Engines

Comments are subject to the site's terms of use and do not necessarily reflect the opinion or approval of the publisher, editorial staff or employees. Users whose comments violate the terms of use may have their comments removed or all of their content blocked from viewing by other users without notification. The publisher does not gurantee information accuracy and disclaims all liability.

AviationRegister E-Xpert Witness Journal

Home
About AvReg
Headline News

Pratt & Whitney Canada (P&WC) is cutting its global workforce by approximately 410 due to a decline in customer demand and weakness in the global aerospace market with no signs of a recovery in 2010. (October 2009)

December 2009

Sukhoi (Russia) is rescheduling deliveries of the Superjet 100 indefinitely because of engine development problems.

Superjet 100 was scheduled for flight test in 2007, then in 2008 and now has no date certain for flight-testing.

Superjet 100 is the first civilian aircraft launched in Russia after the collapse of the Soviet Union.

Superjet 100 is priced in the $28M range and has an estimated 150 firm orders and 80 options.

Superjet 100 is designed to compete with Embraer E-Jets and the Bombardier CRJ and is priced in the $28M range.

Superjet 100: Aeroflot is a major buyer and was due to receive the first production units in the first half of 2010.

Sukhoi is in talks with existing buyers about new timeframes for the delivery of the aircraft already ordered.

Superjet 100 is a new, fly-by-wire regional jet (75 to 95 passengers) fitted with two turbofan engine surpassing ICAO noise and emissions requirements.

Aircraft Main System Suppliers: Thales, Messier Dowty, B/E Aerospace, Honeywell, Parker, Hamilton Sundstrand, & BF Goodrich.

Engine: The new PowerJet SaM146 engine (14,000 to 17,500 lb thrust) being certified to European, U.S., and Russian standards.

Engine JV: PowerJet is a development JV between Snecma/Safran (France) and NPO Saturn (Russia).

Engine design: Most of the engine design is based on CFM’s CFM56, jointly developed by Snecma (Sub of SAFRAN, France), and General Electric.

PowerJet is building the PowerJet SaM146 engine that was to be certified by May/June 2010.

Sukhoi’s civil aviation division is building the Superjet 100 airframe. Sukhoi is a subsidiary of United Aviation Corporation (UAC).

UAC was created in 2006, is state-owned, consolidated companies that manufacture, design, and sell military, civilian, transport, and unmanned aircraft.

UAC is projecting revenues of $4B for 2009, $5B in 2010, & is restructuring $2.4B of debt.

NPO Saturn claims that the PowerJet SaM146 is going through the process of receiving necessary documentation and testing.

UAC claims the engine makers shifted to an unspecified timetable for certification because they are not ready.CFM International China deal is worth $15B over 30 years.

Safran & General Electric won the deal to supply engines for China's proposed C919 commercial jet.

Safran via CFM will supply engines propulsion systems components to Commercial Aircraft Corporation ( COMAC) for the C919.

C919 is China's first large passenger, narrow-body, single-aisle jet & China is developing it to compete against Airbus and Boeing.

COMAC selected CFM International (A GE/SAFRAN Co.) to supply the new LEAP-X1C engine as the sole western power plant to launch China’s COMAC C919 150 seat commercial jet.

Commercial Aircraft Corporation of China (COMAC) is developing the new C919 single-aisle commercial jet aircraft to enter service in 2016.

COMAC has forecasted a global market for more than 2,000 C919 aircraft over the 20 years following entry into service.

CFM claims to be the world’s most successful jet engine suppliers – delivering more than 20,000 engines for aircraft flown by more than 500 airlines worldwide.

LEAP-X was launched in 2008 and is a totally new centerline engine.

LEAP-X1C engine will be assembled in China. Nexcelle (Aircelle/MRAS) was selected to supply the nacelle for the engine.

Pratt & Whitney is testing a full-scale PurePower engine core consisting of an ultra-efficient HPC, a low-emissions combustor, and an all-new HPT designed jointly by P&W and MTU.

