United Technologies And GE Fight For The Top Spot In The Aircraft Engine Market

by Trefis Team
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United Technologies (NYSE:UTX) through its subsidiary Pratt & Whitney (P&W) is locked in a battle with General Electric‘s (NYSE:GE) GE Aviation for the top spot in the global aircraft engine market. These two companies and Rolls Royce are considered the big three of the aircraft engine manufacturing industry. Both United Technologies (UTC) and GE Aviation are involved in design, manufacture and sale of other aerospace components like landing gears and actuation systems as well as maintenance, repair and overhaul (MRO) services in the global airline market.

P&W along with UTC Aerospace Systems, which provides aerospace components, clocked revenues of $19.6 billion in 2011, while GE Aviation’s revenues were $19.1 billion. [1] [2] With the Goodrich Acquisition, UTC is expected to take a major lead in the aerospace component segment; however, in the aircraft engine manufacture and MRO segments, competition continues to be intense.

Strategic joint ventures have strengthened GE’s and UTC’s positions

Both UTC and GE entered into strategic joint ventures that allow sharing of research expenses and expertise with the main objective of increasing market share. GE Aviation has a joint venture with Rolls Royce under the name CFM International, which manufactures one of the leading aircraft engines CFM56. While UTC’s joint venture, International Aero Engines (IAE), has three more partners – Rolls Royce, MTU Aero Engines and Japanese Aero Engine Corporation (JAEC).

Pratt & Whitney (P&W) vs GE Aviation in the commercial aircraft engine market

P&W and GE Aviation sell their commercial aircraft engines to nearly all aircraft manufacturers including Boeing (NYSE:BA), Airbus and Embraer. In the narrow body, single-aisle, short-to-medium range airplane category, which has the highest selling numbers among the other major airplane categories, there are¬†two major players – Boeing’s 737 series and Airbus’ A320 family of aircraft. The Boeing 737 series airplanes are powered by CFM International’s CFM56 while Airbus’ A320 aircraft comes with the option between engines of CFM International and IAE.

The advanced version of these two models – the Boeing 737MAX and Airbus A320neo – which are more fuel efficient and have lower noise levels also have similar engine offerings. That is the B-737MAX is powered by CFM’s engines while A320neo offers the option between engines of CFM International and P&W. Thus, it is safe to say that in this airplane category, GE’s engines power a greater number of models compared to P&W’s.

Other major airplane models like Boeing 787 Dreamliner and 747-8 are powered by GE’s GEnx engines, whereas Boeing 757 and Boeing C-17 Globemaster are powered by P&W engines. Several other airplane models including¬†Airbus A300/A310/A330 and Boeing 747/767/777 offer airlines the choice between engines offered by both P&W and GE Aviation. On the whole, competition is intense between these two players in the commercial aircraft engine market.

P&W vs GE Aviation in the military aircraft engine market

P&W leads GE Aviation in the military engine market. At present, nearly 11,000 P&W military engines are in service with 27 armed forced worldwide. [3] P&W’s F135 powers the F-35 Lightening, which is the largest aircraft program in the history of the U.S. under which the armed forces of the country and 10 other partner nations will purchase nearly 3,000 F-35s. P&W’s F119 engine is used in the F-22 Raptor. Additionally, the military engines manufactured by P&W also power F-15, F-16, AWACS and B-52.

In comparison, military aircraft engines manufactured by GE Aviation power fewer models. GE Aviation’s F110 engine powers F-15 and F-16. To date, 2,900 of these engines have been built. [4]

UTC and GE as partners

Nevertheless, these two competitors have also partnered to serve certain airplane segments. For example, their 50-50 joint venture called Engine Alliance provides GP7000 engine which currently powers Airbus A380 – the largest commercial passenger airplane.

All in all, the market for providing aircraft engines is highly competitive in both commercial and military aircraft segments. As a result, engine performance, fuel-efficiency, reliability and price are highly critical. Both UTC and GE will need to continue to invest in their aviation R&D to compete in this market.

We currently have a stock price estimate of $92 for UTC, significantly above its current market price. We are in the process of updating our model to reflect the recent acquisitions.

See our complete analysis of UTC here

Understand How a Company’s Products Impact its Stock Price at Trefis

Notes:
  1. UTC 2011 10-K, www.utc.com []
  2. GE 2011 10-K, www.ge.com []
  3. Pratt & Whitney military engines, Nov 21 2012, www.pw.utc.com []
  4. GE’s F110 military engine family, November 21 2012, www.ge.com []
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United Technologies Logo
  • commented 1 years ago
  • tags: MMM GE UTX BA
  • With the acquisition of Goodrich, UTC is much better positioned than GE and Rolls Royce for growth in the "nose to tail" market. The GE venture into other aircraft systems with the acquisition of Smiths has not yielded the benefits GE planned and has recently announced several of the businesses are on the market. UTC/Goodrich is market leader in several key aircraft systems with a very strong aftermarket global enterprise which is a major profit generator. On the engine side GE has the edge with about a 60% market share on all commercial engines, PW through its former IAE partnership with Rolls Royce has a position on the A320 family or about 25% of the 20K to 40K thrust market. PW has bought out the Rolls share and now owns the V2500 franchise. With the development of its Geared Turbofan and its reported fuel and noise benefits PW is poised to gain more market share initially in the lower thrust range for A320, C Series and MRJ applications but is planning to grow its thrust to very large applications including the yet to be announced 777 growth application. With the new Geared Fan engine, the acquisition of the V2500 franchise and the acquisition of Goodrich, PW is positioned to be the future dominant player in both engines and airframe systems. A concern for PW will be "are Boeing, Airbus and other platform primes willing to delegate that much technology, product and financial responsibility to a single entity".
    United Technologies Logo
  • commented 1 years ago
  • tags: MMM GE UTX BA
  • Thank you for pointing out the error.
    Readers: The revised third paragraph is as below.
    Both UTC and GE entered into strategic joint ventures that allow sharing of research expenses and expertise with the main objective of increasing market share. GE Aviation has a joint venture with Snecma (a subsidiary of Safran of France) under the name CFM International, which manufactures one of the leading aircraft engines CFM56. While UTC has a partnership with MTU Aero Engines and Japanese Aero Engine Corporation (JAEC) with Rolls Royce as a major supplier, under the name International Aero Engines (IAE).
    United Technologies Logo
  • commented 1 years ago
  • tags: MMM GE UTX BA
  • GE is not partnered with RR on the CFM56 engine family. They are partnered with the French company, Safran.