Archive For The “UTC Aerospace Systems” Category

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 #223 – The Consolidating Supply Chain

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The biggest commercial aerospace industry story revolves around Airbus and Boeing and how they compete vigorously for every order. But that is only the tip of the iceberg. Customers (airlines & lessors) only take an OEM offer seriously when they are confident in the vendor and product.  What drives this confidence?

On numerous occasions we have seen Airbus COO John Leahy show off a chart much like the one you see here. He is justifiably proud of the chart. Airbus has been the steadier of the two large OEMs in production terms, with steady and measured growth.

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How Innovative is the Irkut MS-21?

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Many in the west have pooh-poohed Russian aviation,  despite the Sukhoi Superjet being a credible competitor, doing well with Mexico’s Interjet and now in service with Dublin-based CityJet.  We suggest people do not under-estimate the MS-21, which may turn out to be more sophisticated than either the A320neo or 737MAX.

The MS-21, which stands for Magistrany Samelot 21 veka, translated to airliner of the 21st century, when written in the Cyrillic alphabet.  With so many in the west calling it MC rather than MS, Irkut has given up the fight and now calls it the MC-21 after so many incorrectly named the aircraft, being ignorant of the Russian transliteration.  Irrespective of what you call it, this aircraft truly is a 21st century design, using both innovative materials and technologies.

The engine choices for the aircraft include the Pratt & Whitney geared turbofan, the same engine utilized on the A320neo.  But with a lighter and more modern airframe, the MS-21 will be more fuel efficient than its counterpart from Toulouse.  For the domestic market, Aviadvigatel PD-14 engines, which are a less efficient ,but also less costly, can be used.  Direct operating costs for the P&W powered version should be about 20% lower than similarly sized A320ceo and 737-800 models, and about 8-10% better than A320neo and 737MAX8.

A number of western suppliers are on the aircraft, supplying the latest technologies.  United Technologies Aerospace Systems has major contracts for subsystems and controls.  Avionics are supplied by Rockwell Collins and its Russian partner Avionika.  Interior components will be coordinated by C&D Zodiac and other Zodiac units.  The interior designs, from very large overhead bins to seats, look just as modern as those from western countries.

Technical innovations on this aircraft are significant, including what one western supplier observed as the most-efficient wing in its class.  It is a composite wing for lower weight made by Sukhoi.  The wing is mounted to a wing-box that will be the first out of autoclave composite structure of its kind in aviation.

The wing box, integrated stringers and skins, and spars, are fabricated by AeroComposit (a division of UAC) and layup is done with automated tape laying equipment from MTorres (Spain) and Coriolis (France).  The stringers and skins are co-molded in one piece, with the spars and wing box fabricated separately.  The co-molding reduces part count, streamlines assembly, and ultimately reduces final part cost.  The innovation in the wing box is a major leap forward, as it would have been easier to utilize a conventional autoclave for the MS-21.

The Bottom Line

Many of the innovations behind the MS-21 design remain unknown.  Combined with the economic sanctions against Russia by the US and EU, the MS-21 remains under the radar, and like the Superjet, slow to gain western acceptance.  Currently, Cairo Aviation in Egypt, with an order for six aircraft and Malaysia’s Crecom Burj Resources, with an order for 50, are the only non-Russian customers.  But if the aircraft turns out to be as good as expected, it should help rebuild the credibility of the Russian aircraft industry.

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A Discussion with Pratt & Whitney Canada President John Saabas

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On Tuesday we had an opportunity to speak with John Saabas, President of Pratt & Whitney Canada.  While our discussion was wide ranging, we focused on four major thrusts for the company — the ground breaking PW800, the forthcoming advanced turboprop for regional aircraft, future plans for the venerable PT6, and the APU market.

The PW800 engine is a new technology engine for large business jets.  It combined the core of the new geared turbofan engine with a smaller fan to accommodate the dimensions and fuselage mounting of engines on business jet aircraft.  The engine has been selected for the Gulfstream 500 and 600, and has been well received by the marketplace.

Currently P&WC has 17% of the heavy jet (5000+ miles range) market. With Gulfstream deliveries, this going to jump to 50%.  Things are looking good for other programs, as well, and the engine is currently under consideration by Cessna for their new Hemisphere aircraft. In addition to new aircraft, an opportunity will exist to re-engine older Challenger 600, 601, and 603 series aircraft, adding more power and speed for those aircraft while reducing fuel burn.  The core of the engine is the same one used on the CSeries, and with the MRJ core forthcoming, P&WC could readily have another engine available in the 10,000 to 12,000 pounds thrust category. With the neo core they could get up to 20,000 pounds thrust for even larger applications, although there’s nothing on the horizon for that quite yet. But the heavy jet segment is worth about 270 aircraft per year.  Then add 2-3% growth, things look good for P&WC in that market.  Despite China having seen a slowdown, and also Brazil, with the PW800 John believes the company has a good future, indicating “it’s a good place for us to play.”

