Re: and the winner is.....

From:         jmweber@goodnet.com (James Matthew Weber)
Date:         Sun, 11 Jul 1999 02:13:56 GMT
Organization: Shore.Net/Eco Software, Inc; (info@shore.net)
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On Sat, 10 Jul 1999 12:51:18 GMT, JF Mezei
<jfmezei.spamnot@videotron.ca> wrote:

>James Matthew Weber wrote:
>> 
>> It has been announced that the engine contract for the 777-200/-300X
>> has gone to General Electric.
>
>I find it interesting that for the 777 family, it was seen as an
>advantage to have multiple engine suppliers. Why would Boeing now go for
>a single exclusive engine supplier for a derivative of the 777 ?
Several  reasons. 

As Andrew Chuang has pointed out, the 777 has been a blood bath for
the current engine suppliers.  I don't think any of them are in a
hurry to repeat the experience.

At least the 747,L1011, D10 and A300/310 family all used essentially
the same engines, so the world wide market for that engine class was
probably close to 10,000

While there is some commonality in engine families, I have to wonder
just how interchangeable the parts are between a PW4098 and a PW4052.
I suspect there is a lot of commonality in how the engine is put
together, and how it does things, probably far less commonality in the
actual parts used.

The 777 engine is not used in any other aircraft, and with only 2 per
aircraft, total market to date is probably not much more than 1000
engines. Lots of R&D money chasing  a relatively small market. Good
for airlines, bad for engine makers. I doubt the engine makers are
excited about doing this again, in fact GE declined to offer an engine
in the 95,000-103,000 pound class and let RR have the AA 777 order as
a result. GE probably  couldn't see anyway to make money. GE also
walked away from the A340-500/600 program. I don't think there has
ever been an official comment, but it is pretty clear they were
unconvinced they could make money on it.


777X engine would probably require a billion+ USD investment by PW,
probably only a couple  hundred million by RR, and probably  less than
a hundred million by GE. My belief is the first 5 years of 777X are
likely to produce only a few hundred orders, so if you try to spread
the required investment to bring 3 engines to market across 500
engines with an effective  $2 billion R&D cost (cost of R&D and
interest on the money over the period), that is about 4 million USD
per engine. That is a big piece of the price tag.

The initial 777X engine from GE will be 115,000 pounds, as I pointed
out, that translates to essentially an all new engine for PW, for RR
it isn't clear they can get 115,000 pounds out of the Trent 800.
110,000 pounds probable, more than 115,000 pounds, not likely. the
GE90 appears to have some growth left however (probably not much,but
some is a whole lot better than none!).. 


If 777X is really intended to be the A340-500/600 killer, than an
early entry to service date is a key consideration, and GE is clearly
in a much better position to deliver that. Only certifying one engine
and aircraft combination will improve the in service date, and hold
down the costs, both very desirable features.


>Is such an annoucement more of a 
>	"so far, GE has committed to produce the engine for this derivative" 
>

>or
>
>	"GE will be the only supplier of engines for this derivative and
>	has an exclusivity contract...
> with none of the other 777 engine
>	manufacturers allowed to compete for this 777 derivative".
Rather than commenting directly, I will let those interested read the
Boeing statement. It is at:

http://www.boeing.com/news/releases/1999/news_release_990706a.html

While RR or PW are probably free to offer such a product, it isn't
likely they would choose too.  If RR or PW wishes to build an engine,
and pay Boeing the NRE to integrate it, and get it certified, I am
sure Boeing will be quite willing. It is a lot a money, and without
official Boeing sanction, hard to sell. Big risk, so 
I doubt it is going to happen.

This has happened in the past. RR paid to have the 747SP certified
with RB211's as part of a deal with Iran Air for RR engines. Only a
handful were ever built (and none of them ended up with Iran
Air!)...Several carriers were interested in putting JT9D-7R/Q engines
on SP's.  PW wasn't interested in picking up the costs, so it didn't
happen.
>
>How does this change the purchase of an aircraft ?
I doubt it does
737's have been available only with CFM engines for almost 20 years
now.
>
>If an aircraft has one engine brand (exclusive), does this mean that the
>airline signs a single contract with Boeing which includes engines (with
>Boeing dealing with engine manufacturer) or does the airline still have
>to negotiate separately with the engine manufacturer as it does when
>many types of engines are available ?
you still buy the engines from the engine maker, but I am sure the
agreement with Boeing also guarantees very competitive pricing. One of
the reasons for such a deal to try for economies of scale as PW  had
with the JT3,JT8 and JT9 families, and GE/SNECMA has had with the
CFM56 family.