LEAP-X: The first core in the development program, eCore 1, successfully completed the first phase of testing earlier in 2009.

CFM has tested the revolutionary 3-D Woven Resin Transfer Molding (RTM) composite fan blade and case.

LEAP-X fan will feature 18 blades, a 50% reduction versus the CFM56-5C, and 25% fewer blades than the CFM56-7B.

Nacelle thrust reverser and exhaust system for the new LEAP-X1C engine will be provided by Nexcelle.

Nexcelle is a 50/50 joint venture between GE's Middle River Aircraft Systems and SAFRAN Group's Aircelle the two companies launched in 2008.

LEAP-X1C offers to reduced fuel consumption through better aerodynamic performance and lower weight, higher in-service reliability, better maintainability

LEAP-X1C design proposes to offer lower direct operating costs compared to the CFM56 currently sold by CFM Int.

Pratt & Whitney (P&W) PW100G engine makes headway against the CFM56. www.aviationregister.biz

PW100G allows new airframe manufacturers to enter the commercial jet market and take market share from Airbus and Boeing. www.aviationregister.biz

PW100G poses a threat to the GE/SNECMA strategy of incremental changes to the design of the CFM56 as fitted on the A320 and B737 families. www.aviationregister.biz

PW100G will now be fitted to the Bombardier C-Series, the Mitsubishi Regional Jet (MRJ) and the Russian MS-21.

PW1000G high-bypass turbofan engine was formerly referred to as the Geared Turbofan(TM) engine.

Irkut (Russian manufacturer) selects P&Ws PW1000G for its MS-21 medium range commercial jet due for first delivery in 2015.

MS-21 – Other suppliers: Avionika (Russian) & Rockwell Collins (USA) will provide the avionics systems to be assembled by Irkut.

MS-21 is an $8B project developed by Russia's major manufacturers Ilyushin, Tupolev, and Yakovlev & it will be built by Irkut.

MS-21 will replace the aging Tu-154, which accounts for some 80% of Russia's passenger and freight traffic.

TU-154 replacement: The TU-154 has been exported & operated by about 17 non-Russian airlines and air forces, and about 214 are in service.

MS-21 is also set to compete with the A-320 and B737 aircraft both fitted with the GE/Snecma CFM56 engine.

MS-21 represents a market for more than 200 replacement TU-154s and could easily lock in the Russian market from 2016.

Threat to the future of the CFM56: Add the MS-21 to the C Series and the MRJ, the potential order book could breach 1,000 aircraft.

Threat to the future of the CFM56: If yes, that would be a deathblow for the “future” development of the CFM56.

Threat to the Airbus/Boeing product line: The PW100G undermines Airbus & Boeing orders for 2,378 A320 family and 2,100 B737s worth about $225B!

Airbus & Boeing have the option to add the PW100G engine to any A320/B737 replacement design and as a retrofit to replace the CFM56.

November 2009

AVIC Commercial Aircraft Engine (ACAE) (China) signed a MOU with MTU Aero Engines to study the building of an aircraft engine industry in China.

Pratt & Whitney completed the build of the core for the first development geared turbofan PW1000G. Certification is to begin in 2011.

PW1000G will be certified in 2013 and promises initial fuel burn improvement of 12%-15% over existing engines.

PW1000G promises initial carbon dioxide reduction of 3,000 tonnes per aircraft per year and a 75% reduction in noise footprint.

Pratt claims the PW1000G will reduce operating costs by $1.5M per aircraft.

PW1000G has been selected for the Bombardier's CSeries (PW1524G) and the Mitsubishi Regional Jet (PW1217G).

PW1000G Boeing’s website acknowledged that the PW1524G engine could be fitted to the B737NG.

CFM Engine: 20,000th CFM56 delivered by manufacturer CFM International to Flydubai.