Another possibility for the PW800 is the Dassault Falcon 5X, which has been delayed two years because of Snecma’s difficulties with the Silvercrest engine. While Dassault has indicated they intend to stay with the Silvercrest, the next six months will determine what happens.  We are keeping very close to them in that regard.  P&WC has a strong reputation and long history with Dassault – almost 18 years.  The Silvercrest was also the original selection for the Cessna Hemisphere, but that process has now been re-opened.

We asked about the potential for a re-engining of the Bombardier CRJ.  John indicated that P&WC has not put any thought into this, but could easily use a lower thrust PW800.  A PW812 would be feasible. “We would not be worried at all about the “hammering” an engine like this would take with many short cycles per day because we’d use the MRJ core, and that core is designed for the same type of flight schedules.” Any stress would be in the core and the core can handle that.  But they haven’t been asked to look at that.

Advanced Turboprop
P&WC recently announced a new Advanced Turboprop to replace the PW100 series for the regional market, with a substantial upgrade in performance.  We asked John about this engine and applications.  He indicated that P&WC still believes there is a need for a 100-seat turboprop.  There is need for a new airframe and cabin, with features like active noise balancing and propeller balancing.  We’ve completed the design for the compressor for our NGRT – our compressor is mapped out. We are looking at a range between 3,500 to 6,000 SHP.  The new engine will offer better SFC, lower noise and lower operating costs than the PW150.

Our belief is that someone will need to invest in a true 100-seat turboprop. We would offer 35% better fuel efficiency on a typical 500NM mission than a jet. The challenge is to make the cabin comfort similar to that of a jet to ensure passenger preference.

We asked John about longer-term threats, particularly the Siemens/Airbus joint venture to develop a hybrid aircraft engine.  John indicated that P&WC is aware of the Siemens/Airbus hybrid development program, but that it’s not clear what will result from that program – how much of the engine will be electric?  We could see a co-existence for the next twenty years of various technologies. We have the experience with the market and supporting operators in this market. It’s not only about SFC – it’s also about product support.  Today we can offer additional support in terms of data, pro-active maintenance systems that improve engine time on wing.  We have continuously improved our maintenance costs to enable our customers to stay competitive.

We are also developing our engine propeller electric control systems (EPECS) which has patents pending.  We should demonstrate this technology within a year from now. It’s a full FADEC with propeller controls and health monitoring built in.  We need a new aircraft program to drive this innovation.

John began by indicating that the PT6 is not an engine – but a family of engines ranging from 500 shp to 1900 shp.  Although it dates back to 1963, the power to weight has improved 50%, SFC improved 20%, with pressure ratios now up to 14:1.  The PT6 is a family that has evolved a lot.  But it is more than an engine. It’s a brand. It a modular design that has allowed P&WC to mix and match – up to 120 variants with 89 applications and 45 of those applications over the last 52 years still in production.

The PT6 is a vast thing that keeps evolving.  We have 400m hours of flying time! We have a total shutdown of 3 per million flight hours.  Nobody is going to replace the PT6 tomorrow.  And we are currently investing in what the next generation PT6 will be.   John indicated that P&WC will be able to match our new competition, and combine it with their strong customer base, broad service and support network, continue legendary reliability and that P&WC will aggressively defend their market leadership in the PT6 segment.

P&WC has taken responsibility for the APU business at UTC, and that segment is growing quite nicely.  John indicated that P&WC will pursue additional programs and continue to grow this segment, in which they can leverage the advantages of the PW toolkit to stay ahead of their competitors.

The Bottom Line
Overall, John seems quite comfortable in the growth trajectory of P&WC, and their positioning in its major market segments.  P&W president Bob Le Duc described P&WC as the “jewel in the crown”, so that comfort is supported. Technologically, P&WC is leveraging the GTF core and other elements from the P&W and UTC tool kits, and P&WC is committed to continuing its leadership in the turboprop and business jets segments while gaining market share in APUs.

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UTAS – Diverse and Growing Stronger

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UTC Aerospace Systems was created four years ago when UTC acquired Goodrich Aerospace and merged it with Hamilton Sundstrand.  As Goodrich and Hamilton had also grown with acquisitions, the company has an extensive portfolio of technologies, enabling it to provide 26 different systems on the Boeing 787.  The range and reach at UTC Aerospace Systems is now quite remarkable.

