Pratt & Whitney Increases Market Penetration With Addition Of Embraer E-Jets

by Trefis Team
United Technologies
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The Brazilian aircraft manufacturer Embraer recently selected Pratt & Whitney’s PurePower engines to power its second generation of E-jets. [1] The selection has further strengthened the position of PurePower engines, which are expected to become a leading engine family for Pratt & Whitney over the long run. The engine family which is currently under development has also been selected to power Mitsubishi Regional Jet, Embraer CSeries, Irkut MC-21 and the highly anticipated Airbus A320neo.

Pratt & Whitney is a unit of the diversified industrial company United Technologies (NYSE:UTX). It designs and manufactures engines for military and commercial aircraft. We currently have a stock price estimate of $86 for United Technologies (UTC), marginally above its current market price.

See our complete analysis of UTC here

Pratt & Whitney beats GE to power E-jets G2

Embraer’s E-jets are a family of four aircraft – Embraer 170/175/190/195 – with a seating capacity of 70 to 120. These aircraft entered service in 2004, and currently more than 900 of these are in service worldwide. [2] Embraer plans to introduce the second-generation of these aircraft, dubbed as ‘E-jets G2′ in 2018.

The current generation of E-jets are powered by GE (NYSE:GE) Aviation’s CF34 engines. But PurePower’s superior performance swung the battle in favor of Pratt & Whitney to get a position on the second generation of E-jets. Paulo Cesar Silva, commercial aviation president for Embraer said, We do appreciate the relationship with GE, but the proposition that Pratt is offering seems to us [to be the] one that brings more value to our customers based on the fuel burn and maintenance costs. So we believe it is the best option.” [3] PurePower engines promise double-digit reductions in operating costs for airlines. They promise to improve fuel burn by 16% compared to today’s best engines used on regional jets and mainline single-aisle aircraft to lower noise levels by 50% to 75% and to reduce carbon emissions. [4]

Aircraft engine market for single-aisle aircraft

In the engine market for single-aisle aircraft, Pratt & Whitney battles for leadership with CFM International, which is a joint venture of GE Aviation and Safran of France. Currently, CFM International leads in this market with an exclusive presence on Boeing 737MAX and Comac C919. On the other hand, Pratt & Whitney has an exclusive presence on Bombardier CSeries, Mitsubishi Regional Jet and now Embraer E-jets G2. Both CFM and Pratt & Whitney have a non-exclusive presence on Airbus A320neo. In AirbusA320neo’s case, customers (airlines) get to choose between CFM and Pratt & Whitney as the engine supplier.

Overall, CFM has orders for 4,350 engines from its three clients – Boeing 737MAX, Comac C919 and Airbus A320neo. While Pratt & Whitney has orders for around 3,000 engines. [5]

Development status of PurePower engines

The PurePower engine program is on track to deliver these engines to aircraft manufacturers as per its original schedule. In June 2012, PurePower PW1200G engine for Mitsubishi Regional Jet completed its first flight test program; Mitsubishi Regional Jet is scheduled to enter service in 2015. In October 2012, PurePower PW1100G-JM engine for Airbus A320neo completed assembly, and recently its full engine testing began; Airbus A320neo is also set to enter service in 2015. And, PW1500G engine for Bombardier CSeries is in its final stage of certification; Bombardier CSeries is set to enter service in 2014. Finally, the scheduled entry of Embraer E-jets G2 in 2018 provides Pratt & Whitney sufficient time to complete its engines – PurePower PW1700G and PW1900G.

All in all, with the addition of Embraer E-jets G2, the enhanced market penetration for PurePower engines will add to Pratt & Whitney’s sales and earnings growth over the long term.

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

  1. Embraer Selects Pratt & Whitney PurePower(R) Geared Turbofan(TM) Engine as Exclusive Power for Second Generation of E-Jets, January 8 2012, []
  2. Embraer Selects Pratt & Whitney’s PurePower Engines for Second Generation of E-Jets, January 8 2012, []
  3. Embraer Picks Pratt & Whitney Engine For New E-Jet, January 8 2012, []
  4. PurePower family of engines, []
  5. Commercial Engine Market Heads Into An Unprecedented Year, January 8 2012, []
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