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On the record with
LOUIS CHENEVERT, PRESIDENT, PRATT & WHITNEY
So what's happening with Pratt? is a question often heard since
Boeing selected GE Aircraft Engines and Rolls-Royce to power the
7E7 Dreamliner.
An apparent series of setbacks has left president Louis Chenevert
unfazed, unapologetic and confident of the future, asserting that
the engine maker has the most balanced portfolio in its history.
Those "setbacks"—failure of the new PW6000 to meet fuel consumption
specs on the Airbus A318, rejection in the competition to power
the Airbus A400M transport, and walking away from the 7E7—were
all very different and unrelated, he told Show News. All part of
placing many bets and expecting a few to win big time.
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"The
key market for us in the future is regional and narrowbody
jets. We are investing tens of millions of dollars into new
technology to be ready to launch whatever platform will be
next. It could be anything from Bombardier to Boeing or Airbus
deciding they want to compete with a new platform. This industry
tends to surprise people – two years ago who would have
imagined the Boeing 7E7?"
—Louis
Chenevert
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"I have been investing aggressively in R&D (it's up 25% this
year without accounting for the 7E7), so we can be ready when an
opportunity presents itself," Chenevert said. "And I've worked aggressively
over the last few years to diversify our portfolio. We now have
a broad range of propulsion systems from small corporate jets through
regional and narrowbody airliners to the A380. And the military
side is lined up nicely with production programs on the C-17, F/A-22
and Joint Strike Fighter.
"It is important for people to realize that we are investing aggressively
in new technology and new programs. A key segment for the future
will be the regional narrowbody, and we want to make sure we have
the right technology and the right product to offer."
The PW6000, Chenevert said, is "fixed" and will breathe new life
into the A318, cutting the airliner's acquisition cost $3-4 million
below that of the CFM-powered version and offering lower running
and maintenance costs. "Airlines will feel it in their pocketbooks,"
he said. "We didn't invest in that engine for the next three to
four years but for the next 30 years," he added. "It's an important
core size in our portfolio."
The A400M engine decision had nothing to do with technology or
value creation, but was a political decision to support Europe's
industry, he asserted.
And the 7E7? "I am very comfortable with the decision we made,"
Chenevert said. "We had a superb offering with great technology,
and with innovative business approaches. Then, when it came to the
finish line, the business case we were willing to go with was not
enough."
Chenevert stressed he has a responsibility to provide value for
his shareholders as well as customers. "It was hard to make both
balance and we said 'OK. This is where we draw the line'" he recalled.
Analysts have said the engine for the 7E7 will cost at least a billion
dollars to develop, while other costs to the engine maker running
up to the airliner's certification and entry into service could
easily more than double that.
"Those widebody airplanes are long cycle airplanes: they don't
eat a lot of spare parts, and that makes for a more difficult discussion
on the business model," he explained. "If we were to re-compete
today we wouldn't do anything different."
Chenevert said technology readiness allowed Pratt & Whitney
to react quickly to the demand for the PW600 for the Citation Mustang
and Eclipse microjets. "Two years ago people asked 'Why are you
doing this?' Now we have a program with 4,000 engine orders just
14 months since launch. I have never seen anything like it."
Another "Why are you doing this?" program was the IAE V2500, in
which Pratt is a partner. That started off with very sluggish sales
but is now powering half the Airbus A320 family airliners rolling
out of the assembly halls in Toulouse and Hamburg. "We've delivered
2,300 engines, and have a backlog for another 2,000. That's just
a great program," Chenevert said. "It will hit 5,000 engines, and
you don't often see programs of that size."
Pratt & Whitney now has 9,000 customers in 168 countries; one
of its engines takes off every three seconds, 24 hours a day. Not
surprisingly maintenance, repair and overhaul and engine services
now make up 60% of Pratt's global revenues, which are expected to
approach $8 billion this year after coming in at $7.5 billion in
2003.
—John Morris
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