Archive For The “United Technologies” Category

Aeroflot places $5bn order for 50 MC-21s

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Aeroflot ordered 50 MC-21s today from IRKUT.  Aeroflot will receive the first jet in the first quarter of 2020, with the full delivery to be completed by 2026.  Under the terms of the order, Rostec, the leasing subsidiary of Aviacapital-Service, will supply the 50 MC-21-300s. These aircraft are to be leased for a term of 12 years, with the option of two-year extensions on the lease no more than three times.

RT reports that the first 25 MC-21s delivered to Aeroflot will have Pratt & Whitney PW1400G engines.  At this stage, we do not know if the remaining aircraft will be equipped with the PD-14 engines, due to be certified later this year.

Aeroflot plans to use the MC-21s to replace its remaining Soviet-era Yakovlev Yak-42, Tupolev Tu-134, Tupolev Tu-154, and Tupolev Tu-204/214 aircraft.  Aeroflot configurations are to carry 169 passengers, with 16 business-class and 153 economy-class seats.  The airline will be using the aircraft on domestic and international routes.

From discussions with IRKUT, we expect to see the MC-21 to offer operating costs around 6-7% lower than its competitors.  Which is a very interesting and exciting data point, numbers which we are in the process of verifying.  Every OEM that has deployed the GTF has seen fuel burn lower than expected and a consequent increase in range.  We expect the same to happen with MC-21.

Vitaly Saveliev, Aeroflot CEO, said: “The signing of a firm order for 50 MC-21 aircraft is a landmark event not just for our two companies, but for our country. Russian manufacturers have created the first next-generation passenger aircraft, marking Russia’s return as a global leader in the aviation industry.  In today’s geopolitical context we believe it is essential that there is competitive Russian-made technology, and that it is of the highest quality and competitively priced.  For this reason, our partnership with Rostec, our largest partner and a shareholder of Aeroflot, is of critical importance.”

Sergey Chemezov, Rostec CEO, said: “This agreement underscores that Russia’s civil aviation industry is making a comeback and taking its place among leading global manufacturers. The MC-21 represents a genuine breakthrough achievement for the aviation industry.  The aircraft uses cutting-edge materials and the latest generation of systems, created by leading Russian companies. Elements of the MC-21 that Rostec produces include titanium and composite parts, onboard electronics, chassis components, other systems, and the ‘heart’ of the aircraft – the PD-14 engine.  We believe that this engine will be selected by Aeroflot as the primary power plant for the MC-21.”

This is a program to watch.  Hopefully, we will see the flight test aircraft Farnborough this year.

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Premium #344 – Does United Technologies acquisition of Rockwell Collins really make sense?

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Boeing’s Legal Battles will Soon be Overshadowed by Supply Chain Battles with the New UTC

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Boeing claimed a victory from the latest round of WTO rulings – Airbus, of course, differed in their interpretation.  Irrespective, the WTO rulings have no teeth and are largely a game for government officials, bureaucrats, and attorneys.  By the time any decision is taken, appealed, and re-appealed, the original topic is usually moot.  But it appears that the 777X wing factory, built with the largesse of the State of Washington, is safe, as everyone knew it would be.

Boeing also just doubled down on its position against Bombardier.  “In Canada, we face a situation with a competitor, an emerging competitor, that has, yes, long received government support – but that just went beyond the pale in 2016,” said Marc Allen, president of Boeing’s international division. Boeing apparently sees a potential new Airbus in Bombardier.  Apparently, only Boeing does not think this case is as ridiculous as nearly everyone else in the industry since they no longer make any aircraft that competes with the CS100 that Delta purchased.

Boeing has a number of fights to contend with. Their drained financial condition and inability to fund a new narrow-body aircraft to “one-up” Bombardier or Airbus mean that Boeing is likely to continue to go to Washington DC to seek economic protectionism and favors.   But in Washington, the threat to Boeing has also turned as American as apple pie.  Several US lawmakers are already skeptical of Boeing’s claim against Bombardier, particularly the impacts it will have on local congressional districts.  Boeing is no longer just tangling with Bombardier, Canada is joining the fight.  Should the US Department of Commerce decide to impose tariffs on Bombardier, there is a very good chance Boeing will lose its fighter deal with Canada. This is not a win-win situation for Boeing but could be very good news for another fighter OEM.

