Posts Tagged “SAFRAN”
Safran reported its 2017 results this week. Revenue of €16.5Bn beat the analyst consensus €16.3Bn. And operating profit at €2.5Bn beat analyst consensus of €2.4Bn.
On the company’s conference call, Safran said it now expects to deliver “at least” 1,100 LEAP engines this year, which is lower than a previous plan for 1,200. Safran’s CEO noted a delivery schedule impact from turbine disc quality. Safran said they expect to be on schedule by mid-2018 because they have not had any technical problems in the past six months.
The narrowbody rate increases proposed by the OEMs to 70 per month are a concern. Mr. Petitcolin said he would be more comfortable making a decision in 2019 rather than today because Safran isn’t sure the supply chain could sustain such a rate. This view is reflected by many people in the industry and was a point of discussion at the recent PNAA event.
The key item for us from this is the recognition that the newest engines, both the LEAP and GTF, are testing materials and technologies under tougher conditions than before. On top of the technical aspects, the demands from Airbus and Boeing are surely a source of intense pressure for the LEAP team. Both the GTF and the LEAP have faced a few hiccups. Because of the rivalry on the A320neo program, the LEAP team and the GTF team give no margin to the other on any potential deal. While LEAP has no competitor on the MAX program, it has to help Boeing on every MAX vs neo campaign, because not every neo will come with a LEAP.
Safran, as a member of the LEAP team, has a multi-sided challenge. Mr. Petitcolin’s low comfort level with a rate increase is well founded. These are not easy times even though the market has exploded with opportunity.
Dassault canceled the Falcon 5X program and terminated its contract with Safran over the much-delayed Silvercrest. This move was widely expected after the press conference at the recent NBAA at which a representative from SAFRAN, the engine maker, was “thrown under the bus” and asked to explain the delays and performance shortfalls of the engine. Instead, Dassault will begin a new program optimized around the PW800 engine of similar size.
“Considering the magnitude of the risks involved both on the technical and schedule aspects of the Silvercrest program, Dassault Aviation initiates the termination process of the Silvercrest contract leading to the end of the Falcon 5X program and plans to start negotiations with Safran.”
This is a major blow to the SNECMA unit of SAFRAN, which builds the Silvercrest engine. The straw that broke the camel’s back was the disclosure of additional performance issues with the high-pressure compressor just before the NBAA show that would have further delayed the program, initially scheduled for this year, from 2020 to 2022. Dassault’s CEO, Eric Trappier, indicated that apart from the engines, the initial flight test for the aircraft proved that the airframe design was sound.
The replacement for the 5X will be a new program with the same fuselage cross-section and a 5,500-mile range but is yet unnamed. It will be powered by the proven Pratt & Whitney Canada PW800 program, which shares its core design with other members of the Pratt & Whitney PurePower family, including the Geared Turbofan powering the A320neo, Bombardier CSeries, Embraer E2, Irkut MS-21, and Mitsubishi RJ. The PW800 also powers the Gulfstream 500/600 models, and the engines are certified. This should shorten the time frame for the development of the 5X replacement.
“We are honoured that Dassault Aviation has once again put its trust in P&WC for its new aircraft and we look forward to further develop our long-standing relationship with them on this new platform“, said Irene Makris, Vice-President, Sales & Marketing, Pratt & Whitney Canada. The advanced common core technology, employed in 15 different Purepower engine applications, has amassed more than 400,000 in service hours.
The Bottom Line
While new programs are often difficult and delays are more common, when delays become so long to tax the patience of customers and lose orders, actions need to be taken. SAFRAN was unable to deliver on its promises and has suffered the consequences. Dassault, facing additional uncertainty and delays, was unable to risk further customer losses because its supplier couldn’t deliver.
By choosing a proven engine, Dassault could rescue its program and deliver for its customers. Pratt & Whitney Canada will gain another application for an excellent engine. The question now is whether the Silvercrest engine will meet its 2019 EIS target for the Cessna Hemisphere, now its only application. A failure for that program could irreparably damage SAFRAN’s reputation and future in the business jet segment.
Even if we have seen this before many years ago from GE and P&W, it is great to see this technology make a comeback.
The concept is well known; open rotors have a much lower fuel burn, in part because of the tremendous bypass ratio. Here’s GE’s Unducted Fan engine video.
So what has SAFRAN done that’s different? Safran says that issues with noise and vibrations have been solved. Plus they are using new materials, for example, the blades are 3D woven. This makes them lighter and they are solid. This Open Rotor demonstrator was been developed under the European Clean Sky research program. SAFRAN claims the architecture of the Open Rotor will reduce fuel consumption and CO2 emissions by 30% over the CFM56.
SAFRAN has an open-air rig at Istres where the engine will be tested.
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.