Pratt & Whitney's Norway maintenance centre is growing rapidly, fuelled by the success of a rival's powerplant. Can it keep on expanding?
Looking out of the hotel window at Stavanger's Sola airport in Norway, where four out of five commercial departures seem to be Boeing 737s, it is not surprising that the nearby Pratt & Whitney Norway Engine Center (NEC) has seen massive growth in its CFM56 engine maintenance business since 2000.
Sitting in the north-west corner of Sola, the NEC is primed for expansion and, if growth continues on track, will need to add space in two years' time. "This year we'll do around 100 engines versus 20 in 2000," says managing director Graeme Crawford. Forecasting 120-125 engines in 2007, he says the number could be "up to 150 in 2008".
Based on the original General Electric/Snecma CFM56-3 maintenance capability set up by Norwegian airline Braathens SAFE in 1990, the business was acquired by P&W in 2000 as part of the US manufacturer's strategic expansion into engine services. This initiative continues through P&W's Global Service Partners business, the most recent move being the November announcement of a joint venture with China Eastern Airlines to develop a CFM56 overhaul site in Shanghai from 2008.
P&W's worldwide overhaul and repair network for its own engines, as well as International Aero Engines V2500s and CFM56s, has grown to 24 sites serving more than 500 customers. Six of these are engine overhaul centres and 18 are repair sites, and together they bring in aftermarket income which, in 2005, accounted for almost 60% of the engine maker's $9.3 billion revenue.
Despite the NEC's success, Crawford is under no illusions about the continuing challenges of fighting for business in the highly competitive CFM56 overhaul market. "There are around 37 [competing CFM56 engine service providers] in total around the world and 15 of those are in Europe," he says. "At least six of those are quality shops, and that's the world we live in. Quality and cost are the entry tickets. If you can't compete on those, you're not in the zone, so that's a given."
Established to maintain Braathens' CFM56-3 powered 737 "Classic" fleet, P&W added -7B and -5B/P capability to the NEC portfolio in 2001 and 2004, respectively. Over the past six years, the customer base has grown from six to about 40, several of them low-cost carriers (LCC) such as EasyJet. "We've put the focus on service, being flexible and customer supportive," says Crawford. "Many of the airlines are run on the LCC model. Most don't have engineering departments as such and are very dependent versus a traditional carrier."
Crawford says the NEC has grown "because we've approached the market with service that matches the LCC model". Using Jet2.Com (formerly Channel Express) as an example, he says: "We sent a team to East Midlands [in the UK] to rebraid a fan case overnight, and the airline had it in service on Monday. We'd never done something like that away as well as on-wing."
Adding the CFM-5B/P and -7B brought in engines sharing a common core that power the two best-selling airliners, the Airbus A320 and Next Generation 737. "It takes a lot of effort to get established with a customer, so when it came to the -3 or operators of CFM56-powered A320s, we thought these will be operating Next Generation 737s or V2500- or -5B/P-powered A320s in the future," says Crawford. The shop rate visit for the newer engines is relatively low, but the first -7Bs are starting to come through and "more will come - it's just a question of when", he adds.
Although part of P&W's acquisition strategy for CFM56 engine services was aimed at reviving and improving its links with operators of single-aisle airliners, the bottom line was making money, he says. "Engine maintenance is a means to an end. We needed it to forge new relationships with the airlines, but there's not much profit in maintenance. One of the big mechanisms is part repair, and we will offer that significantly cheaper than the original equipment maker's repair."
NEC is at the forefront of P&W's Global Material Solution (GMS) alternative parts offering for the CFM56-3, which sparked so much controversy when it was announced in February. "It grew out of our repair development process," says Crawford. "When you get into repair of parts like nozzle guide vanes, just about all you save is the serial number. You can make a new part cheaper than repairing the original. I think that's what really drove it.
"In talks with operators, we asked where we could make an impact. Some said it would be in providing alternative gas-path and life-limited parts. Some 60% of the cost of any overhaul is replacement material, and GMS covers 90% of those parts."
The balance is made up of engine maintenance costs (15%) and parts and component repair (25%), says Crawford. "So this means replacement parts is where all the biggest value is, and we're bringing in aggressive repairs and some have better yield, which scraps less parts."
P&W is completing design and development of the first set of alternative parts for the CFM56-3, and plans to begin test runs in an engine in January. US certification of the first block of 11 new parts is expected by the end of the first quarter of 2007. A second block of life-limited parts will be certificated and available by the end of the first quarter of 2008. European certification of the first block is due in the second quarter of 2007. Initial castings include first- to fourth-stage low-pressure turbine (LPT) blades, LPT first-stage vane clusters, high-pressure turbine (HPT) first-stage vane assemblies and the HPT shroud. "Life-limited parts have more complexity and it's a first in the industry for someone else to make the other guy's life-limited parts, so the authorities need more time to certify them," says Crawford.
P&W emphasises that, unlike traditional parts manufacturing approval (PMA) items that are basically replicas of the originals, the GMS initiative uses company know-how to develop all-new, but completely interchangeable parts, which it says will offer longer life and better overall performance. "All the work is done here and not using CFM proprietary data," says Crawford. "At 35,000ft you won't know the difference, but when it comes to the repair bill, you'll definitely notice something."
Only United Airlines has been announced as a customer for GMS on the CFM56-3, but Crawford says: "We have several others interested. We are in negotiations and it's fair to say there's high interest." Standard original equipment manufacturer and other parts will continue to be offered alongside the new-build P&W parts.
P&W is targeting only the 4,000-plus CFM56-3 market, and is keeping quiet on any plans to advance to the -5 or -7 variants. "We've got to walk before we can run, but if we're successful on the -3, then I guess it's possible," says Crawford. "But it all depends on the business case."
NEC staff are working to streamline the flow of engines through the site while planning for the future. "The focus is on growing Norway to be as big as we can get it," says Crawford. "We have two years before we have to add bricks and mortar, but we have land available for expansion." A new engine test cell will come on line early in 2007, he adds.
As for construction capabilities in this part of Norway, Crawford says: "There's a huge capability in concrete here because of the North Sea oil industry. The challenge is getting them scheduled."
Source: Flight International