But then came the biggest news, and next potential battlefield – UTC’s deal to buy Rockwell Collins.  If Boeing fears Bombardier, the UTC deal should absolutely terrify Boeing.  The newer, bigger, UTC will be a manifest threat to Boeing.  Boeing issued a statement indicating: “We intend to take a hard look at the proposed combination of United Technologies and Rockwell Collins.  Until we receive more details, we are skeptical that it would be in the best interest of—or add value to—our customers and industry.”  On an order of magnitude impact, the WTO case just disappeared into a puff of smoke, and Bombardier became irrelevant.

This will undoubtedly turn into a fight that Boeing isn’t used to, a fight between US-based relative equals.  Boeing needs a number of parts and pieces from the new UTC.  No other aerospace company has the same heft, nor as broad a footprint, as the new UTC, except perhaps the new SAFRAN if Thales joins the group as rumored. From engines to avionics, interiors, landing gear, electrical systems and other offerings, UTC could nearly assemble a full aircraft from the parts it provides.  UTC now easily represents more than 60% of the content of the Boeing 787 and is unlikely to be pushed around by the Boeing when the next negotiations occur.

Boeing (and Airbus) are rightly nervous about the new UTC.  Both OEMs have been moving into the services business, much to the annoyance of the supply chain.  As Jim Cramer points out: “Boeing can play off everybody…. but If you own the landing gear, you own the brains, you own the inside, the seating, you can be a player that can say to Boeing ‘we’re not part of your partners’ plan.’ To be able to make you more money, you’re going to make us more money. So it changes the balance of power.”

UTC builds just about everything that goes on an aircraft, with the exception of the fuselage and wings.  But if it seeks to return to its origins in manufacturing commercial aircraft, all it would need is another acquisition – someone like Spirit for example,  with a majority of the aircraft being from the combined UTC – to fully compete with Boeing or Airbus.

The question that needs to be analyzed is where the innovations in aviation come from – the airframe OEMs or the supply chain.  With increasing technological complexity in both airframes and components, the answer is both.  Imagine a Boeing without the combination of products from UTC and its Goodrich and Rockwell Collins acquisitions.  We couldn’t pull together a list of alternative suppliers with the same capabilities and technologies, and a transition would be exceptionally difficult for Boeing.

Boeing recently changed the balance of power with the supply chain with its Partnering for Success program, which was an effective 10-15% price cut in favor of Boeing.  Their second effort resulted in additional marginal gains, and rumors of a PFS III are rampant in the supplier community, wondering when and how hard the next shoe will drop.

When PFS was introduced, UTC balked, and Boeing awarded the 777X landing gear to Heroux-Devtek, a Montréal-based manufacturer that, while capable, has never built a gear quite that large.  UTC heard the message loud and clear.

But instead of playing dead and acquiescing to Boeing’s wishes, it decided that the acquisition of Rockwell Collins, and growing the critical mass represented by UTC to become so large that it is unlikely that any aircraft manufacturer could dare attack their margins again.  They know it, and so does Boeing.  This is a deal that changes supply chain leverage from the OEMs favor towards the supplier, and equalizes the playing field.   Meanwhile, other suppliers are hoping that whatever favors UTC can gain will trickle down to keep the playing field level.

Can Boeing shut off UTC if its demands become too great?  Of course, it can, but it would be like cutting off its nose to spite its face – an ugly arrangement.  The balance of power has shifted, and there is a new 900-pound gorilla in the zoo pounding its chest.  It will be interesting to watch this class over the next few years.

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Premium #340 – NEO Deliveries Improving, but Continue to Fall Short of Plan

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Pratt & Whitney Lands GTF Order from IAG

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Pratt and Whitney and IAG, parent of British Airways, Iberia, Vueling and Aer Lingus, as signed a memorandum of understanding to power 47 of its 200 aircraft neo order with the PW1100G engine. This GTF order from IAG represents an additional 94 engines in backlog. No determination has been made on the other 153 aircraft, nor has IAG stated whether it intends to split the order with CFM International.

Despite initial issues with the GTF engine, this represents a vote of confidence from a major player in the industry, underscoring the strong performance of the engine in service.

Pratt & Whitney has also obtained 180 minute ETOPS certification for the  PW1100G-JM engine powering the A320neo from the European Aviation Safety Agency.  This follows the previous US FAA ETOPS certification in December 2016.

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Matthew Bromberg at Pratt & Whitney Media Day

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Matthew Bromberg, President of Pratt & Whitney Military Engines, provided an overview of his business unit at the Pratt & Whitney Media Day.  A video of his briefing follows:

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