Managing director at US airline
- Operating environment and pandemic impacts on engine manufacturers
- Positioning, strengths and weaknesses of major players – GE Aviation (NYSE: GE), Pratt & Whitney (NYSE: RTX) and Rolls Royce (LON: RR) – and outlooks
- Drivers for supply chain tightness and outlook for relief
- Propensity of operators to outsource maintenance programmes
- 2023 outlook, including potential consolidation and next-generation technology
How does an airline determine its aircraft needs? What does the criteria look like for an airline to decide its fleet? What makes it decide to go with an all-Boeing, Airbus or a mixed fleet?
All mainline carriers have a mixed fleet to some extent. Is that the natural progression with airlines, and as they grow they gradually go towards a mixed fleet, or would you expect smaller carriers and LCCs [low-cost carriers] to remain with the single-sourced fleets they have today?
What drives shifts away from Boeing and into Airbus or vice versa? What would lead a carrier to switch most often? Is it mostly pricing, reliability or capacity?
What shifts do you expect via aircraft retirements? We saw American Airlines retire the 757. Are there any other aircraft that you think are on their way out in the next 5-10 years?
How do airlines typically source parts such as engines and components? What do contracts look like and how easy or hard is it to get cost pass-through from the engine OEMs or component suppliers?
How would you describe the pandemic’s impact on engine manufacturers? What have been the 2-3 key takeaways from the last year? What has structurally changed?
You alluded to the issues with casting and labour, but can you take us through the supply chain issues over the last couple of years? What materials or components were and remain hard to source and what were the drivers for each? Is this a structural issue or is this pandemic-induced and temporary?
You made a point about the structural casting and forging side, but in your opinion, it’s not the labour piece but more the lack of suppliers. How short would you estimate we are of structural casting capacity?
What do lead times look like across the board for engines components? What was the peak? How have lead times trended as of late?
We talked about the casting and forging side, but where else are pressures most salient in the aerospace supply chain?
Could you expand on the no-fly, no-go or critical parts you were alluding to? What does that list look like? What are the critical components we should be watching for potential delays?
What is driving issues across components? You mentioned you don’t think it’s labour. What are the core drivers and when would you expect any relief? Is this going to nag for two years, one year or six months, or longer?
What will serve as a supply chain constraint next? Where do you expect supply chain tightness will be going forward, and are there any particular vulnerabilities or areas of concern?
Given the US is considering a complete ban on Russian aluminium, how are you thinking about the issues relating to Russian metal and the implications and challenges for engines and airlines trying to source metal elsewhere?
Could you describe the major engine players’ positionings and the relevant areas of strength and weakness for each, discussing GE, Pratt & Whitney and Rolls Royce as well as any other OEMs you’re familiar with?
What is your aftermarket forecast for Q4 2022 and 2023, touching on how maintenance costs are trending and anything else you feel is important to highlight pertaining to your aftermarket expectations?
Is there an appetite for airlines to bring some operations in-house, whether it’s maintenance or elsewhere? Do you expect airlines to start looking to bring things in-house given all the constraints you’ve discussed?
Would there be a cost threshold for when in-housing makes economic sense?
Used serviceable material was topical during the pandemic. Airlines were quick to use their parked aircraft and then as traffic ramped, they started to scramble for parts. Is that something you’re still seeing? How has that progressed since the pandemic’s onset?
Do you foresee any challenges for any engine manufacturers with hitting the production rates Airbus and Boeing are now putting out? As we ramp to those 2024 and 2025 stated delivery targets, do you think they’re feasible? What will you be watching for to gauge the progress there and if it is feasible?
Would you expect further production cuts from Boeing and Airbus?
Is consolidation the answer here? Does it make sense for the aircraft or engine OEMs to consolidate? Do any pairings make sense?
We’re seeing airlines make commitments to electric aircraft, and hydrogen-fuelled aircraft have been alluded to. You mentioned Rolls Royce pulling out of Supersonic. Which of those new aircraft types are you most optimistic about? What’s the greatest opportunity? Are any frothy?
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