CFM International (1974) is a 50/50 JV between General Electric and Snecma (SAFRAN Group). It is one of the most successful ventures in the history of civil aviation.

CFM56 it is the world’s best-selling commercial aircraft engine and is in service with more than 500 airlines.

CFM56 engine: A CFM56-powered airplane takes off somewhere in the world every 2.5 seconds.

CFM, Pratt make progress on next-generation engines

LEAP-X is the new centerline engine being developed to power the next generation of short/medium-range aircraft.

LEAP-X fan features 18 blades, a 50% reduction from the CFM56-5C, and 25% fewer blades than the CFM56-7B.

LEAP-X is designed to reduce nitrogen oxide emissions by 50%-60% compared to ICAO CAEP 6 limits.

LEAP-X CFM56 replacement: CFM is gearing up to replace the CCFM56 with the new Leap-X engine (LEAP56) from 2016.

LEAP-X, an entirely new baseline turbofan engine to power future replacements for current narrow-body aircraft.

LEAP-X incorporates revolutionary technologies developed since 2005 as part of the LEAP56 technology acquisition program.

LEAP-X will blend new technologies, with the exceptional reliability of the CFM backed by the existing customer support structure.

LEAP-X demonstrator engine is scheduled to run in 2012, and LEAP-X could be certified by 2016.

LEAP-X: The new turbofan will reduce the engine contribution to aircraft fuel burn by up to 16% compared to current

CFM56 Tech Insertion engine.

LEAP- Additional fuel burn improvements will be achieved once this engine is paired with new aircraft technology.

Financing Difficult Aircraft Transactions

Publisher:

Freighter Operator Guide

Airline Fleet & Network Management

London

Author:

Patrick Harris

Executive Vice President Business Development

Mercury Aviation Partners, LLC

Engine, Teardown & Spare Parts

Financing

Airlines spend about $10 billion a year on aircraft maintenance in order to reduce delays and maintain aircraft safety. The FAA estimates that about a half a million U.S. flights were delayed in 2006 at a cost of $6 billion for airlines and more than $9 billion for passengers as measured by the value of time lost. In a recent article in Aircraft Technology Engineering & Maintenance Daniella Horwitz reported on figures released by Boeing showing that 50% of all flight delays are due to engine problems. Each delay caused by engine failure costs $9,000 per hour, every flight cancellation costs the carrier an average of $66,000 per flight and an in-flight engine shutdown can cost $500,000. The costs are of such a magnitude that a well stocked and competitively financed engine parts pool plays a key role in supporting carriers managing these challenges.

Best Market Prospects

A total of 47,285 commercial turboprops and jets have been ordered over 35 years and 36,500 of these have been delivered. An estimated 9,300 of these aircraft are on operating leases and 2,600 are on financial leases. The total number of operators is believed to be in excess of 3,000 airlines but the core market is focused on approximately 900 airlines worldwide that feed the demand for engine leases and engine spare parts.

An estimated 5,451 commercial aircraft have been retired to date. The delivery of new commercial aircraft will release 7,000 older, used aircraft to the tear-down market over the next twenty years which in turn will be used to feed spare engines and parts into the trading market.

Rolls-Royce has projected a demand for 51,000 civil aircraft valued at $2.7 trillion up to 2025 ranging from very light jets (VLJ’s) to Super Jumbos that will be fitted with a total of 114,000 engines costing $600 billion. Eighty two percent of that demand will be generated by orders for jet engines and aircraft in the 100 to 400+ seat category. The current backlog of orders for commercial jets in this category stands at 5,900 aircraft due for delivery by 2016 with deliveries peaking between 2007 and 2010.

Leading Markets

The largest markets for engine parts are the USA with about a one third market share, followed by France and Germany, each with 15% of the world market. The other leading large-volume markets include Australia, China, Italy, Japan, Korea, the Netherlands, Singapore and the United Kingdom.

