NEWTOWN, Conn. - For several years, air traffic growth has been growing as economies slowly emerge from recession. While growth is continuing, it has slowed of late due to weakness in emerging markets.
At the half-way point in 2014, Pratt & Whitney posted sales of $3.59 billion, down slightly from the $3.62 billion reported in the first half of 2013.
Despite the slowdown, production of commercial aircraft continues to be strong. As airlines seek to improve profitability, the focus is fuel-efficient aircraft and the engines that power them. As a result, there has been an order frenzy for narrowbodies and new efficient engines over the past few years. Boeing and Airbus have increased production rates, and are considering further hikes based on suppliers' ability to support additional increases.
Taking advantage of this environment, Pratt & Whitney has moved to strengthen its commercial operations, which have, in the past, lagged behind the company's more robust military engine segment.
In mid-2012, Pratt closed a deal to buy out Rolls-Royce's stake in the IAE consortium, which produces the V2500 engine for the Airbus A320s. The move gives Pratt control of the consortium and boosts its competitiveness in the A320 engining effort. Now, Pratt & Whitney can offer customers the standard A320 package or the newer PW1000G for the A320neo. This packaging ability mirrors that of one of its major rivals in the A320 re-engining market, CFM International, with its LEAP program.
Central to Pratt & Whitney's commercial strategy is its new PW1000G Geared Turbofan engine. This new family of next-generation commercial and business jet engines - offering double-digit improvements in fuel burn, environmental emissions, engine noise, and operating costs - is expected to be a cornerstone product for the firm in the years ahead. The PW1000G program is in high gear, with five engine variants currently in development for Mitsubishi's MRJ, the Bombardier CSeries, Airbus' A320neo, Embraer's E2 family and Irkut's MC-21 narrowbody jet. According to Pratt's president David Hess, the PW1000G program could earn as much as $325 billion over the life of the aircraft programs for which it has been selected. Such a performance is what is guiding the company's management goal of doubling revenue to $24 billion over the next eight years.
As it looks ahead, Pratt also sees a solid aftermarket for its soon-to-be-installed base of new engines. As airlines keep flying at a steady pace, the need for maintenance and spares will remain solid. Pratt & Whitney has been investing in partnerships and joint ventures worldwide to serve this growing requirement.
As such, Pratt & Whitney is bullish on its aftermarket as it seeks to garner more long-term maintenance contracts. Meanwhile, the military engine market remains healthy despite a downturn in Federal spending. Long the company's strong suit, defense-related engines will continue to play a key role in the company's outlook. Overall, the military side of the business is expected to grow markedly, as Pratt's F135 is now the sole power source for the F-35 Joint Strike Fighter. This program will be critical for Pratt's military engine operations as legacy programs such as the F100, F117, and F119 will wind down in the near term.
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