Will Ge's New Jet Engine Ever Get Off The Ground?Todd Vogel
It's 3 a.m. one October morning, and Ronald E. Welsch, GE Aircraft Engine Group's general manager, is frantically dialing suburban Chicago telephone numbers. United Airlines Inc. is about to place the biggest commercial airplane order ever, and General Electric Co. is fighting to supply the engines. Moments earlier, Welsch's negotiators at United headquarters had awakened him with an urgent question. After saying he'd call them back, Welsch groggily scrawled the wrong number. "I started playing with the seventh digit," he says, sighing. "Eventually, I got there." For GE, however, it was already too late. Months of sweat and working through the night didn't pay off. On Oct. 15, United placed its historic engine order with rival Pratt & Whitney, a unit of United Technologies Corp. It was a bitter defeat. After spending 10 years and as much as $2 billion on research, GE is still looking for a launch customer for its new GE90. Worse yet, the engine is now stigmatized as the one United didn't like. Worries Brian H. Rowe, GE's senior vice-president in charge of the aircraft-engine division: "You can't afford to get too far behind." The stakes are enormous. The new engine is GE's big bet on the future. With dismal airline earnings threatening commercial-aircraft orders and military spending on jets tailing off despite the gulf war, jet-engine makers are feeling the pinch. Their best hope is the market for widebody commercial jets, particularly for "widebody-twins"--aircraft such as the new Boeing 777 and the Airbus Industrie A330 that save fuel costs by using just two high-powered engines instead of three or four. Edmund S. Greenslet, publisher of The Airline Monitor, figures the widebody market should grow twice as fast as total demand for airplanes over the next decade. So rivals GE, Pratt, and Britain's Rolls-Royce are slugging it out for pieces of what could be a $20 billion bonanza. "Every sale is a battle," says Pratt & Whitney President Selwyn D. Berson.
20-YEAR PRIZE. Airlines such as United--which agreed to buy 34 Boeing 777s and 30 Boeing 747-400s--are placing orders to meet their needs through the end of the century. For engine makers, the orders mean business in spare parts and service for 20 years after that. GE has done well on four-engine widebodies such as the 747. But ever since the market for widebody-twins began to take shape in the mid-1980s, the company has been at a disadvantage. Unlike Pratt and Rolls, GE didn't have a high-thrust engine to soup up for new planes such as the 777. It had to start from scratch.
GE designed its entry to be the most powerful ever, and executives are confident that the GE90 will eventually pay back its huge investment. But in the short term, Rowe is trying to sell the prototype of an unproven engine to airline executives who are always skittish about new technology. Says Louis J. Valerio, United's senior vice-president for finance: "It's a major gamble."
True, GE has spread its risk on the project, selling 45% ownership to partners such as France's SNECMA consortium and Japan's Ishikawajima-Harima Heavy Industries Co. Rowe and his rivals can also take comfort in huge order backlogs for other engines generated over the past few years. But there's evidence of concern. General Electric is pouring its considerable management expertise into recasting the way it produces jet engines. "We're trying to create a whole new culture," says Welsch, who is in charge of the GE90 project.
To encourage a fresh approach, Welsch has sequestered more than 400 of the engine company's crack engineers, marketers, and strategic planners in a nondescript office building nearly 13 miles north of GE's sprawling Cincinnati engine complex. They're using a Cray supercomputer to speed up the design process while working closely with a select group of suppliers to craft parts that can be produced more efficiently.
The engine they came up with is ambitious, indeed. Compared with the competition--Pratt's PW4000 and Rolls-Royce Inc.'s Trent--GE's engine is designed to shave fuel consumption by 5% while providing the higher thrust needed by widebody twins. It also promises to run more quietly than any previous GE engine, thereby allowing planes fitted with the GE90 to slip into airports with even the tightest noise rules. It should reduce air pollution, too, by cutting nitrogen-oxide emissions. Despite the United defeat, these specifications leave Rowe sanguine: "We're going to sell more GE90s than the other two guys together."
