Bernstein Research on April 13 issued a research note that is one of the best side-by-side comparisons we’ve seen about the Pratt & Whitney P1000G Geared Turbo Fan and the CFM International LEAP-X.
Bernstein’s aerospace team, led by Douglas Harned, laid out pros and cons of both engines in a succinct, bullet-pointed format. As an independent third party with no axe to grind and no favorites to play, we think his report is a must-read by everyone who can get their hands on it.
We’re not able to post or link the report 17 page report due to Bernstein policy—the main number is 212-756-4400 and see if Bernstein will provide a copy (unlikely if you’re not already a client). But here are some of the salient points:
- On the A320neo, we believe that Pratt & Whitney’s Geared Turbofan (GTF or PW1100G) is advantaged over CFM’s (GE, Safran) LEAP-X if it can execute well with a clearer path to further improvements and the fact that its technology appears more mature at this stage. Should Pratt succeed with the GTF, there is the potential for the geared engine architecture to play a major role in multiple future engines over the long term. The GTF was selected by Airbus as lead engine and has won all three customer selections to date (ILFC, IndiGo, Lufthansa). But, we see the coming decisions by all-CFM Virgin America and AirAsia as more important indicators. (Bold face is Bernstein’s.)
- Pratt’s GTF. The most controversial aspect of this engine is the gear. But, although the gear was a concern earlier in the development process, we are not seeing it as a major issue for potential customers. The GTF should have the benefit of an upgrade path by going to higher gear ratios, as well as higher temperatures and pressures using the GTF architecture. We do not believe that the same upgrade path is present on the LEAP-X. The most important issue we see is Pratt & Whitney’s ability to deliver on conventional aspects of the engine, as many airlines have memories of the troubled PW6000 program. The GTF is also farther along than the LEAP-X, with the first C-Series engine now out of test and planning for Q3 flight testing.
- CFM’s LEAP-X. The approach to performance improvement for CFM has been to raise the bypass ratio by moving to higher temperatures and pressures. This move is supported by a switch to new, more advanced materials. A key application of new materials will be the use of ceramic matrix composite (CMC) blades in turbines for the LEAP-X. It appears that these blades are now to be ready to go into service in 2020 (we understand that this slipped from 2018). This timing is four years after the engine should be service. Our concern is that greater cooling requirements will reduce fuel burn performance and higher temperatures will reduce blade life on the early engines. The LEAP-X is also at an earlier development stage than the GTF with design freeze planned at the end of 2011 and “core 3” to be completed in mid-2012. The flying test bed is scheduled for Q3 2013.
- We expect Pratt & Whitney’s Geared Turbofan to be the preferred engine on the A320neo if the company executes well.
- We see CFM positioning LEAP-X as the lower risk alternative. CFM must convince customers that reliability will be better than the GTF even through the LEAP-X has more stages and, hence, more moving parts.
There is much more to the Note, of course, but these excerpts are probably at the limit of the fair use doctrine.
With respect to the last point, Bernstein seeing CFM positioning itself as lower risk and greater reliability vs. the GTF, recent CFM advertising (which is always very good, by the way) indeed is emphasizing this. We’ve also talked to potential customers who have noted that CFM’s messaging to them is about risk and reliability instead of emphasis on fuel burn vs. the GTF. We’ve previously noted that we are hearing from people who’ve seen the numbers of both engines that the GTF has a 2%-4% advantage over the LEAP-X.
Another interesting aspect to the Bernstein note: Contrary to Airbus assertions and hopes for a price premium, Bernstein writes:
“We do not expect Airbus or the engine OEMs to get price premiums for their next generation products. Instead we expect the prices of existing equipment to drop. We understand that deals being discussed now on engines have pricing that his not very different from pricing on current generation engines.”
We know from talking with an insider that Boeing is concerned that NEO won’t be sold for price premiums.
If there is no premium for the NEO or the new engines, what is driving the business case? Does it also follow that Airbus’ assertion that they won’t allow the NEO to cannibalize the existing A320 family backlog is also not completely accurate? And…if there’s no premiums on the new products, why even mess with something that has the potential to adversely impact the residual value, despite vigorous denials by the OEM and some lessors?
Well, the business case seems to be to sell some 6000 copies of the A320-NEO; or about 10 times as many as the original business case for the A320 back in the eighties. The price premium has nothing, or little to do with the “price premium”. I’d guess that post Paris Airbus will have sold more NEOs than what is required to pay for the required R&D and certification of the NEO programme.
http://www.aviationweek.com/aw/blogs/commercial_aviation/ThingsWithWings/index.jsp?plckBlogPage=BlogViewPost&plckController=Blog&plckElementId=blogDest&plckPostId=Blog%3A7a78f54e-b3dd-4fa6-ae6e-dff2ffd7bdbbPost%3Aa9f27b47-3c6f-400e-abce-0076c8f780cf&plckScript=blogScript
The whole idea of a premium for the NEO is to ensure, among other things, that current orders for the A320 can’t just be switched to NEOs. Airbus wants, of course, to have certainty and predictability in their A320 and A320-NEO production planning, and will thus not want too many A320 production slots to be deferred in favour of the A320-NEOs. This is really not a big deal. Most manufacturers demand a price premium for their most recent products so as to ensure that their current portfolio don’t collapse “overnight”, so to speak. When older products have been phased out, the price for the newer ones will start to drop.
Although the NEO is viewed by many as something that might severely curtail future sales going to newcomers such as the C-Series, the C919 etc, and that the NEO is a smart move for a minimum level of investment on a platform that was born to be re-engined; IMHO this is more about the long term strategic positioning of Airbus in the competitive landscape vs. Boeing. The history of the LCA business has shown time and time again, that the second mover has often been in a profitable long term strategic position. Boeing’s management and board should be perfectly aware of the high probability of Airbus launching a superior aircraft half a decade later; that is if Boeing moves first with an all new NB with EIS in 2020.
By launching the (born to be re-engined A320-) NEO, Airbus is piling pressure on Boeing at a time that BCA is also in need to do something about a competitive response to the A350-1000. Therefore, it’s perfectly understandable that Boeing indeed is concerned that the NEO post 2017/2018 will not be sold with a price premium, and that Airbus will, in all likelihood, increase their NB market share even if the Boeing chooses to re-engine the 737NG in the near to mid term with a sub-optimised and seemingly inferior Leap-X engine.