The wide body market will see the introduction of new models at a rate not seen since this sector came into fruition in the 1970s. The 787 will have two new models, the A350 three new models, and the 777X two new models all entering service or production by 2020, joining the 787-8 and 747-8 that have recently entered service. While advanced materials are an important element of these new programs, it is new engines drive this sector.
Pratt & Whitney has made a significant recovery in the narrow body market, and will be on five of the seven new narrow-body programs. But in the wide-body market, application of the GTF is less likely.
The following chart illustrates the engine programs driving these new technology programs and the thrust levels for each application:
Where is the hot spot in the wide body engine market?
The following chart shows the engine market size by thrust range. As one can clearly see, the sweet spot for engines is in the 70-75K thrust range, accounting for 43% of the engine market illustrated. This bracket covers the A330, 787-9 and A380. The next biggest segment is off to the right for the 777 (110-115K+) market at 18%. The third biggest segment is that of the 787-8 at 16%.
Another way to look at the market is using a three dimension chart as shown below, where the X-axis is programs, the Y-axis is number of aircraft and the size of the balloon shows number of engines.
The 777-300ER demonstrates its market success by having 717 aircraft in service and on order, accounting for 17% of the market even though it represents 15% of the engines. Airbus’ A330 represents 26% of the market and 22% of the engines. The A380 on the other hand represents 7% of the market but 13% of the engines.
That explains the market. How will competition shake out? Where should the engine manufacturers concentrate their R&D?
GE and Rolls-Royce have engines in all the right segments. Now is the time to aggressively compete and harvest the R&D investments made in new programs. But Pratt & Whitney needs more aircraft platforms to work on. Currently it is on the A330 and has a stake in the A380. Clearly Pratt is looking for an application of the GTF in the wide-body market.
- 787 is already taken by GE and RR
- A350 is Rolls-Royce exclusive for -1000 and only Rolls-Royce engines are available on the other models
- 777-X is GE exclusive
So where is there opportunity for Pratt? The A380, A350-800 and -900, and A330 re-engining appear to be the only options. But is there a sufficient market to warrant the cost of an all new engine development? Because the GTF is scalable, development costs can be lower for a new wide-body engine family – but without a strong application, it will be difficult to break into the market.
The A380 market appears moribund, as airlines are moving away from four engine aircraft, including the 747-8 and A380, both under-performing market forecasts and expectations. Rolls-Royce and Airbus promise A340 operators a “four for the price of two” maintenance deal on engines to maintain the viability of the A340-500 and -600 models, which have plummeted in value recently. From our perspective, investing in a new engine for the A380 would be unlikely to provide a positive return unless the engine has other applications.
A re-engined A330, with 15% better fuel economy than the current PW4000 would be an attractive airplane, and yield costs within 4.5% of the similarly sized 787-9 in operating economics, but at a lower capital cost. This could be an intriguing option for airlines that do not require the longer range of the 787-9. But a 4.5% differential in operating economics will require a significant capital cost differential by the equivalent of the present value of the differential expense over the projected life of the aircraft. It is hard to maintain engine margins when an airframe manufacturer is forced to cut price, so from an ROI perspective, that program isn’t particularly attractive.
The differential against newer technology engines for the A380 and A350 would be smaller than against the older generation PW4000, and we estimate 10% over the GP7200 and 4-5% over the Rolls-Royce Trent XWB. Replacement of the GP7200 with a new GTF could be viable, if the market for the aircraft was stronger, but adding an engine choice to only a portion of the A350 family, which is trending towards the larger -1000 model in orders, appears commercially risky.
With three major new programs already decided with respect to engine manufacturers, it appears that the Pratt GTF has too few applications available in the short-term, and may need to wait until the next generation of wide-bodies to gain a profitable application, which is unlikely to occur for another decade.