General Electric and Rolls-Royce have responsibilities too

In all the excitement about Steven Udvar-Hazy’s comments about China, less attention was paid to something he said about GE and the A350 XWB. His point was that Airbus really needed to persuade GE to get on board the -1000 version of the aircraft to ensure its competitiveness with the Boeing 787-10.

GE has been reluctant to commit to the -1000 because of its challenge to the 777-200ER/300ER on which it is sole-source engine supplier. But I think this raises a deeper question about the immense power of GE and Rolls-Royce in the market these days, and their resulting responsibilities.At the time, Boeing and GE made themselves pretty unpopular with the airlines when they tied up the sole-source deal. Fortunately, the aircraft, especially the -300ER, turned out to be terrific performers and beautifully aimed at the market.

But they definitely annoyed the Japanese carriers, and I’m pretty sure one result was Rolls’ unexpected win on ANA’s 787s a few years later. (Although there’s history to that.) ANA had become increasingly uncomfortable about its reliance on GE, and the sole-source decision was the last straw.

I know there are other sole-source cases: the A340-600 is Rolls-only, but it’s a true niche aircraft; and the basic A340 itself is CFM-only, but that’s for want of a competitor. And it’s also true that Boeing to some degree will have done the airlines’ negotiating for them – they didn’t want to pay through the nose either.

But this time things are different. Pratt & Whitney’s decline (temporary or not we shall see) has left GE and Rolls with unprecedented power. And I don’t think either of them using that power to cripple an aircraft programme by hamstringing one of its family members is good for the industry.

When Boeing and Airbus made fools of themselves a while back, Flight International very publicly urged them to get their act together. One did, the other only managed it for a while. But our motivation was that their collective failure of leadership was hurting the vast network of suppliers and airlines that depend on the airframers’ world-class leadership for their good health.

When and if the airframers build commercially viable aircraft, it comes with the engine-makers’ territory that they should power them. GE should think hard about this one.

, , , , , , , , , ,

5 Responses to General Electric and Rolls-Royce have responsibilities too

  1. Aurora 21 March, 2007 at 10:49 pm #

    RR and GE have responsibilities to their shareholders. What other responsibilities should they have?

  2. enplaned 22 March, 2007 at 7:46 am #

    GE and Rolls are obligated to take whatever steps best benefit their respective shareholders. That’s their prime responsibility.

    It may be that this coincides with providing “leadership” in the form of building engines for whatever aircraft the airframers dream up, but then again, it might not. For instance, GE and Rolls both showed no interest in building a powerplant for the still-born Bombardier C-Series. Presumably they believed this was in the interests of their shareholders.

    So what’s the difference between that situation and GE deciding to take a pass on the A350-1000?

    Given what a hash Airbus has made of aircraft development recently, the soap opera that is EADS and in particular the multiple false starts on the A350, it seems perfectly reasonable that GE might regard the A350XWB as a bad risk, especially in as much as any success it does have will cut into GE’s profits on the 777 program.

    Seems to me, Airbus has no one to blame for this but itself.

    Idlewild

  3. Kieran Daly 22 March, 2007 at 9:19 am #

    Enplaned says: “…it seems perfectly reasonable that GE might regard the A350XWB as a bad risk…”

    But they don’t do they? Their problem is that they think it will be too successful and compete with their legacy programmes.

  4. Aurora 22 March, 2007 at 12:38 pm #

    Kieran Daly says: “But they don’t do they? Their problem is that they think it will be too successful and compete with their legacy programmes.”
    Or they could be holding back to avoid having to put up $$$ as a risk sharing partner? I’m sure GE would love to hang one of their engines on the A350XWB, but at what price? Are they willing to commit to the funding to share in the program development costs? How bad does EADS want a second engine for the A350XWB? And if they do let GE in on these terms, I suspect they won’t endear themselves to RR! I mention all this to point out that it may not be entirely about protecting their (GE) legacy programs, but garnering the best possible deal from Airbus. And…GE is in a position to squeeze real hard here.

  5. Hughes 27 April, 2007 at 11:06 pm #

    Any chance GE just decided to cast its lot with the 787-10 instead?

Leave a Reply