Guy Norris/LOS ANGELES
Business is booming for International Aero Engines (IAE), which last month celebrated the 10th anniversary of entry into commercial service of the V2500. "It's an important milestone for us, and we have come a long way," says Mike Terrett, IAE's newly installed president and chief executive.
Terrett took over the helm from outgoing president Barry Eccleston who presided over the most rapid phase of expansion in the company's 16-year history. Virtually all of the success is attributed to the growing boom in Airbus A320 "family" sales, to which the company's V2500 engine is intimately linked. The first V2500-powered A320 flew in July 1988 and was certificated the following year. Since then the orderbook, including options, has grown to around 3,000 engines worth more than $18 billion. Almost 470 V2500-powered aircraft have been delivered and more than 9 million engine hours accumulated.
"We think we have really come of age, and we have got a product that is a perfect fit for the A320 family. It is still modern, and although it is not brand new, it has all the latest technology in it," says Terrett. Reliability problems, once a major issue with the earlier engines, is a thing of the past, he adds. "The initial problems have been shaken out and now we are selling reliability, and the reliability is good".
Change in fortunes
The change in fortunes for IAE is reflected in the orderbook, and in a series of big victories notched up in recent months against CFM International. The most significant of these includes last year's selection of the engine by British Airways to power 59 A319/A320s on firm order and 129 A320 family aircraft on option. Big wins in 1999 have, so far, included Spanair's selection of the V2500 to power up to 45 A320 family aircraft, a contract potentially worth $540 million, and an order from New Air which could extend to 75 aircraft in a deal worth up to $900 million to IAE. The company's share of the A320 market leaped to 55% last year, thanks mainly to the British Airways order and an earlier victory with the TACA Group of airlines in Latin America. With the succession of selections so far this year, IAE claims a 68% market share for this year. Significantly, CFM International sets IAE's market share for the same period at 69%. Overall, IAE has a claim to 41% of the A320 family.
Against this rosy picture there are inevitable concerns. IAE has tried, and failed, to find alternative applications for the engine. It succeeded with the McDonnell Douglas MD-90 (above), achieving exclusivity on the twinjet, but saw the line closed prematurely by Boeing following its takeover of the rival manufacturer in 1997. The last MD-90 is due to be handed over in 2000, marking the end of a short production life. To date, some 98 MD-90s have entered service, but only a further 16 are scheduled to be built.
IAE's attempt to secure a position on the A340 ended with the SuperFan fiasco of 1986/7, as Airbus was preparing to launch its four- engined, long-range airliner programme. IAE promised Airbus significant range and efficiency gains by using a geared, ultra-high bypass derivative of the V2500 on the A340. Airbus quickly adopted the V2500 SuperFan in favour of a conventional derivative of the CFM56, only for IAE to suddenly cancel the engine after recongising that the development timescale was unrealistic, given the technical challenges it faced. This was an embarrassing incident at a critical time in the A340 programme, and left Airbus with no choice but to switch back to the CFM56. That engine has since powered every one of the 160 A340s delivered to date.
The sheer marketing and financial inertia of CFMI overwhelmed its attempts to get a place on Boeing's Next Generation 737 family. While other projects, such as a V2500 re-engined 727-200 have come and gone, IAE has focused all its energies on the Airbus narrowbody twins. The results have been rewarding, with more than 500 A320s ordered, almost 280 in service and 225 on backlog. The A319 looks equally promising, with more than 200 V2500-powered versions on order, around 30 in service and almost 180 on order. Even the substantially larger A321 provides significant business with more than 110 on order, 61 in service and 51 on backlog.
Busy future
It was IAE's failure to win a place on the 737 that finally pushed one of its major partners into the development of a new, independently developed engine to challenge the CFM56. Pratt & Whitney, which holds a 32.5% stake in IAE, is working on the PW8000, a geared fan powerplant based on the core of the PW6000 which is in development for the A318. Despite the development of what amounts to a V2500 successor, the IAE partnership remains firm - at least on the surface.
The other partners, which include Rolls-Royce with a 32.5% share, Japan Aero Engines with 23% and MTU with 12%, have voiced some concern but for moment appear to be continuing with "business as usual". P&W says it does not wish to sell its part of the programme, particularly now that sales are booming and money is coming in at a valuable time when research spending is high, and sales in other engine programmes are suffering.
Terrett remains philosophical about both the near and longer term prospects. "Our focus is obviously on the current A320 family, and we don't see how we could get into any immediate Boeing application. Beyond the A320 and 737 is really a hard call. We keep trying to look beyond that horizon and see what might be required". He remains sceptical about the PW8000 and says: "Pratt & Whitney does not have any applications for that so far and, as far as we can see, the A320 family will be selling for many years yet. Any developments planned for that airframe we believe we can match for at least the next 10 to 12 years," he adds.
In the nearer term, IAE's plan continues to be a focus on implementing the latest technology where it makes the most business sense. The Phoenix package, for example, brought the hot and high performance benefits of the V2500-A5 to the earlier -A1 powered A320.
"That won't be the end, although there is nothing firm planned at the moment. We need to follow what the market and airframes need, and our tentacles are always out there looking for guidance. Pratt & Whitney and Rolls-Royce have the biggest portfolio of modern developments under way in the industry. We plan to flow down technology from the Trent and PW4000 families and continue to pour it into the V2500".
In the meantime, Terrett is dealing with the welcome problem of meeting demand. "So far we have 68% of the market. If we continue at that rate we will have to increase production gently over the next few years," he says, adding that the annual tally could rise from around 250 to 300 engines "depending on how active Airbus is, and how successful".
Source: Flight International