The spares market is developing rapidly in other countries including Cyprus, Ethiopia, Hungary, Ireland, United Arab Emirates, Uzbekistan and Vietnam.

Aircraft Act as the Platform

The demand for engine spare parts is a derived demand based on the strength of the aircraft market. The spares market is strongest for the most popular jet types such as the A320, A310, A330, B737, B747, B757, B767 and RJ’s, as well as turboprops such as the ATR42, ATR72, Dash8, EMB 120 and Saab340.

OEM Risk Sharing

The long term commitment of engine manufacturers to support used engines and to provide spare parts is a consideration for lenders participating in engine and spare parts markets. The investment risk in developing new turbofan engines is high and some original equipment manufacturers (OEM’s) have shared that risk by jointly launching engines in markets where they would otherwise compete.

CFM International is a company jointly owned by General Electric of the USA and Snecma of France. CFM and its product line the CFM56 were named by combining the two parent companies’ commercial engine designations: GE’s CF6 and Snecma’s M56. Each company has its own assembly line. GE is responsible for the high pressure compressor, combustor and high pressure turbine. Snecma is responsible for the low pressure turbine, the gearbox, the exhaust and the fan.

The Engine Alliance is a joint venture between GE, Snecma and Pratt & Whitney that is developing, manufacturing, selling, and supporting the GP720, built on the GE90 core and the PW4000 low-pressure system.

Pratt & Whitney, Rolls-Royce, Aero Engines Corporation of Japan (JACE) and MTU Aero Engines are shareholders in International Aero Engines (IAE). Pratt & Whitney manufactures the combustor and high-pressure turbine, Rolls-Royce builds the high-pressure compressor, JAEC manufactures the fan and low-pressure compressor and MTU is responsible for the low-pressure turbine.

Spare Parts Risk Profile

Airframe and engine parts can be conveniently segmented into three groupings namely spare engines, rotable parts and expendables. The lowest risk segment is focused on high value rotables such as avionics, actuators, accessories, valves and servos. These are followed by engine life limited parts (LLP’s) such as disks and blades. At the higher end of the risk spectrum are the items that are not time controlled and that are slower to sell such as airfoils and cases. The slowest selling and least valuable parts are interior equipment such as galleys, trolleys, seats and sidewalls followed by expendables such as nuts, bolts and rivets.

Engine Focus

The jet engines families that are most attractive to finance are fitted to the most popular aircraft types and are manufactured by CFM, GE, IAE, Pratt & Whitney and Rolls-Royce. The most popular turboprop engine is manufactured by Pratt & Whitney Canada.

Investors tend to specialize in specific engine type. The engine market leaders are CFM’s CFM56 family, Pratt & Whitney Canada’s PW100 turboprop engine, GE’s CF6 family, Pratt & Whitney JT8D-200 and PW4000 families, Rolls-Royce’s Tay, RB211 and Trent families and IAE’s V2500. On the turboprop side by far the leading engine is the PW100 family fitted to the leading aircraft types such as the ATR42 and ATR72 families, the Dash8/Q400 family, the EMB120 and F50.

The market leading models stand out as having strong investor confidence and attract financing support for both leasing and tear-down that in turn feed the spares market. These include the CFM56-3B and 3C variants fitted to the B737-300, -400 and -500; the CFM56-5A and -5B’s fitted to the A318, A319, A320 and A321, the PW100 fitted to the ATR42, ATR72, Dash8/Q400, EMB120 and F50, the CF6-50C2 fitted to aircraft such as the A300 and DC10/KC10, the JT8D-200 fitted to the MD80 family, the PW4000 variants fitted to the A300, A310, A330, B767, B777 and the MD11, the Tay fitted to the F70 and F100 and the RB211-535 series on the B757 and the V2500 fitted to the A320 family and the MD90.

