Colliding interests will force engine makers into a new business model
What’s good for Airbus and Boeing isn’t necessarily good for General Electric, Rolls-Royce and Pratt & Whitney.
The second in a two-part series on the impact of the COVID-19 pandemic on the business of building commercial aircraft engines.
You can only blame so much on a pandemic. Like a pre-existing condition that can make a case of COVID-19 deadly versus asymptomatic, the business model governing engine makers and their relationship to aircraft manufacturers made them exceptionally vulnerable. The collapse of global commercial aviation merely revealed the fundamental weakness baked into the relationship.
Related: Coronavirus shred the engine maker business model
The hope, strategically, was that the aircraft industry moved at a pace slow enough where the collision between Airbus, Boeing and General Electric, Rolls-Royce and Pratt & Whitney could be averted. Yet the pandemic has accelerated the reality that the incentives that govern both sides of that coin are inherently unsustainable. The mismatch in the relationship comes at a time when they need to be getting closer, not farther apart.
Today airplane manufacturers are scrambling to keep afloat, maintain a semblance of liquidity and promote deliveries of new aircraft — principally for replacement of older less-efficient aircraft. For engine makers, this solves only half of the equation with new production and exacerbates a problem with the other, far more important, half.
Because of the very nature of the model — an existential reliance on the aftermarket parts and services for engines that fly for decades built on the back of selling new engines at a loss — some of the leading proposals to kickstart an industrial recovery may end up kneecapping the engine manufacturers.
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