Rising fleet utilization, a soon-to-be growing installed base and a bigger share of engines under long-term maintenance agreements has Pratt & Whitney bullish on its aftermarket outlook, United Technologies Corp. (UTC) CEO Louis Chenevert says.
"The good news is the airlines are flying. The cycles are there, the hours are there," Chenevert said during the Deutsche Bank Global Industrials and Basic Materials Conference June 4. "So we always said when we had the slump that they would come back, and it is coming back."
Lower aircraft utilization and concerted efforts by operators to defer work suppressed engine overhaul revenues during the last several years. A notable uptick that began in the second half of 2013 seems to be taking hold, with many aftermarket providers, including UTC’s Pratt and UTC Aerospace Systems (UTAS), reporting strong year-over-year improvements.
"As we [get to] the back-end of the year, compares will get more difficult," Chenevert noted. "But for now we’re up double-digit in Pratt, double digit in UTAS, and I see that continuing."
Two key legacy models, the PW2000 and PW4000, have "stabilized," while the International Aero Engines V2500 is "what really moves the needle," he added.
The V2500 installed base, which cracked the 2,000-engine threshold in 2011, should break through 2,900 sometime next year. On its heels is the geared turbofan (GTF) series fleet, which—depending on the version—is 60% to 80% covered by Pratt long-term fleet management programs (FMP). That compares to about 20% for the PW2000 and 40% for the PW4000, Chenevert notes.
"This is [a] game changing process and creates a much better model," he says of FMP.
Pratt’s installed base is transitioning as legacy models like the JT8D and JT9D and the early PW2000s and PW4000s are phased out. Counting IAE products, the Pratt family’s installed commercial engine base has dropped from about 7,000 in 2005 to less than 6,000 today, a Jeffries analysis shows. The IAE fleet has more than doubled, to about 2,700 engines, but the legacy Pratt fleet has declined 47%, to about 3,000 engines.
But the macro fleet trend is changing. Continued V2500 growth and a backlog of some 5,500 GTF engines slated to start delivering next year will soon reverse the overall fleet decline.
Chenevert points out that the fleet shift also means resetting the overhaul cycle. The new-engine maintenance honeymoon period means only about half of the current Pratt and IAE engines in service have made their first shop visits, he says.
Pratt also is streamlining its aftermarket business, aligning two dozen profit and loss centers to focus on a single bottom line (Aviation DAILY, May 28) . The simplified approach is expected to help slash turn times by as much as 20%, company officials project.