With the launch of the A320neo, with both the Pratt & Whitney Geared Turbo Fan and CFM LEAP-X as options, the market will watch closely how the orders stack up. Here is an assessment of how the competition will proceed.
First, a little background:
First, a little background:
CFM International: The CFM56-7BE “Evolution” enters service this year, providing another 1% or slightly better fuel burn, which when combined with aerodynamic improvements, is to give the 737NG 2% or more lower fuel burn. With the launch of the A320neo, Boeing figures the 737-800 will be at a 3%-4% DOC disadvantage, and the company is already trying to develop further improvements to narrow or eliminate this gap. Boeing says most of this will have to come from further engine improvements.
The A320 with the CFM56-5 as yet doesn’t have similar improvements. The launch of the NEO may eliminate efforts to pursue this, though normal PIPs often may be retrofitted.
CFM is launched the LEAP-X with a 15%-16% lower fuel burn compared with the CFM56 for the COMAC C919. The second application is for the A320neo. CFM promises maintenance costs the same at the current CFM56. CFM also continues to research open rotor technology, with a target date of 2025, or nine years after promised EIS for the LEAP-X.
Pratt & Whitney: PW now has four airplanes for its Geared Turbo Fan: the Mitsubishi MRJ, the BBD CSeries, the Irkut MS-21 and the A320neo. Boeing likes the GTF technology but a 737 re-engine is restricted by an exclusive supplier contract to a CFM engine. However, a new airplane stands a good chance of having a GTF engine.
(Boeing is also interested in the GTF for the 777 class airplane. UTC doesn’t think an engine this size will be ready for 10 years. We think PW should figure out how to advance this timeline to offer a GTF option for the A350, and by extension, a 777 replacement or Enhancement. Of course, suggesting this and making it so are two very different animals.)
CFM and PW have very different views of which technology is better: the LEAP-X, which draws on GEnx technology and which is an evolution of the CFM56; or the GTF, which is a major departure from traditional jet engines through the use of the gear box. Skeptics are still concerned about the long-term maintenance costs and reliability of the GTF and of PW claims of 20% lower maintenance costs than today’s engines. PW has used gear boxes on turbo props and helicopter engines, so the fundamental technology isn’t new, just the application. We’re no engineer, but we talked to people who are and who have no connection to PW or CFM. The general consensus is that the LEAP-X might be a “safer” choice in the short-term given the roots in the CFM56, but that the higher operating temperatures and new materials technologies raise questions for longer term. The PW GTF has greater long-term potential for a full family of engines, we’re told. On balance, these neutral engineers believe the GTF is the better choice.
Airbus’ John Leahy told us last May the company was satisfied with PW claims on fuel burn and maintenance. The final launch of NEO with GTF clearly is an endorsement of this new application on a big turbine engine.
So with this, how does the competition for order shape up?
CFM probably has the upper hand in the form of a huge installed base of CFM56 engines. CFM is the sole supplier on the 737 and it powers around half of the A320s. Since some of the potential NEO customers now operate the 737 and A320 and some are A320-CFM operators, CFM has the ability to wheel-and-deal on existing contracts and maintenance deals, which gives CFM huge leverage to cut deals on the LEAP-X. PW’s leverage is greatly diminished to do the same because its A320 installed base is via its partnership in the joint venture of International Aero Engines, which makes the V2500 for the A320. One IAE partner is Rolls-Royce, and RR/PW are engaged in nasty patent infringement lawsuits over their respective engines. RR’s RB282/285 engine competes with PW’s GTF and Airbus rejected the RR engines for its NEO. There is absolutely no reason for RR to cooperate in any PW GTF venture that might include a desire to recut V2500 deals.
This is why PW appears headed into its own JV with other IAE partners for the GTF.
This is why PW appears headed into its own JV with other IAE partners for the GTF.
On purely commercial terms, CFM appears to have more flexibility than PW might and this is why the market will see strong LEAP-X sales. Assertions to the contrary, LEAP-X sales won’t be wholesale rejection of GTF technology.
Lessors will split their orders (except for GECAS, which by corporate policy will only order engines from sister GE Aviation) because customers choose between the CFM56 and the IAE V2500. In general, we think the A320/CFM airlines will likely prefer to stick with CFM and the LEAP-X and A320/IAE airlines will be more inclined toward the GTF.
Lessors will split their orders (except for GECAS, which by corporate policy will only order engines from sister GE Aviation) because customers choose between the CFM56 and the IAE V2500. In general, we think the A320/CFM airlines will likely prefer to stick with CFM and the LEAP-X and A320/IAE airlines will be more inclined toward the GTF.
The interesting play will be for those carriers who have both engine types, like the new United (A320/IAE, 737/CFM) and US Airways (A320s have both types, 737s have CFMs).
Overall, we expect solid orders for both engines as NEO selections are made this year.
Overall, we expect solid orders for both engines as NEO selections are made this year.
