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Pratt’s $10 billion bet stumbles as buyers turn to GE jet engine

By RICHARD CLOUGH
Bloomberg

August 22. 2017 10:07PM


Pratt & Whitney’s $10 billion bet on a new jet engine is faltering after a troubled rollout, and buyers are rushing to a General Electric model instead.

The GE turbine has won 10 times as many orders this year to power a narrow-body Airbus plane on which the two suppliers compete head to head. Pratt has signed just one buyer in that span to supply its geared turbofan engine for the aircraft, according to data provided to Bloomberg by Flight Ascend Consultancy.

The figures paint a stark picture for Pratt and parent United Technologies Corp., which billed the so-called GTF as a technological breakthrough that was supposed to help reverse GE’s recent market dominance. Instead, weak demand for the engine is fueling doubts about the long-term payoff of Pratt’s most important product.

“It reflects a concern about the engine and where it’s going to go from its rather checkered start,” aviation consultant Robert Mann said. The GTF has “had its share of teething problems and those have yet to be sorted out. And even if sorted out, it’s delaying a lot of aircraft deliveries. It gives people who made the initial choice of the GTF pause.”

Both companies have operations in New Hampshire. GE Aviation makes parts for the turbine engine at its plant in Hooksett. Pratt & Whitney operates a logistics center operated by UPS in Londonderry.

“The LEAP is the most utilized new engine in the single-aisle airline world, which means the engine is powering Airbus A320neos that take off and land several times a day,” GE Aviation spokesman Rick Kennedy told the Union Leader in an email Tuesday. “And the engine is performing well. This is reflected in the industry’s broad acceptance of the engine. Hooksett is a huge part of this success.”

Pratt & Whitney opened the 600,000-square-foot logistics center in 2015 on Pettingell Road next to the Manchester-Boston Regional Airport. Startup problems at center, primarily an interruption in the flow of materials, held up the delivery of 55 jet engines, costing the company $500 million in sales, company executives told analysts that year. Production was up to normal production that fall.

Pratt & Whitney spent $25 million on the supply chain in New Hampshire in 2016, spokesman Matthew Bates said in an email to the Union Leader on Tuesday. Of the total $770 million spent on the engine program, $600 million was invested in the United States, he said.

Customers’ decisions about engines for the Airbus A320neo are crucial, because of the one-on-one matchup with GE and the plane’s importance for airlines. Along with the Boeing Co. 737, the single-aisle A320 family is a workhorse of the global jetliner fleet, far outnumbering the wide-bodies used on long-haul routes. The A320neo, Airbus’s latest version of the aircraft, will be flying for decades. That represents a long-term revenue stream for engine makers, which rely partly on service deals to recoup heavy initial investments.

While the geared turbofan has met performance specifications in areas such as fuel burn, it has also been beset by manufacturing hurdles, delivery delays and technical glitches. Airlines such as IndiGo, India’s largest carrier, have been forced to ground planes because of Pratt’s problems, while Airbus is struggling to meet its delivery commitments for the A320neos. Pratt is rolling out fixes this year for durability issues affecting a carbon seal and combustor.

A slowdown in orders has been “deliberate to some extent” as the company focuses on addressing the issues, United Technologies Chief Financial Officer Akhil Johri said in an interview last month. The Farmington, Conn.-based company invested $10 billion to develop the engine.

Pratt, which also supplies the GTF to planemakers other than Airbus, has more than 8,000 orders on the books, Chris Calio, president of commercial engines, said in a statement. He reaffirmed the goal of producing 350 to 400 of the new engines this year.

“We are confident in the long-term value of our GTF program,” he said. “We are aggressively addressing our entry-into-service issues and are focused on minimizing the operational impact on our customers as we ramp production.”

Mike Cote of the New Hampshire Union Leader contributed to this report.


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