787 strikes deep affection in the heartlands of America and Britain

Nestled in the US Mid-West and the British midlands, managers at General Electric and Rolls-Royce must love the Boeing 787.


Boeing’s decision to kick-start the mid-size, long-haul sector when it did, dragging Airbus along with it, was a dream made reality for the engine-makers. Although, as ever, they are having to spend more R&D money, it is well worth the price.


The aircraft, with the A350 too, shows huge promise for the airlines and is an easy purchase decision for many of them. For the engine-makers it means increased returns through derivatives of well-established designs – effectively the icing on the cake – and earlier than it might have been too.


It’s one of the reasons why Rolls-Royce shares, worth less than 」2.00 in January 2004 are now within touching distance of 」4.00.


But I’m not sure the two companies feel the same way about the A380. I’m a great believer in the aircraft, but I suspect it will be a long time before either Rolls-Royce or GE, with its partner Pratt & Whitney in the Engine Alliance, sees a meaningful return on their investment. I’ve been able to put that question to management in both companies at various times during the A380 development and the replies are much more cautious than on any other programme that they run.


On top of what was always a demanding business case, both of them then had to swallow a substantial extra R&D hit when the fan design had to be changed to improve the A380′s noise characteristics. How much that cost and how it was financed has never been explained.


And there have been industry rumours – they are no more than that – for a good while that relations at the programme level have not always been sweetness and light. Airbus may have negotiated itself a very good deal it now seems, and the engine-makers are feeling a bit bruised.


Still, the new CEO of Boeing, no less, previously had views on all that and believed there was enough wiggle-room for GE at least to make a buck whatever happened.


Back in July 2000, when he was CEO of GE Aircraft Engines, he said that if Airbus sold the 750 aircraft it then believed it would, and the Engine Alliance powered only half of them, then GE would do very well out of it. But he added that he personally thought they would sell only 500, in which case GE would still be OK. And finally, he noted that he had actually underwritten the investment assuming that sales would be even worse than that.


Wonder what he thinks today? 

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