PMA Parts: the Alternative Spares Market

The debate over the impact PMA alternative parts (parts manufacturer approval) have on engine residual values continues between lessors, manufacturers and MRO’s. Pratt & Whitney is leading the charge to introduce alternative parts by offering engine PMA parts for the CFM56. The 48 CFM56 parts targeted for PMA replacement by Pratt & Whitney represent 75% of the engine value including 19 LLP’s. These parts account for 90% of the cost of material during a typical engine shop visit. Starting with United Airlines, Pratt & Whitney has set it sights on providing PMA’s to more than 200 carriers worldwide. The trade off between OEM parts and PMA parts is that airlines see benefits in the reduced cost of the PMA parts, MRO’s foresee increased shop visits and lessors are undecided about the likely impact on residual values.

Targeted Financing Opportunities

The key segments of the spares market that are attractive for financing are engine leasing, both short term and long term, engine tear-down, parts sales and rotable inventory leasing. The key areas that require special attention are asset management and protecting the residual value of the inventory financed.

Spares Leasing

Leasing offers flexibility and this is an emerging market for rotable spare parts in particular. The returns are higher than aircraft leasing to justify the risks involved. Stub-life leases are useful because they allow the lessee to use up the remaining time on the engine before it is run-out and in the process generates additional revenue for the investor before the engine goes for tear-down.

Spares packages are now available on a short to long term lease basis as well as cost per hour leases. Spare engine and rotable parts leases can be arranged for one lessee or as a pool for geographically diverse multiple end users. Lease default is less of a threat especially from the lessor’s point of view if the engine is nearing the end of its economic life or leasing is the final step in the engine life cycle which makes tear-down a viable option. In making the tear-down decision the lessor will take into account if the engine is a high cycle one; if a lease renewal opportunity is available; the cost of major overhaul and the value of the lease return conditions.

Protecting Collateral

Many of the jurisdictions identified as growth markets have a variety of legal frameworks that should be considered from the point of view of default, repossession and enforcement of foreign judgments. The two most complicated part of protecting the collateral value of spare engines and rotable parts is identifying them and securing the location where they are stored. The fact that each part is marked by a serial number and corresponding hard copy records helps to identify the collateral. Ideally the lender should require the borrower to store the parts in a secured, bonded facility under the direct control of the borrower and in a jurisdiction where court orders can be enforced. A key objective should be to require that the collateral be separated from the borrower’s other stock by storing the parts on separate shelving, in cages or in containers.

No Escaping Records

The issues with respect to aircraft records are the same for spare engines and rotables. The greater the frequency at which rotable and LLP’s exchange hands the greater is the need to monitor hard copy records. Keeping a copy of the part records on file adds a layer of protection and ensures back-to-birth traceability. Each component must be supplied with a current FAA 8130-3 form or the EASA Form 1 to verify that the certification is current and ideally this should be on a dual release basis. In some cases carriers issue their own serviceable tags as certification and these need to be evaluated on a case by case basis.

Monitoring Residual Value

Appointing an experienced advisor is critical in obtaining an accurate assessment of the borrower’s performance over the life of the facility. The key questions are (a) are the parts selling as quickly as projected and (b) are they selling at prices that meet expectations? The answers to these questions will allow the lender to monitor the rate of value depreciation compared to the loan balance outstanding. In addition the borrower should be required to produce monthly or quarterly reports to determine if loan-to-value ratios are being maintained. An action plan may have to be agreed in the event of default though this may not be practical in all circumstances.

Controlling the Transaction

Unlike an aircraft based financing transaction, spare engine and rotable financing can involve large quantities of parts installed in multiple aircraft, in different MRO shop’s for overhaul, or they may be stored in several locations or on loan, or awaiting sale, exchange or lease. The lender needs to address these issues in order to protect the value of the collateral. In the event of default the lender need to understand how to recover the records and the parts if they are fitted to an aircraft, stored in an outstation or if they are on loan to another carrier? It is common to find that the borrower placed some of the parts with the MRO for repair and that a mechanics lien is attached to them.

