May 9, 2023, © Leeham News: Last week, I provided an overarching view of the business model the engine makers used for decades to sell their engines and services to the airlines and leasing companies. Today, we discuss this in more detail and move to other issues facing engine makers as well.
Aviation Week’s MRO Americas last month was the venue for the engine panel.
The panelists include two from the manufacturers, Becky Johnson, I’m the Director of Marketing for CFM commercial programs at GE Aerospace, and Sam Raby, who is Associate Director at Pratt & Whitney for aftermarket marketing and strategy. Two other panelists were from the MRO sector: Russ Shelton, president of GA Telesis Engine Services, and Sebastian Torhorst, Head of Sales for Energy Services for the Americas for Lufthansa Technik.
As LNA wrote last week, the business model relies on selling engines at a steep, steep discount—sometimes up to 80%, and in rare instances, the engine maker gave (as in free) engines to customers. In either case, the quid pro quo was to enter into long-term service contracts for parts and maintenance, repair and overhaul (MRO). Deeply discounted sales meant it could take 10-15 years for the engine makers to recover development costs.
By Scott Hamilton and Bjorn Fehrm
May 8, 2023, © Leeham News: India’s GoFirst Airlines filed for bankruptcy last week. The carrier pointed to around 29 of its 50 Pratt & Whitney Geared TurboFan-powered Airbus A320neos being grounded as the reason.
The aircraft have been grounded for months. Despite negotiations with PW and a favorable arbitration ruling, GoFirst says PW failed to provide replacement engines. As a result, GoFirst paid about $196m in lease rates for the grounded aircraft, without being able to fly them for revenue.
Lufthansa Group last week complained that a third of its Swiss Airbus A220 fleet, also powered by the GTF, are likewise grounded with technical issues. As LNA previously reported, Air Baltic, Egyptair and Air Senegal also have A220s grounded. Iraqi Airlines has some A220s that are grounded. And now there’s news that Embraer E195-E2s at KLM’s regional airline are also grounded due to GTF issues.
India’s Indigo Airlines also has a large number of A320neos grounded with GTF problems. About 11% of the nearly 3,000 A320neos in service are grounded or fly one a week, an Aviation Week analysis revealed.
PW’s reputation was already badly damaged before the GoFirst bankruptcy. However, an LNA analysis shows that forward orders for engines on the A320neo already were suffering.
May 2, 2023, © Leeham News: The business models for engine makers for decades have been simple: deeply, deeply discount the engines on the sale and make up the revenue and profits on the maintenance, overhaul, and repair (MRO) contracts.
It’s a model that’s served engine makers and customers alike well. Customers save millions of dollars on the upfront purchase of airplanes. The engine companies win market share.
There are downsides for the Original Equipment Manufacturers (OEMs), though. The discounts typically are steeper than those offered by Airbus and Boeing (and Embraer and ATR). LNA has seen deals with discounts as steep as 80% on the sales price. We’ve even seen one deal in which the OEM gave (as in free) the engines in exchange for the MRO contract.
The big downside to this is that it can take 10-12 years, or more, for the OEMs to recover their research and development and production ramp/learning curve costs. Then as the CFM 56 matured into perhaps the most reliable jet engine ever, with more than 25,000 hours on-wing, followed by the IAE V2500, MRO services contracts didn’t return the revenue and profits as quickly as before.
April 28, 2023, ©. Leeham News: This is a summary of the article New aircraft technologies. Part 10P. Engine choice. The article discusses the engine architecture choices that must be made when developing the next-generation airliners.
By Bryan Corliss
April 25, 2023, © Leeham News – Raytheon reported a 10% increase in first-quarter sales and a record backlog of $180 billion in orders, amid what Chairman and CEO Greg Hayes called “continued global airline travel and defense systems demand.”
Among its commercial aircraft segments, Collins Aerospace had first-quarter sales of nearly $5.6 billion, up 16%. That was driven by a 24% increase in commercial aftermarket sales and a 12% increase in commercial original equipment sales.
Collins’ operating profit was up 80% from the first quarter of 2022, Raytheon said.
Meanwhile, Pratt & Whitney had first-quarter sales of $5.2 billion, up 15%, with a 27% increase in original equipment orders and a 14% increase in commercial aftermarket sales.
Pratt& Whitney’s first quarter profit of $415 million was up 175% compared to the first quarter of 2022.
April 21, 2023, ©. Leeham News: This is a summary of the article New aircraft technologies. Part 9P. Engine core advances. The article discusses how developments for the next-generation airliner engine cores will increase the thermal efficiency of next-generation engines.
By Bjorn Fehrm
April 21, 2023, ©. Leeham News: This is a complementary article to Part 9. Engine core advances. It discusses in detail the next-generation propulsion system cores and what efficiency improvements to expect from different technological advancements.
By Vincent Valery
March 27, 2023, © Leeham News: In an article last year, LNA highlighted the divergence in the post-Covid-19 recovery among OEMs and select Tier 1 suppliers. Airbus had higher profits than before the Covid-19 pandemic, while all others lagged. Revenues were well below 2019 levels.
Commercial Aviation OEMs were severely impacted last year by supply chain disruptions. Airbus and Boeing ramped up production significantly slower than envisioned on all programs. The war in Ukraine and tighter financial conditions are complicating the situation further.
LNA collected financial information on the big three aircraft manufacturers and 10 major commercial aircraft suppliers to assess how quickly they recovered. There will also be an analysis of the numerous charges Airbus and Boeing have taken since 1999 through 2022.
By Bjorn Fehrm
Jan. 23, 2023, © Leeham News: Following Thursday’s article about an up-and-coming Airbus A220-500, we now look at the operational cost for the A220-500 and compare it with the A320neo it should replace.
We put the data we discussed in Thursday’s article in our Aircraft Performance and Cost model, fly the aircraft on a typical single-aisle mission and look at the results.
By Bryan Corliss
Jan. 24, 2023, © Leeham News – Aerospace suppliers GE and Raytheon both reported fourth-quarter sales surges, as the commercial aviation industry continued its recovery from the worst of the Covid pandemic.
Both companies also project strong sales growth in 2023, but warned investors that there are lingering supply chain issues and labor shortages that could hold them back.
“While we are broadly beginning to see our supply chain improve, it is not yet at the levels we need,” Raytheon CFO Chris Calio told stock analysts during the company’s fourth-quarter earnings call on Tuesday. “We are assuming a recovery as we move into the back half of the year.”