July 17 (Bloomberg) -- One executive sat silently, lacking even a name card, when his Airbus and AirAsia Bhd peers hugged and congratulated themselves after agreeing to a $13.8 billion aircraft sale.
Seated alongside the dignitaries at the Farnborough Air Show this week was Eric Schulz, the president of civil large engines at Rolls-Royce Holdings Plc. The London-based company is the reason the deal came together: Rolls-Royce will fit more efficient engines under the wing of the A330s that AirAsia purchased, making the jet the hottest seller at the show.
New-engine versions of earlier models are at the forefront of aircraft development at Boeing Co. and Airbus Group NV, and the manufacturers of the power plants are playing a pivotal role pulling in purchases. Engine technology has overshadowed airframe advances, helping airlines boost fuel economy at a time when jet kerosene is the largest share of operating costs.
“It’s very much the engine makers who are the unsung heroes in this, coming up with new ideas and materials,” said Tom Williams, the head of programs at Airbus. “There are airframe modifications, like winglets and like optimizing the design, that also contribute to improvements. But without a doubt the biggest ones are the engine changes.”
The stature of engine makers shows in the numbers. General Electric Co.’s aviation unit, including joint ventures, said it announced contracts valued at about $36 billion through the first three days of the air show near London. Among contracts signed were engine deals with EasyJet Plc and Emirates of Dubai.
Pratt & Whitney, a unit of United Technologies Corp. whose new geared turbofan engine competes with GE in the narrow-body market, and Rolls-Royce, which vies with GE to power wide-body planes, didn’t disclose contract values. GE, Rolls-Royce and Pratt are the world’s three-biggest engine makers.
Ever since Airbus turned its A320neo into the fastest-selling aircraft in commercial aviation history, the refreshing of older models with new engines has accelerated.
Boeing followed Airbus’s 2010 move with its 737 Max the next year, and Airbus introduced the A330neo this week at the Farnborough expo, pulling in more than 100 orders and commitments for the wide-body plane, topped off today by a deal for 12 aircraft from Transaero Airlines. The Russian carrier also agreed to buy eight current-version A330s.
Hong Kong Purchase
Fuel often represents the biggest expense for airlines, meaning any minor improvement in efficiency translates directly to the bottom line. Airbus has won orders for more than 3,000 re-engined A320s -- the latest coming in Farnborough today as leasing firm Hong Kong Aviation firmed up a contract for 40 A320neos and 30 A321neos -- and fitting new turbines under an existing frame is much cheaper than an all-new program.
“Suddenly, re-engining has proven, certainly in the current environment, to be a very productive and expeditious way to get new products to market,” Tony Wood, Rolls-Royce’s president of aerospace, said at the air show.
The competition for under-wing space has amped up the rhetoric between the engine makers, with Pratt & Whitney President Paul Adams touting his power plant for single-aisle aircraft as the “a much lower-risk approach than our competitors are taking.”
“It does not involve or require the invention of exotic materials,” Adams said.
David Joyce, chief executive officer of GE Aviation, fired back at the geared turbofan favored by Pratt, suggesting the design adds unnecessary complexity that could compromise reliability. GE makes the engine in a joint venture with France’s Safran SA.
“We don’t need to have a complicated architecture in our engine to provide the level of value that these customers are looking for,” he said in an interview at GE’s Farnborough chalet, a few hundred feet from Pratt’s base of operations.
The two companies go head-to-head on the new-engine version of the Airbus A320. While current data on the engine breakdown for the A320neo aren’t available, both sides have said this week they have at least 50 percent of the market.
While industry wags sometimes joke about Toulouse, France-based Airbus and Boeing making only heavy gliders, the public fascination with flight means that air-show crowds flock to see the planes in the air and on the ground, not engine displays.
The partnership between Airbus and Boeing and their suppliers is pivotal, said Jeff Knittel, the CEO of CIT Group Inc.’s leasing company, which agreed to buy re-engined A330s aircraft at the show alongside Boeing Dreamliners.
“I look at it as a cooperative effort, that’s the reality,” he said. “Obviously, passengers don’t fly on an engine. They fly on an airplane.”
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