THE ABSENCE of vapor traces in clear air is an obvious sign that commercial aviation has been hit hard by covid-19. The consequences for the manufacturers of the aircraft cars that create those short-lived streaks – fewer aircraft sold, fewer flight hours and older aircraft retiring early when the fleet is cut – are a threefold blow to an industry that mostly benefits through their years long in the air after it is sold.
The immediate impact for the company, dominated by a handful of manufacturers, was fully apparent on March 11th. Rolls-Royce, a British company that competes with the aviation division of General Electric of America (GE) to power long-range wide-body aircraft has published dismal results for 2020. The hit on commercial aviation, the source of half of its revenue in 2019, resulted in an operating loss of £ 2 billion ($ 2.8 billion). It only sold 264 large engines, up from 510 the previous year.
Rolls-Royce is likely to recover the slowest, as it makes engines only for the toughest-long-term market. But Pratt & Whitney, a division of Raytheon, an air and defense group, competing with a joint venture between GE and Safran of France to make short-haul aircraft engines also showed a 20% drop in revenue in 2020. GE Aviation’s sales fell by a third to $ 22 billion, shedding 13,000 jobs, a quarter of the total.
The slump will have an impact for years to come. Engine manufacturers work more like service companies than traditional manufacturers. They sell engines at cost (or even loss) to build an ‘installed base’. For GE, the most powerful of the three, it amounts to 37 700 units. Bernstein, a broker, reckons the provision of parts and maintenance in an engine life of 20 years or longer. Production cuts by Airbus and Boeing, which the aircraft make themselves, mean lower demand for engines. Capacity reduction by airlines exacerbates matters. With early retirements and about a third of the fleet stored, transport companies can save planes for expensive parts or even swap entire engines due to an expensive overhaul for those with fewer miles on the clock.
A merger between GECAS,’s giant aircraft rental unit, and the Irish AerCap, announced on March 10, could also disrupt carmakers. Over the past few years, Airbus and Boeing have preferred to offer only one type of engine for new aircraft rather than a choice, which lowers their development costs. But that leaves airlines less room to get discounts from carmakers by threatening with a competitor. GECAS, with a fleet of more than 1,000 aircraft, given GE more power to insist that the two major planners opt for sole proprietorships. Under new ownership, his strategy could change.
Uncertainty about the next generation of aircraft is another headache. Last year, Airbus said it was aiming for a net emissions aircraft by 2035, which might use hydrogen as fuel. Boeing investigates biofuels. None of the businesses have fixed plans yet. But such announcements make Rolls-Royce, which spent £ 500 million on UltraFan, a more efficient engine but using existing technology. If the planners are serious about getting green, it can be difficult to find customers. ■
Dig deeper
All our stories about the pandemic and the vaccines can be found in our coronavirus center. You can also listen to The Jab, our new podcast on the race between injections and infections, and find trackers showing the worldwide rollout of vaccines, excessive deaths by country and the spread of the virus in Europe and America.
This article appears in the Business section of the print edition under the heading “Losing thrust”