number of airplane/engine programs require a major ramp-up of production during the next few years.
  • The major investment in new engines is largely over for now, leading to the expectation of long-term revenue from MRO.

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