Pratt & Whitney Positioned for Global MRO Business

An aggressive strategy to increase its aftermarket business calls for Pratt & Whitney to expand beyond engines and take care of entire airplanes for its commercial and military customers.

Its "Nose-to-Tail" service is a brand new line of work, but one the engine manufacturer had to take in order to quadruple its aftermarket sales from $1 billion a year now to a targeted $4 billion by 2004 (these figures do not include the sale of spares). The new business could generate $1.5 billion, the company says.

Most of the pieces are now in place for Pratt to become a major player in the global MRO business, which is expected to total $50 billion a year worldwide by 2004. A key part is United Technologies (UTC) sister company Hamilton Sundstrand, which manufactures and overhauls APUs, environmental control systems and power generation and distribution systems. Together, Pratt and Hamilton Sundstrand claim to have the world's largest aerospace aftermarket business, with revenues (including spares) of $5-6 billion a year.

The other key player is the engineering and maintenance subsidiary of KLM Royal Dutch Airlines, with which UTC earlier this year signed a strategic alliance with the ultimate goal of providing full third-party "nose to tail" aircraft, component and engine maintenance services.

"Hamilton Sundstrand will look after the systems and equipment, Pratt the engines, and KLM the airframes," Hamilton Sundstrand president Ron McKenna told Show News. "In reality UTC is the only company in the world that is an engine provider and a systems and equipment provider, so by teaming with a number of airlines, joint ventures of this type can be major finalists in MRO. With consolidation in the industry, having the OEM as well as the aftermarket is something that will propel us to the forefront of the handful of major MRO companies in the world."

The KLM joint venture extends Pratt's strategy to overhaul engines built by its competitors. It will build on the airline's existing global GE CF6 overhaul operation (which covers 10% of the world's global CF6 fleet, according to Pratt & Whitney president Louis Chenevert), and add overhaul work on P&W's PW4000 engines for customers in Europe, the Middle East and Africa. The joint venture will be housed in a new 250,000-square-foot facility at Amsterdam's Schipol airport.

Pratt also has a CFM56 overhaul capability after acquiring the engine shop of Norwegian airline Braathens ASA, and a joint venture with Singapore Airlines that aims to capture no less than 35% of the engine overhaul market in Asia from airlines that do not have their own facilities.

But the nose-to-tail concept is a new twist.

"Our new relationships with KLM and Hamilton Sundstrand are a real breakthrough. Not only are we expanding our engine overhaul capabilities to include GE's CF6 engines, we can add other partners to this alliance," according to Bob Weiner, P&W's vice president for engine services.

For example, Pratt's acquisition of Cade Industries gives it the capability to overhaul a complete propulsion system, including nacelle and thrust reverser. And Hamilton Sundstrand recently signed a strategic agreement with Rockwell Collins to cooperate on overhaul and repair of equipment. "They could be the provider of all the avionics equipment services," McKenna noted.
Hamilton Sundstrand also has several MRO joint ventures with airlines, including Malaysia's MAS for environmental control systems, and Singapore Airlines Engineering for repair of fuel pump equipment.

By John Morris