The airplane industry is currently undergoing a similar renaissance as the auto industry, as the two aerospace juggernauts — Boeing and Airbus — are vying to replace airlines’ aging fleets with their new, fuel-efficient, composite material-laden new aircraft. With billions on the table, it’s an all-out brawl for marketshare — but it’s also a fight among the suppliers providing these two companies with the needed materials.
Enter General Electric (NYSE:GE) — more specifically, GE’s joint venture, CFM International — and Pratt & Whitney (NYSE:UTX), two of the largest jet engine manufacturers in the world. According to Reuters, there’s $20 billion riding on the rivalry between the two in the form of engine contracts for new aircraft.
CFM has generally been the dominant provider for engines on narrow-body, single-aisle planes; Pratt, meanwhile, has a smaller presence in commercial aircraft but is a big player in the military contracting field.
But single-aisle planes is where the fight between the two companies will ultimately be fought out, as they account for “more than 60 percent of all commercial jets flying today and are expected to account for 70 percent of the 35,000 new commercial jets delivered over the next 20 years, a market worth nearly $2.3 trillion,” Reuters reports.
The market for jet engines is expected to fall at around $500 billion over the next 10 years, based on figures calculated by Teal Group. Initial sales of units are critical, since down the road, the cash streams continue by means of replacement parts and routine maintenance.
Two of the most prominent new jets — Boeing’s 737 MAX and the Airbus A320neo — have made great headway as far as aerodynamics are concerned, but it’s the engines they are equipped with that provide the bulk of their fuel savings. Both Pratt & Whitney and CFM have pledged at least 15 percent lower fuel use than current-generation engines, Reuters says.
“The most significant change on either of these jets is the engines,” Will Alibrandi, an aero turbine analyst for Forecast International, told Reuters.
CFM has the 737 MAX all sewn up, but the A320neo is still a battleground. Pratt’s new geared turbofan engines are meant to break CFM’s grip, and the company has already reached exclusive deals with smaller jet makers, including Bombardier and Embraer.
The Airbus A320neo is still anyone’s game. Of the 2,610 A320neo orders as of January, about 32 percent have selected CFM and 32 percent have selected Pratt, Airbus said, according to Reuters. Each engine costs roughly $11 million, so the value of the outstanding 1,880 engines is worth about $20 billion.
Reuters concluded its report by noting that the first Pratt-powered A320neo is due for delivery to customers in late 2015, while the LEAP (CFM)-powered A320neo is scheduled to start flying in the second quarter of 2016.
“It’s early, and they both have very compelling products,” said William Storey, Teal Group’s president, to the news service. “The jury is out on who will win.”