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United Set For Aviation Growth

The CEO of Pratt & Whitney (P&W) parent United Technologies (UTC) was in buoyant mood as he discussed 1Q results yesterday (May 21).

Louis Chenevert forecast that new technology such as the geared turbofan and the big corporate acquisitions of Goodrich and IAE would accelerate growth in coming years.

“Basically, I love our position in aerospace,” Chenevert told analysts. “Goodrich has gotten a lot of headlines, but IAE will also provide significant benefit to Pratt with its aftermarket business and that's sometimes overlooked.”

P&W bought out Rolls-Royce’s stake in V2500 engine manufacturer IAE last year, at around the same time it finalised its $18bn takeover of component supplier Goodrich, and the purchases contributed to a 16 per cent rise in group sales in 1Q 2013.

Aside from spares and maintenance revenue, the IAE deal strengthens United’s presence on both sides of the A320 market, with 2,500 V2500s still to deliver for current-generation models and P&W’s geared turbofan (GTF) to come on the A320neo.

United reports 3,500 GTF sales to date and is backing the new technology to revive its fortunes in the commercial engine market, where the GTF will enter service first on Bombardier’s C Series, then on the A320neo and then on the Mitsubishi Regional Jet and the next generation of Embraer aircraft.

“Pratt will return to the volume that it used to have in the 1980s and will be delivering engines at a rate that we have not seen basically for over 30 years and the ramp up all starts to occur as the C series enter the service,” Chenevert said.

Chenevert is confident that a revived aviation sector – where he expects five per cent traffic growth per year – will underpin strong United profits for years to come, with the geared turbofan driving top-line growth.

Yet P&W’s flagship engine has significant hurdles to overcome. It is the sole-source engine for the C Series, the MRJ and Embraer’s so-called G2, but none of those aircraft has won enough customers to really register an impact on the balance sheet of a company as large as UTC.

That leaves the A320neo, where the GTF – officially called the PW1100G – will compete with CFM’s Leap-1A
Chenevert predicts that the GTF will be selected for more than half of A320neo orders, even though it is trailing the LEAP-1A very slightly on the type so far.

Still, that’s already better than P&W’s share on current-generation A320s, where the V2500 only has about 40 per cent of the market, and Chenevert has also been cheered by the GTF’s popularity on the A321neo.

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