The slump in engine orders is resulting in huge job losses - with many programmes threatened

Two months and almost 20,000 job losses after the 11 September attacks on the USA, the aero-engine business continues to struggle with the massive re-adjustments sweeping through the industry. Swelling up from "ground zero", the recessionary tidal wave first hit airlines, then aircraft manufacturers, and finally engine makers themselves. The wave is now beginning to hit second- and third-tier suppliers and contractors.

It is not only washing away jobs - it also threatens the long-term prosperity, or even survival, of several programmes. The Rolls-Royce Trent 500-powered Airbus A340-500/600 and General Electric GE90-powered Boeing 777-200LR have become the immediate victims of delays, while longer term casualties could include the BR715-powered 717-200. Established forecasts have become meaningless overnight, and major re-evaluations of mid- to long-term prospects are under way. While many, such as R-R and Honeywell, believe long-term trends remain unaffected, others see fundamental shifts taking place. All expect renewed emphasis to go into repair, overhaul and maintenance strategies, as well as upgrades.

Hope for growth

While the North American airline market is bearing the brunt of the collapse, the region may also lead renewed growth in the business jet market, which many predict will be one of the few beneficiaries of the attacks. It is not only fear of commercial flying and higher insurance costs that are expected to drive this growth, but also the impact of higher levels of security on the time of highly paid executives. The result is cautious optimism from business-aircraft makers, and retrenchment from airliner manufacturers. The engine makers are similarly split, at least in the short- to mid-term.

GE, which had already begun planning for a slowdown pre-11 September, drastically accelerated its restructuring efforts, and is in the process of laying off 4,000 employees, or 13% of its global workforce. Pratt & Whitney announced reductions of 2,500, or around 8% of its workforce, while sister company Pratt & Whitney Canada plans to axe around 600. Honeywell's engine workforce, having just escaped drastic rationalisation as part of the abandoned GE merger, is set to shrink by around 500. R-R, exposed across a broad front, appears to be worst hit. Predicting 30% fewer civil engine deliveries next year than previously expected, it plans to lay off almost 5,000 - or 17% of its 28,000 employees worldwide. Of this total, 1,200 jobs will go at the former R-R BMW operations in Germany and the former Allison plant in Indianapolis. Follow-on cuts in the engine-maker supply chain are under way, with TRW Aeronautical Systems axing 1,100 jobs, Hamilton Sundstrand cutting 1,500 and Goodrich planning similar reductions.

China's immunity

In the longer term, signs of continued growth, although at a slower or delayed pace, appear consistent for both narrowbody and widebody types. China has once again shown itself to be immune from the international situation, placing orders for Next Generation Boeing 737s within weeks of the attack and actively discussing regional jet programmes with all-comers.

Despite the odd bright patch, however, the airframe outlook is much gloomier than before 11 September. Airbus is slowing growth to planned deliveries of around 345 aircraft next year, as opposed to the 400 originally scheduled. Boeing is suffering to a much greater extent, and expects deliveries next year to fall to between 350 and 400, as compared with the best-case pre-September estimate of 520. Worse still, its mid-term forecasts are believed to be as low as 250 in 2003, or fewer than half the 522 now expected for delivery this year.

Not surprisingly, the airline picture is extremely bleak. Figures released by IATA show passenger traffic on member airlines' international scheduled services declined 17% in September, compared to the same month last year. The statistics revealed carriers had been unable to park aircraft quickly enough, and load factors fell from 78% in August to 69% in September. The picture is far worse for North American carriers, which saw passenger and freight traffic tumble 30%. Asian and European carriers saw a 12% drop overall, but IATA adds "carriers with a high US component in their services fared worse".

As ever, the best barometer of the industry's general health remains the status of the stored jetliner fleet. A quick glance at data compiled for Flight International by Airclaims makes sober reading. The day after the attacks, the first of 12 737-700s from bankrupt Midway Airlines was ferried to Goodyear, Arizona, where the total fleet was assembled within the next three days. By the 15th, the floodgates had opened - 14 aircraft ranging from Continental Boeing MD-82s to American Airlines Boeing 767-200ERs flying into storage on that day alone. The desert fleet continues to grow, with more than 50 arriving at Goodyear, Marana, Mojave and Victorville over a three-day period at the start of last month. Analysts believe the final mothballed fleet tally could top 2,000 - up from the 1,300 stored at the start of the year.

For future engine programmes all this means an inevitable slowdown. Even the long-term Boeing sonic cruiser effort, which is more likely to enter service in 2008 than 2006, is feeling the effect. Engine makers, which were studying 777 powerplant derivatives for the optimum solution, are believed to be examining new designs to meet the transonic speed requirements of the fast transport.

Dominant position

GE is also once more believed to be seeking a dominant position on the programme having established exclusivity on the longer range 777-300ER with the GE90-110/115B. The shelving of the -200LR, although disappointing for the engine manufacturer, is not considered a massive setback in view of the fact that only three firm orders had been placed.

The crisis does little for P&W, which faces growing pressure to expand its product line or suffer the consequences. The company's declining income from the once-ubiquitous JT8D is set to take another plunge with the grounding of hundreds of older Boeing 727s, 737s and McDonnell Douglas DC-9s in the wake of the attack.

Slow progress continues with the PW6000 for the Airbus A318, while higher-thrust study applications are mainly restricted to evolving solutions for the sonic cruiser, collaborating with GE on the GP7000 for the A380, and curing the annoying surge snags on the PW4000. Closer collaboration with its Canadian sibling is also likely, particularly on the Advanced Technology Fan Integrator, which paves the way for the PW800 family of gear-driven turbofans spanning the 10,000-19,000lb- (45-85kN) thrust gap between the two companies. P&WC is meanwhile busier than ever with a wide range of new turbine projects for helicopters, turboprops and business jets, including the newly won deal to power the Dassault Falcon 7X with the PW307A.

Future developments

R-R's long-term developments are focused for the moment on sonic cruiser, potential supersonic business jet projects and the Trent 900 for the A380, the latter effort bolstered by confirmation of a £250 million ($363 million) UK Government loan. The same loan, approved by the European Commission on 30 October, also supports the Trent 600 development which is expected to build on Trent 500 technology for future 747 developments.

Elsewhere in Europe, Snecma is exploring new commercial possibilities outside its vastly successful CFM link with GE, by sounding out partnerships with NPO Saturn, Rybinsk and other Russian companies on development of a regional engine dubbed the SM146. The engine could chase a joint Boeing/ Ilyushin/Sukhoi regional aircraft project timed for around 2004. Honeywell's regional ambitions continue to be wedded to BAE Systems' RJX and its AS900 engine. The AS907 version is also flying on Bombardier's Continental business jet.

Source: Flight International