UTAS has major subsystems involvement on a number of new-technology programs, including the Airbus A320neo, A330neo, A350 and A380, the Boeing 787, 737 MAX and 777X, Bombardier’s CSeries, Embraer’s E2 jets, COMAC’s C919, Irkut’s MC-21, and MITAC’s MRJ.  This is in addition to its strong history with legacy programs.

UTAS is also strongly involved with military, helicopter, business jets, regional aircraft, and UAV programs, with applications across multiple platforms and subsystem integration roles on many.  As a result, it is the largest aviation supplier, but a factor of nearly two over its nearest competitor.  The company now has revenues of $14.3 billion annually and is forecast to grow at 5-6% per year for the foreseeable future.

UTAS was built through the acquisition of industry leading companies by its predecessor companies.  Hamilton Standard acquired Sundstrand.  Goodrich Aerospace, known for wheels and brakes, acquired Rosemount (pitot tubes) and Rohr (engine nacelles).  Many of these companies trace their histories back to the inventors of their category of components that moved aviation forward.

OEMs like to talk about how every few seconds one of their aircraft take to the sky.  For UTAS a component or part takes to the air every second. At any given moment, more than 2.5 million parts made by UTAS are in flight.   With 90 product lines sold to 1,500 customers and installed on 70,000 aircraft, UTAS is clearly the gigantic supplier that few people have heard of, because most of its products aren’t high visibility items.  But behind the scenes, UTAS products are used to power, start, ventilate, control, monitor, protect, land, and stop aircraft.

What’s the next step for a company with 90 separate products?   The trends in commercial aircraft are towards more integrated, more electronic, and more intelligent systems.  UTAS is at the forefront of each of those trends.

The Boeing 787 is an example of a more electric aircraft.  UTAS developed the electrical system for this aircraft, and through the elimination of pneumatic bleed air from the engines, not only improves fuel efficiency but also saves weight throughout the aircraft.  Today, for the next generation of commercial aircraft, UTAS is working on on-board wireless communications between components to save even more weight, and communicate added intelligence about how its components are performing and to alert operators of potential maintenance issues beforehand to avoid costly cancellations.  Today, individual components communicate their status.  In the future, the trend will be towards more integrated systems, with sub-systems talking with each other to optimize performance.  With experience in each of these areas, UTAS is ideally positioned as a systems integrator, a role it demonstrated with the Boeing 787.

In that process, UTAS has been able to double its revenue on high-tech versus low-tech aircraft through new technologies.  Whether from sensors and actuators for fly-by-wire components to new electronics, as new program enter the market and replace older models, UTAS content will continue to grow at faster than the industry growth rate in the commercial sector.  But the more exciting element will be the next generation of aircraft, in which capabilities from multiple subsystems can communicate and be optimized on a total aircraft, rather than subsystems level.  For that task, a company with deep experience in many of those subsystems has a natural advantage.  And UTAS has 26 such sub-systems on the Boeing 787.

UTAS benefits from the boom in aerospace across their wide footprint.  With about 26,000 commercial aircraft now flying, business is good. But with 46,000 aircraft expected to be flying in 2036, business is going to get a lot better.  UTAS is currently on all the key platforms to one degree or another.  UTAS is twice the size of any other aerospace systems vendor.  Yet is not a brand that comes to mind – because almost everything it makes lives under the skin.

The company is remarkably active in technology. UTAS employs 8,000 engineers that have earned the company more than 900 patents in 2015 (2+ per day), while investing $12.5 billion in R&D over the last 5 years.  The company has seen its content on commercial aircraft  rise from about 2% for legacy models to 4% in the new high-tech commercial models, a major potential source of growth.

The US aerospace business generated $300 billion in economic activity in 2015 according to the Aerospace Industries Association, which is equivalent to 1.8% of the nation’s GDP or 10% of the national manufacturing output.  UTAS generated $14.2Bn in sales which puts the group at about 4.7% of the $300Bn in the overall aerospace sector.

It is reasonable to assume that aerospace is going to grow faster than the rest of the economy for the next several years.  Demand for new aircraft is high and should remain strong.  These new aircraft will deploy the products and devices UTAS delivers, and provide an aftermarket for years afterwards.   UTAS is well positioned to ride the current aerospace wave.

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UTC Aerospace – Interview with Tim White, President, Electronic Systems

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In this video, we interview Tim White, President of Electric Systems at  UTC Aerospace Systems to discuss the trend towards increasing electronics on aircraft and the benefits that technology change means to customers, and UTAS.


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