Leeham News and Analysis
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Leeham News and Analysis
- Bjorn’s Corner: New engine development. Part 5. Turbofan design problems April 26, 2024
- Airbus 1Q2024 results: Airbus CEO: “A350 in-service experience drives positive reputation and orders” April 25, 2024
- A350-1000 or 777-9? Part 3 April 25, 2024
- Boeing CEO promises company is turning around…again April 24, 2024
- Solid start for stand-alone GE Aerospace despite cuts to LEAP output April 23, 2024
Focus on quality not slowing innovation, says GKN
By Tom Batchelor
April 18, 2024, © Leeham News: The crisis at Boeing forced the entire supply chain to re-evaluate manufacturing processes and double down on quality control – but that is not yet stifling innovation, according to Peter Dilnot, CEO of Melrose PLC, the parent company of aerostructures and engine components supplier GKN Aerospace.
GKN Aerospace has undergone a restructuring that is now largely complete. Source: GKN
Melrose is most of the way through a comprehensive restructuring, and the company has emerged as a pure-play aerospace business that has consolidated production sites and exited “non-favorable” contracts.
“We don’t want to be everywhere,” explained Dilnot during a briefing in London attended by LNA this week, which was intended to set the scene ahead of July’s Farnborough Airshow.
“One of the reasons I think aerospace is so much in vogue at the moment is that it is one of the very few markets where you’ve got structural growth. Aerospace is unique in that we’ve got these long order backlogs, structural growth and as a result a growing top line for industry participants.”
From 50 production facilities pre-COVID, GKN is now down to 33, and it will soon be at 31 sites. Its four global technology centers remain in the UK, where it is headquartered, the US, the Netherlands, and Sweden.
The positioning of Melrose as a leaner business after the spin-off of its automotive unit is producing positive results. The company posted revenue of £3.35bn ($4.29bn) for 2023, 17% growth over the previous year, and adjusted operating profit of £420m (up from £186m in 2022), in its full-year results last month. Operating margin reached 12.5%, up from 6.3%, and profits of £700m are being targeted by 2025.
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GKN Aerospace eyes further growth as earnings surge
By Tom Batchelor
Mar. 7, 2024, © Leeham News: Strengthening demand for airframe structures and engine components helped British supplier GKN Aerospace, a subsidiary of Melrose PLC, achieve higher profits and record margins in 2023.
GKN Aerospace has invested in its sustainable additive fabrication capability. Source: GKN
The company, whose supply contracts encompass all leading commercial narrowbody and widebody aircraft, as well as business jet and defence customers, announced full-year results on Thursday.
Melrose posted revenue of £3.35bn ($4.29bn), 17% growth over the previous year, and adjusted operating profit of £420m (up from £186m in 2022). Operating margin reached 12.5%, up from 6.3%.
The Birmingham, England-based group enjoyed growth within its engines division of 16%, and structures growth of 18%, largely from OEM deliveries ramping-up.
CEO Peter Dilnot told investors 2023 had been a “transformational” year with “profit more than doubling, ahead of expectations.”
He said order backlogs stretching nearly a decade across Airbus and Boeing lines, and a “significant gap” in time before next-generation platforms are likely to be introduced, had resulted in “something of a harvest period” for GKN.
Aerospace Metals lead ATI’s Q4 Earnings
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By Chris Sloan
Feb. 1, 2024, © Leeham News: 
Aerospace continued its upward trajectory share of Allegheny Technologies’ overall business, the metals marker reported in its fourth-quarter earnings call.
“We made significant progress toward our strategy of aerospace and defense leadership, reaching 63% of total sales from those markets in the fourth quarter, up 10 percentage points over last year,” said Robert S. Wetherbee, Board Chair and CEO – noting the company is closing in on its 65% target.
Overall, ATI’s Q4 sales of $1.06bn were up 5% year over year. Full-year 2023 sales increased by 9% to $4.17bn over 2022. “ATI delivered a strong finish to 2023, with the highest quarterly revenue of the year,” reported the chief executive.
ATI is managing challenges up and down the supply chain and within its own house, including materials input costs inflation, furnace maintenance and outages, inventory control, Pratt’s GTF troubles, and the continued saga of changes in MAX production rates and deliveries, which have only become cloudier. “Aerospace and defense is a complex industry, and we’re living in complicated times,” A seemingly unphased Wetherbee admits. Yet, he remains confident despite “demand signals aren’t always clear.” ATI doesn’t “cast or melt anything that doesn’t have a specific order, so it must be ready to meet demand as it comes. A relentless campaign of “debottlenecking everywhere” underpins the business model.
FY and Q4 2023 Earnings: Hexcel’s Sales and Margins Expectations Miss Draw The Ire of Analysts
By Chris Sloan
Jan. 25, 2024, © Leeham News – Advanced composite materials maker Hexcel received a drubbing from analysts for reduced narrowbody sales in the most recent quarter. “This is the second quarter in a row that Hexcel has missed consensus expectations, and we used the sell-off last quarter to upgrade the stock, thinking it was a seasonal aberration,” said a sharply worded note from Vertical Research Partners Robert Stallard. The vexed analyst added,” Clearly, we were wrong, as Hexcel has missed again on every operating metric in 4Q. Given its established reputation as a quality aerospace company enjoying the OEM ramp, this performance is a jarring contradiction versus expectations.”