Conclusion

The aircraft spare engine and spares markets are developing rapidly and attracting the interest of lessors, lenders and income funds. This market will expand as new aircraft deliveries peak and older aircraft are retired in the next three years presenting significant lending and leasing opportunities for new and used equipment.

Engines & Aircraft Applications

Engine Manufacturer (OEM’s)Thrust (LB)*Aircraft Application

AE2100*

Rolls-Royce

4,152

Saab 2000, C-130 Hercules

AE3007

Rolls-Royce

6,495

Citation X, EMB 135, EMB 140, EMB 145, Embraer Legacy

ALF502

Honeywell

7,000

Avro RJ, BAe146,

BR700

Rolls-Royce Deutschland 14,000

717, Global Express

CF6

General Electric

41,500

A300, A310, A330, 747, 767, DC10, KC10, MD11

CF34

General Electric

9,200

ARJ21, Challenger, CRJ100-900, CL600, EMB170/175, EMB190/195

CFM56

CFM International

19,500 A318, A319, A320, A321, A340, 737-300-900, DC8-70

CT7*

General Electric

1,735

CN-235, Saab340, Sukhoi S-80

Dart*

Rolls-Royce

2,280

Avro 748, F27, YS11

GE90

General Electric

76,000

777

GEnx

General Electric

72,000

A350, 747, 787

GP7200

Engine Alliance

70,000

A380

JT3C/3D

Pratt &Whitney

11,200

707,720, DC8

JT8D

Pratt & Whitney

14,000

727,737,Caravelle, DC9, Mercure

JT8D-200

Pratt & Whitney

19,250

MD80, Super 27

JT9D

Pratt & Whitney

45,600

A300, A310, 747, 767,DC10

LF507

Honeywell

7,000

Avro RJ

PW100*

Pratt & Whitney Canada 2,000

ATR42, ATR72, ATP, CL215, Dash8/Q400, C295, EMB120, F-D328, F50, IL114,

MA-60

PW2000

Pratt & Whitney

38,250

757, IL96

PW4000

Pratt & Whitney

50,000

A300, A310, A330, 747, 767, 777, MD11

PW6000

Pratt & Whitney

22,100

A318

RB211

Rolls-Royce

37,400

747, 757, 767, L1011

Spey

Rolls-Royce

9,900

BAC111, F28, Gulfstream

Tay

Rolls-Royce

13,850

F70, F100, 727RE, Gulfstream

Trent

Rolls-Royce

53,000

A330, A340, A350, A380, 777, 787,

V2500

International Aero Engines 23,000

A319, A320, A321, MD90

Source: Mercury Aviation Partners LLC * Thrust measured in shp

Status of Engine Manufacturers

OEM

OrderedBacklog# Operated# Carriers% Stage III

Pratt &Whitney Canada

26,641

2,154

17,841

9,192

1,00.0

Rolls-Royce

12,421

812

8,083

1,895

90.5

Pratt &Whitney

11,559

145

6,183

957

74.7

CFM International

9,899

2,210

6,616

468

1,00.0

General Electric

9,394

1,201

6,056

1,419

86.5

IAE

2,414

687

1,375

114

1,00.0

Source: ACAS

Engines Operated by Carriers

Engine Type

# Operated# Carriers OrderedBacklog

CFM56

6,616

468

9,899

2,210

PW100

2,185

443

2,725

225

CF6

1,922

236

2,563

121

V2500

1,375

114

2,414

687

JT8D-200

1,161

125

1,168

PW4000

1,007

112

1,324

Tay

929

443

1,094

112

RB211

905

134

1,204

CT7

631

125

716

Trent

505

966

348

JT9D

400

108

717

Source: ACAS

Aircraft Deliveries Units and Values

2006-2025

Aircraft Deliveries

Value($BN)

Business Jets

24,027

344

Regional Jets & Turboprops

5,745

120

Commercial Jets

22,042

2,223

TOTAL

51,814

2,687

Source: Rolls-Royce