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THE ABSENCE vapor trails in a clear sky is a clear sign that commercial aviation has been hit hard by covid-19. The bottom line for jet engine makers creating these fleeting streaks – fewer planes sold, fewer hours flown, and older planes retiring early when fleets are pruned – is a triple blow to an industry. which mainly benefits by keeping them in the air for years. after their sale.
The immediate impact for the company, dominated by a handful of manufacturers, was fully demonstrated on March 11. Rolls-Royce, a British company which competes with the aerospace division of the American General Electric (GIVE) to power long-haul jets, published dismal results for 2020. The blow to commercial aerospace, which was the source of half of its revenue in 2019, led to an operating loss of £ 2 billion ($ 2.8 billion). It only sold 264 large engines, up from 510 the year before.
Rolls-Royce is likely to recover more slowly, as it only manufactures engines for the hardest hit long-haul market. But Pratt & Whitney, a division of Raytheon, an aerospace and defense group, which rivals a joint venture between GIVE and Safran of France to manufacture engines for short-haul aircraft, also revealed a drop in revenues in 2020, of 20%. GIVE Aviation sales have fallen by a third to $ 22 billion and it is shedding 13,000 jobs, or a quarter of the total.
The crisis will have an impact for years to come. Engine manufacturers operate more like service companies than traditional manufacturers. They sell engines at cost (or even at a loss) to build up an “installed base”. For GIVE, the most powerful of the three, this represents 37,700 units. In the life of an engine of 20 years or more, the supply of spare parts and maintenance earns three to five times the selling price, estimates Bernstein, a broker. Production cuts by Airbus and Boeing, which manufacture the planes themselves, mean lower demand for engines. Reductions in airline capacity are making matters worse. With early retirements and around a third of the fleet in stock, carriers can salvage planes for expensive spare parts or even swap out entire engines due to a costly overhaul for those with fewer miles on the odometer.
A merger between GECAS, the huge aircraft rental unit and Irish AerCap, announced on March 10, could also disrupt engine manufacturers. In recent years, Airbus and Boeing have preferred to offer a single type of engine for new aircraft rather than a choice, which reduces their development costs. But that leaves less room for airlines to earn discounts from engine manufacturers by threatening to go with a rival. GECAS, with a fleet of more than 1000 aircraft, gave GIVE more power to insist that the two big planners have opted for a single supplier. Under a new owner, his strategy may change.
The uncertainty about the next generation of aircraft is another headache. Last year, Airbus said it was aiming for a net-zero emissions aircraft by 2035, possibly using hydrogen as fuel. Boeing is looking at biofuels. Neither company has firm plans yet. But such announcements worry Rolls-Royce, which has spent £ 500million on UltraFan, a more efficient engine but which uses existing technology. If planners are serious about going green, they might struggle to find clients. ■
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This article appeared in the Business section of the print edition under the headline “Lose the Push”
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