Weekly Aviation Note: United Technologies And Boeing

The past week saw important developments related to two aviation companies under our coverage. The Bombardier’s CSeries powered by Pratt & Whitney’s geared turbo fan (GTF) engine undertook its maiden flight on September 16. With this airplane, Bombardier will compete directly with the smaller airplanes of Boeing (NYSE:BA) and Airbus for the first time. Meanwhile, United Technologies (NYSE:UTX) announced that it has shelved plans to form a joint venture with Rolls Royce for developing a new engine for the mid-size commercial aircraft market.

Boeing

Bombardier’s CSeries CS100 airplane, which seats 110 passengers, flew for the first time on Monday, September 16. ^[1] Expected to enter service in the second-half of next year, this airplane along with its larger model, CSeries CS300, which seats 135 passengers, will take on smaller models of Boeing’s 737 series and Airbus’ A320 family over the coming years.

The 110-150 passenger seat segment in which Bombardier has launched its CSeries models is an important segment for aircraft manufacturers as it sees high order and delivery volumes driven by low-cost airlines that operate on short-to-medium range domestic routes. With the CS100 priced at $62 million and CS300 priced at $71 million, Bombardier is seeking to cut in to Boeing and Airbus’ market share, whose competing models are priced higher at $76 million for Boeing 737-700, $85 million for Boeing 737MAX-7 and $89 million  for Airbus A319neo. ^{[2] [3] [4]}

Bombardier had announced the CSeries program in 2004 and it has produced the CS100 and CS300 models at an overall program cost of $3.9 billion. ^[5] Though the program is running around nine months behind schedule, this compares favorably to the delays that have been seen in the new airplane programs of Boeing and Airbus. Importantly, the CSeries airplane fuselage features a higher proportion of composite materials like with the 787 Dreamliner, and the company contends that the CSeries is up to 20% more fuel efficient than its current competitors.

The primary factor behind the impressive fuel efficiency of CSeries is that it is powered by Pratt & Whitney’s new PurePower geared turbo fan (GTF) engine. This engine employs a gear which rotates the front jet engine fan at slower speeds compared to the turbine shaft. This improves thrust without burning additional fuel, to raise fuel efficiency. Additionally, the GTF engine produces much less noise and carbon emissions and is therefore in line with the growing regulatory demand of quieter airports.

The GTF produced by Pratt & Whitney, which is a unit of United Technologies (UTC), has also been selected as the exclusive engine for Mitsubishi Regional Jet (MRJ) and Embraer’s second generation of E-jets, and as an engine option for Airbus A320neo and the Russian Irkut MS-21.

See our complete analysis of Boeing here

United Technologies

UTC has announced that it has put-off forming a joint venture with Rolls Royce for developing engines for mid-size commercial airplanes that seat between 120 and 230 passengers. ^[6] Instead, the industrial conglomerate announced that it will develop further versions of its GTF engine to power mid-size airplanes. Currently, the largest airplane that GTF has been selected to power is A321neo, which can seat around 185 passengers in a typical two-class cabin arrangement. ^[4] UTC cited the current regulatory environment while calling-off the venture with Rolls Royce without providing additional details.

Last year, UTC had purchased Rolls Royce’s interest in International Aero Engines (IAE), which builds the V2500 airplane engine family, to gain majority shareholding.

See our complete analysis of UTC here

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

1. PurePower® Engine Powers Bombardier CSeries First Flight: ‘You Could Hardly Hear The Take-Off’, September 17 2013, www.pw.utc.com [↩]
2. Bombardier CSeries, September 20 2013, www.wikipedia.com [↩]
3. Boeing’s commercial airplane list prices, September 20 2013, www.boeing.com [↩]
4. Airbus A320neo family, September 20 2013, www.wikipedia.com [↩] [↩]
5. New Bombardier jet takes flight, September 16 2013, online.wsj.com [↩]
6. Pratt & Whitney Remains Committed to Midsize Aircraft Market Segment, September 19 2013, www.pw.utc.com [↩]