By The Numbers
Overall, Hexcel’s Q4 2023 sales reached $457.5 million, up from $429.4 million in the fourth quarter of 2022. Hexcel’s largest corporate segment, commercial aerospace, increased 4.4%year-on-year to $267.5 million due to increasing demand and production rates for composite Airbus A350 and Boeing 787 airframes. This partially offset reduced Hexcel’s narrowbody sales for advanced materials for control surface, engines, and fuselage components for mainline workhorses A320s and 737s.
Vertical’s Stallard called this an 11% miss short of forecast. A Goldman Sachs First take piled on with, “4Q23 results are below consensus on revenue, margins, and EPS but ahead on free cash flow. Segment EBIT is 14% below consensus on revenue, which is 3% below.”
Hexcel achieved a full-year sales increase of 13.4% to $1,789 billion, up from $1,577 billion in 2022. Again, commercial aerospace, which constitutes 60% of corporate sales, lifted by 17.2% to $1,068 billion . The materials maker is guiding for mid-teens growth for FY 2024.
RTX FY and Q4 2023 Earnings: Pratt GTF Propulsion Prognosis Improves, Collins Enjoys Widebody Renaissance Tailwinds
By Chris Sloan
Jan. 23, 2024, (c) Leeham News: 
RTX, the parent company of Pratt & Whitney and Collins Aerospace, reported during its fourth-quarter earnings call slivers of good news in the GTF program, which enters its ninth year of service – mostly in the headlines for the wrong reasons of poor reliability. Despite beating performance guarantees, the beleaguered powerplant family has been besieged by durability, operational, and production shortcomings since it entered service with the inauguration of Airbus A320neo service by Lufthansa back in January 2016 and EIS with the Bombardier C Series operated by Swiss (now Airbus A220) in July 2016.
The overall money metrics picture is upbeat despite weakness in military-based segments, higher production costs, and the continued Odyssey of the Pratt Geared TurboFan platform.
Pratt & Whitney reported an ascendant fourth quarter 2023 sales trajectory of $6.4 billion – up 14 percent versus the prior year. Commercial OE drove a 20% increase, while aftermarket rose 18%. Pratt reported $23.6 billion in sales for the entire year – an increase of 25%. Pratt’s full-year operating profit climbed by 25% versus 2023 to $382 million. The propulsion producer attributed its full-year profit growth to higher commercial aftermarket and OE mix.
Analysts were cautiously optimistic about the results. “While it’s no doubt a positive that the GTF is on track, there is still quite some way to go before RTX can declare ‘mission accomplished.’ But if RTX can hit its targets on GTF and also gradually improve the performance at Raytheon, then the stock looks inexpensive at 14.5x 2025 P/E,” said Vertical Research Analyst Robert Stallard.
2024 Outlook: A Mixed Bag for Propulsion OEMs
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By Chris Sloan and Gordon Smith
January 11, 2033, © Leeham News: In 2023, a slew of problems plagued propulsion providers, with Pratt & Whitney’s GTF Engine and supply-chain
shortcomings grabbing the bulk of negative headlines and customer complaints. There were bright spots for all the big three with a slew of significant orders, emerging technologies, and critical management shifts.
As the calendar turns to 2024, all eyes will be on a return to fulfilling enormous backlogs, supporting OEM production rate increases, and returning GTF-propelled planes to the skies – while edging towards new technologies, both incremental and revolutionary.
Summary
- Pratt and its operators navigate massive AOGs (aircraft on ground) and unhappy customer claims for its GTF.
- The GTF Advantage closes in on EIS.
- GTF maladies open the door to a possible new platform, the long-mooted Airbus A220-500.
- The X66A Tranonic-Truss-Braced Wing offers promise for both Pratt’s GTF and GE’s future RISE engines.
- GEnx and GE-9X win blockbuster campaigns on the 787 and 777X as the 777X hurtles toward certification.
- CFM’s LEAP goes from strength to strength on the heels of MAX orders and 737-7 and 737-10 certification and entry-into-service.
- Fixing LEAP durability and delivery challenges.
- Rolls-Royce Trent troubles continue to draw the ire of customers.
- UltraFan testing moves forward in Roll’s quest to build a next-generation engine platform for the 2030s. Read more
SR Technics navigates surge in MRO demand, bridge to new-gen engines
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By Judson Rollins
November 13, 2023, © Leeham News: On the sidelines of last month’s Aviation Week MRO Europe conference, LNA sat down with Matthias Düllmann, CEO of engine MRO provider SR Technics.
Düllmann spoke at length about how the company is coping with ongoing supply chain issues while adding support for GTF and LEAP engines. He also discussed the recent AOG Technics undocumented parts scandal, staff retention, sustainability, and aviation’s public image.
Matthias Düllmann. Credit: SR Technics.
Summary
- Supply chain issues persist, even for legacy engine parts.
- Supplier approval processes offer protection from unscrupulous suppliers.
- Staff recruiting and retention are growing concerns.
- Sustainability is a key pillar to keep aviation attractive as an employer.