10/13/2011

Changing the engine landscape

That was really a big surprise for everyone, I guess! Not so much the fact, that PW bought  RR out of the IAE – that was considered by UTC for about two years. The real surprise is the Joint Venture to tackle the market of next generation single aisle aircraft – in particular, of course, the Airbus A30X and the Boeing NSA/B797.
At first glance, this is a technical win for Pratt & Whitney, as, at least in the near term, development will focus on the Geared Turbo Fan technology. The Open Rotor concept, advanced geared technology and “other advanced configurations” will also be pursued, but it seems that the GTF has won for now.

RR rationale 
But what is the reason for Rolls Royce to “give up” their own plans (at least for the nearer future) for next generation engines in that market? So far Rolls Royce planned with three options: Advance2, a two spool advanced turbo fan, Advance3, a three spool configuration and the open Rotor option as the answer for beyond 2025. Work on these concepts will continue, RR President  Mark King says, but to what extent is unclear. King also says that the formation of the joint venture should not be seen as a shift in strategy, but as a natural extension of their strategy and an elegant solution. Well, this is at least a discussable point of view…
The JV does not include the PW1217G and the PW1524G for the Mitsubishi MRJ and the Bombardier CSeries. An interesting question would be if Rolls Royce will compete with an own engine for the reengining of the EJets or the clean-sheet narrowbody CSeries competitor. P&W logically would offer versions of the PW1200 and PW1500 (maybe with added technology, depending on the EIS). Rolls Royce could become a risk sharing partner in these engines, but this seems unlikely.

A little bit in contrary to what RR officially said, they were also in the running to power the A320neo, but lost to CFM and P&W. Inside the IAE there were no agreement about the architecture of an offer for the A320neo, so both major IAE partners took their offer to Airbus. As RR had difficulties to scale the three spool concept down to the size of the neo thrust requirement (the most inner spool had such a small diameter that it could not withstand the torque).

The consequence was that Rolls Royce would have been out of the new narrowbody business once the last A320 with V2500 engines were delivered. Of course the aftermarket business for the V2500 would have been a long cash-in program for Rolls Royce, but without at least a participation in a running program it would have been very difficult to get back into the business once an A30X or a Boeing NSA where on the table. The fate of Pratt & Whitney after they lost their B737 business with the JT8D is a good example what Rolls Royce is about to avoid with the new JV and their “modest financial investment” in the PW1100G-JM.

PW rationale
So there is a good reason for RR to start the JV with P&W. But what about P&W? What is their rationale? Maybe it’s like that:
With a unbeatable customer base, CFM seems to be a set candidate for the Airbus A30X as well as the Boeing NSA. It is unlikely that one of the aircraft OEM’s will offer three engine options, so one of either P&W and RR would have lost. Maybe each of them would have gotten one application – but with both joining forces, this CFM antagonist can be seen as an almost sure second choice for both aircraft, without competing against each other and spending a lot of money to win against the other. So it is a win-win situation for both OEM. Not so much necessarily for the existing partners in the PW1100G-JM, JAEC and MTU. Their shares in the next generation engine program could be lower than it is in the PW1100G-JM now. On the other hand  they now have the possibility to enlarge their share in the V2500 and at least MTU already submitted a statement that they intend to do so.

IAE exit
Why does Rolls Royce exit the IAE consortium?
First, this is good news for P&W and the PW1100G-JM. Marketing the GTF engine becomes easier, as the owner of IAE and the partners in the PW110G-JM are the same now. Campaigns were airlines take both the classic version and the neo version of the A320 (like American Airlines and LAN) are now easier to handle. Also existing V2500 customers who order the A320neo can be given cross concessions easier (look what CFM/GECAS did for Frontier to get the A320neo business).
For Rolls Royce it means they get $1.5bn in cash immediately and a steady stream of cash flow in the next 15 years without any cash out (winning new campaigns usually means a cash out) and saving own IAE personnel, as they are “just” a supplier now).
Now - does Rolls Royce need cash? If one looks at the balance sheets of the last years: not immediately. But with the Trent1000 three years behind (cash-in) schedule, at least two of the A350 models delayed, further development costs for the A350-1000 TrentXWB engine, there could be a cash problem approaching Rolls Royce in the next couple of years, so the deal with P&W to exit the IAE could ease that.

7 comments:

  1. Christopher Dye aka CubJ3October 13, 2011 at 5:46 AM

    Do you mean that RR is terminating or delaying open rotor? If so, this may be bad for A's proposed A320 replacement in 2030 because the latest I have heard is that they will use open rotor.

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  2. I talked to a someone who joined the recent ISABE (Int. Society for Air Breathing Engines) conference. There have been engineers from all over the world and all companies there. The overall mood was very pessimistic for the OR (in fact it was called "dead"). The 10% fuel burn advantage over engines like those for the A320neo in large parts driven only by the lower speed you achieve with the OR. IF you fly the same speed with a "conventional" shrouded engine, the SFC benefit is not that large and installation and noise problems for the OR will persist.

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  3. OK, but when you talk to engineers the optimism is always short in supply. Ask people about laminarity, or composites, or other fancy things. There are always lots of challenges, and when your work consists of getting rid of one particular challenge, you sometimes can't see the forest (or nicer in German: "den Wald vor lauter Bäumen nicht sehen").
    I'm engineer in research myself, so I know what I am talkin about.

    The OR-problem seems to be the same as it was in the 1980ies: does it yield enough to justify the investment. And can airlines live with a M0.7 aircraft.

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  4. Schorsch,
    the speed problem is a problem not only the airlines but also the ATC has to live with...and one thing that people tend to overlook when stating the big benefit of the OR - if you fly a turbofan powered aircraft at M0.7, half of the often quoted 10% fuel burn benefit of the OR are gone.

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  5. The misleading magic of the concept of the "SFC" again I guess ...

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  7. Exactly - the operator (airline) is not interested in a certain SFC, but only in FUEL BURN!

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