Maybe. But just getting the engine out the door on time will be a challenge. While GE insists that the 90 will be ready when the Boeing 777s are--in 1995--some of GE's parts vendors are running behind schedule. Then there's the painstaking work of getting the government to certify the complex machine. Because the GE90 is designed for planes that fly with only two engines over oceans, the Federal Aviation Administration is particularly strict about failure rates. A plane can't fly for long on one engine. "It's not a rubber-stamp process," says Welsch with a groan. To test the fan section, for example, GE must design a special cannon that fires flocks of dead birds at 240 mph into the whirring blades. Welsch maintains a staff of six full-time workers just to manage the government paperwork.
Rowe must also convince skeptical airline executives that the GE90 can live up to its billing. United's Valerio says Pratt had a big advantage over GE in the most recent competition because United is already a big Pratt user. Airlines like commonality among their aircraft and engines so they don't have to retrain mechanics or buy two sets of parts. But a source close to the talks says GE also couldn't yet prove some of its fuel-efficiency claims to United, and wouldn't provide the same guarantees as Pratt. GE had no comment on the United deal.
Many airline executives fear they'll be saddled with the GE90's startup snafus, and some are already zeroing in on potential technological troubles. The fan, which draws air through the engine, uses blades made of layers of titanium and synthetic materials instead of a single solid cast. That leaves airline officials queasy about its strength. They're also dubious that the 90 can run without creating extraordinarily high temperatures in the engine core, which would cause parts to burn out more quickly. Kenneth A. Raff, managing director of fleet planning for American Airlines Inc., is considering the GE90 for a big order of widebodies. But, he cautions, "there's a fair amount of risk associated with that engine."
Even if GE does overcome the airlines' design fears, as Rowe claims it can, the company still faces a dicey airplane market--even for widebodies. As the economy slouches into recession, and airlines wrestle with record losses because of the spike in fuel prices, expenditures for new planes and equipment are being put on hold at many carriers. Marc P. Desautels, president of Polaris Aircraft Leasing Corp., agrees that widebodies are the fastest-growing segment of the airplane market. But, he contends, orders may yet soften. "In a recession, you don't go racing forward," he says.
FIERCE FIGHT. For now, GE must pin its hopes on snaring business from All Nippon Airways Co., which has ordered 15 Boeing 777s but hasn't yet specified an engine. American's widebody order is also in the mffing, and both competitions will be fierce. Pratt can relax a little after its big United win--worth $1.8 billion in firm orders--but it will still exert pressure on GE. And although Rolls Royce also needs a launch customer for the enhanced version of its Trent engine, that power plant is an offspring of an earlier version. It has more credibility among airline executives.
GE's Rowe remains patient. "We're talking about a project that lasts 30 years," he says. Analysts such as Judith L. Comeau of Goldman, Sachs & Co., however, think GE may have to wait for the next generation of even bigger aircraft before it gets any significant business. Unless airlines' fears subside soon, sales efforts could remain fruitless for awhile. And it may be a long time before Ron Welsch or Brian Rowe can expect to get a full night's sleep.
THE BIG THREE IN JET ENGINES
GE AIRCRAFT ENGINE
1990 REVENUES $7.6 billion*
WIDEBODY MARKET SHARE 45%
FIRM BACKLOG $13.3 billion*
BIGGEST CUSTOMERS American Airlines, Lufthansa, All Nippon Airways
PARENT General Electric, Fairfield, Conn. 1990 revenues: $58.4 billion
PRATT & WHITNEY
1990 REVENUES $7.3 billion
WIDEBODY MARKET SHARE 43%
FIRM BACKLOG $13.2 billion
BIGGEST CUSTOMERS United Airlines,
Delta Air Lines, Singapore Airlines
PARENT United Technologies, Hartford, Conn. 1990 revenues: $21.8 billion
1990 REVENUES $4.5 billion*
WIDEBODY MARKET SHARE 12%
FIRM BACKLOG $6 billion
BIGGEST CUSTOMERS British Airways, American Airlines, Cathay Pacific
PARENT Rolls-Royce PLC, London.
1990 revenues: $6.5 billion*
*Estimates DATA: BW, NOMURA SECURITIES CO., AND COMPANY REPORTS