Engine makers slightly more positive about supply chain recovery

UPDATE April 26 - Engine makers Pratt & Whitney and GE Aerospace are seeing progress made within the supply chain, with parts production and inventory improving in the first quarter. But overall, the supply chain remains challenging from the performance and cost perspective. The two parent companies, Raytheon Technologies, and General Electric, presented their Q1 results on April 25. Engine makers slightly more positive about supply chain recovery. GE Aerospace’s Larry Culp said: “In the supply chain, we saw areas of improvement with material inputs and LEAP shipments improving sequentially, thanks largely to our lean efforts. However, output continued to be impacted by material availability and supplier challenges, particularly in defense, where revenues declined by two percent.” “While we experienced stabilization in some areas, such as electronics, we continue to experience challenges in castings, forgings, raw materials, and machining,” said Raytheon Chief Operating Officer Chris Calio. Structural castings were up by thirty percent in Q1 over last year, so that is promising. There are still some labor constraints, but P&W is positive that it will be able to meet Airbus’ production rates toward the end of the year. P&W is positive that engine deliveries will increase 30-35 percent year over year, although this will result in some $250 million in negative engine margin headwinds that are compensated by strong aftermarket and shop visit demand, said Calio. In 2023, P&W delivered 712 large engine deliveries. Both GE Aerospace and Raytheon continue to support suppliers on a day-to-day basis. “Predictability, stability, and improved delivery remain key for us going forward,” said Larry Culp. Raytheon said it supports 400 suppliers with a focus on high-impact locations to make sure that issues are identified in time and solved. On the cost side, inflation remains to be high to which Raytheon is responding with some 2.000 cost reduction programs. It also raised prices aggressively over the past eighteen months, said Raytheon Chairman Greg Hayes. GTF upgrades Chris Calio shared some updates on P&W’s Geared Turbofan (GTF) program, which has come under scrutiny and much criticism in the past year over its low on-wing time and continued need for repairs as parts wear more quickly than expected when the program was launched. Calio more or less repeated what P&W said in January: “We continue to introduce upgrades and improvements to increase reliability and durability. With respect to reliability, we have met the target of dispatch reliability, which is now at mature engine levels. In respect to durability, we have improved time on wing since the program's inception but we are not where we and our customers expect. This is putting stress on the operations of the fleet.” Some eighty percent of customers are covered by long-term service contracts. Asked if P&W is able to make money out of them as they were agreed in times of very different prices, Greg Hayes said he isn’t worried about that. “The one bright spot is that most of those contracts are eight to ten years in length. If you think about the long-term outlook, I am very optimistic that margins will improve because we have a chance to relook at some of those contracts. Obviously, there is a challenge today with margins because time on wing is not what we expected it to be. Dispatch reliability is great at 99.98 percent, but time on wing is the challenge, but we have got some solutions to that.” Chris Calio said: “We are running as fast as we can to insert upgrades into the fleet during shop visits. This is only about fifty percent of the fleet. We continue to develop upgrades to the GTF configuration to improve durability. We are also expanding our MRO capacity (with JetBlue and Delta), working to reduce shop visit turnaround times and service availability. But it will take some time to realize these benefits, we will continue to invest in time on wing improvements as we were able to do over the course of the V2500 program.” He added that development of the GTF Advantage continues to plan, “which will incorporate all of our technical learnings since the entry into service of the GTF.” Greg Hayes admitted that the GTF is having a hard time in harsh environments: “We probably didn’t do enough of testing in those harsh environments, especially in places like India. That’s where we have seen lower life on the combustor and turbine blades just because of the harsh conditions. The Advantage will have a lot more testing and all learnings from the existing fleet. It should be significantly more durable in terms of time on wing.” LEAP GE Aerospace is on the same trajectory to get the LEAP to the same levels of reliability as the CFM56, but this will take a few more years. In some areas, the engine is doing better than the CFM56, as GE already said recently during its Investor's Conference. Part of that comes from expanding the MRO capacity, just as P&W is doing with the GTF. “As we improve performance and on-time wing, that will accrue to the margin profile,” said Larry Culp. Safran President and CEO Olivier Andries said during the Safran Q1 earnings call on April 26 that remedies for the LEAP issues will take a few years: "It is clear that we are having improvement steps over the two to three years to come. We are working on the high-pressure turbine blades especially. The time on wing will gradually increase over the years with the new engines that we are going to deliver. You can imagine that all those engines need to be removed for what we call quick-term maintenance, we will retrofit the blades with a new type of blades. This will be a big plan for the next two to three years." Q1 results In Q1, Pratt & Whitney produced $5.230 billion, up fifteen percent on an Adjusted basis year on year. Commercial OE sales were up 27 percent, with more large and small engine deliveries. P&W delivered 167 large engines (including the GTF) versus 119 in Q1 last year, but against 199 in Q4. Pratt & Whitney Canada delivered 499 engines versus 455 in Q1 last year but down from 542 in Q4. After-sales were up by fourteen percent thanks to an increased volume favorable mix. The $434 million Adjusted operating profit was up $126 million year on year thanks to higher commercial aftermarket and military sales. For 2023, Pratt is expected to grow sales to the low or mid-teens and grow the operating profit to $200-$275 million versus 2022. GE Aerospace received orders for 519 engines in Q1 compared to 553 last year. GE’s and Safran’s joint venture CFM got 281 LEAP orders compared to 442 in Q1 of 2022. Commercial engine sales in Q1 were 481 versus 343 last year, of which 366 were LEAPS versus 239. This includes spare engines, with CEO Larry Culp saying that spares will be forward-loaded in the year and stabilize over the coming months. Aerospace generated $6.981 billion in revenues compared to $5.603 billion in 2022. Military sales were down.

US Flight Planner - US DoT On-Time Data	Airbus vs Boeing - Official OEM Data
US Airline Schedule Performance - US DoT Data	Daily OEM Production & Deliveries -

Subscribe To Our Newsletter

Related News

Subscribe To Our Newsletter

Related News

Falcon 10X First Flight Breaks High-End Duopoly

KKR’s $1.4 Billion Bet Confirms PE’s Bet

A SAF plant opens in South Africa