MTU Adds Suppliers as Rising Airbus Demand Boosts Engine Output

MTU Aero Engines Holding AG, Germany’s largest aircraft engine maker, is shifting work to low-cost countries and adding suppliers to help manage a large boost in output in the coming four years.

Commercial engine work will increase 45 percent through 2016 from 2012, said Anton Binder, MTU’s senior vice president commercial business. Sales are expected to grow 60 percent, he said.

MTU faces increasing demand as commercial aircraft makers Airbus SAS and Boeing Co. boost airliner output. The Munich-based engine maker is also readying for the production rampup of geared turbofan engines being developed by partner United Technologies’s Pratt & Whitney unit for Bombardier Inc.’s CSeries, the Mitsubishi Regional Jet and Airbus’s A320neo.

“This means a huge challenge for MTU’s supply chain,” Chief Operating Officer Rainer Martens said. To avoid shortfalls, MTU is adding supplies for critical parts, he said.

To boost profitability, MTU wants to shift 30 percent of production to low-cost countries from around 10 percent currently, Binder said. New automation technologies will also be introduced to increase output without adding staff.

Near-term growth is driven by production of V2500s built with Pratt and Japanese Aero Engines Corp. for the current A320. Production of the existing powerplants for Airbus will cease around 2018, Binder said, although it will continue in smaller numbers for the KC-390 military transport being developed by Embraer SA.

Engine Backlog

Business on the V2500 is expected to drive a “mid-teen” increase in new engines sales in 2013, said Chief Financial Officer Reiner Winkler at an investor day last week. MTU this year increased its share of work on the engine to 16 percent by value from 11 percent.

Sales linked to the replacement offering, the geared turbofan, are still at a low level although output is poised to match the peak of V2500s production in 2016, Binder said. MTU and its partners have a backlog of more than 2,900 engines, Binder said.

Certification of the first geared turbofan, the PW1500G for the Canadian CSeries, is due by year-end, MTU said.

Although narrowbody airliner production represents the large volume increase in MTU business in the coming years, increasing Boeing output of 787 widebodies is contributing as well. MTU is a partner to General Electric Co. on the GEnx engine offered on the 787 and 747-8.

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