Civilian jet engine makers gear up for a fight

The business of propelling large passenger jets is at maximum thrust. Boeing and Airbus delivered a record 1,300 planes between them last year. They also racked up 2,800 new orders to bring their combined backlog to well over 10,000. The engines account for up to a third of the value of a new jet. So some pundits reckon engine makers' revenues could total $1 trillion over the next 20 years.

Pratt & Whitney used to tower over the market for such engines, but these days it is third-placed in a business dominated by GE, another U.S. company, and Rolls-Royce, of Britain. Pratt is now hoping to claw its way back to the top with its new generation of jet engine, the "geared turbofan." This has a gearbox that lets the fan at the front of the engine turn at a different speed to the compressors inside it. By allowing each to run at optimal speeds, it makes the engine more efficient.

Pratt's new engine is one of the options airlines can choose when ordering Airbus' revamped version of its A320 "narrowbody" jet, used for short- to medium-haul routes. It is the only choice on the CSeries, a jet whose Canadian maker, Bombardier, is seeking to bust a duopoly between Airbus and Boeing for narrowbodies. But the CSeries' entry into service was this month put back until perhaps 2015, two years later than first planned.

Understanding the aircraft-engine business is made harder by the fact that as they compete ferociously in one part of the market, manufacturers work together in joint ventures in other parts. In all, about 70 percent of the world's jetliner engines are made either by GE alone or by CFM International, GE's joint venture with Snecma of France. CFM supplies all the engines for Boeing's 737, its rival to the A320. Buyers of A320s can currently choose between a CFM engine or one from International Aero Engines (IAE), a consortium including Pratt and Japanese and German firms. For bigger "widebody" jets, Rolls and GE are the main contenders.

The cost of developing a new engine, about $1 billion, resulted in today's odd mix of competition and collaboration. Airlines prefer competition, to keep costs down, but there are some advantages to doing without it. It means the plane and engine are made for each other, optimizing their performance. An enginemaker guaranteed exclusivity may contribute toward the development costs of a new plane, cutting the risks borne by the planemakers.

Pratt has gotten by for years on its military-jet engines, its slice of IAE and by milking its installed base of older civil-aircraft engines, which need lots of maintenance and spare parts. But from 2016, when the first revamped A320 is scheduled for delivery, its new geared turbofan engines will go head-to-head against CFM's LEAP, a more conventional design that uses composite materials to increase fuel-efficiency. Pratt may eventually remake its geared turbofan for wide-bodied jets, where profits are fatter. Rolls, having given up on the narrowbody market, plans to return when Boeing and Airbus replace their 737s and A320s — but that is a decade or more away. Chinese and Russian firms want to enter the fray, though that may take even longer.