MTU Aero Engines, the German OEM and maintenance provider, expects its profit margins to widen from 2018 as it winds down a phase of investment in research, development and tooling.
The Munich-based company produces the low-pressure turbine and first four stages of the high-pressure compressor for Pratt & Whitney’s PW1000G geared turbofan, which has now entered production.
Overall, that gives MTU about 15% of the PW1000G program, which is expected to deliver 350-400 engines next year.
These will drive up sales of new equipment by almost 10% in 2017, though MTU made no mention of the production delays that have befallen the PW1000G this year.
To keep costs in check, MTU says it has manufacturing plants at globally competitive locations, while increasing digitalization should improve efficiencies and strengthen its market position, the company adds.
For real value, however, the company’s shareholders will look to the aftermarket.
“We expect our highly profitable spare parts and maintenance business to generate the highest increase in revenues as of 2018,” says Reiner Winkler, CEO of MTU Aero Engines.
Commercial engine maintenance is expected to lead MTU’s earnings growth, with maintenance sales expected to rise between 10% and 15% next year.
Thereafter MTU’s maintenance strategy rests on partnerships with OEMs and airline maintenance arms such as Lufthansa Technik, with which the company is planning a joint venture for PW1000G support.
“We have built up strong relationships that we aim to expand in the future as a means of driving forward the industrialization of our commercial maintenance business,” says MTU chief program officer Michael Schreyögg.
Spare parts sales, meanwhile, are expected to grow by about 5% next year, led by platforms including the V2500 – the predecessor to the PW1000G – which MTU is also a manufacturing partner on.