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Opinion: OEMs—If You’re Listening…

Have OEMs become too focused on earnings at the expense of airline customers and product quality?

I am concerned that today’s major aircraft and engine manufacturers have taken their collective eye off the ball and appear to have become far too focused on short-term shareholder value and quarterly earnings results at the expense of their airline customers and product quality.

Given the historic, record-breaking OEM order backlogs, production rates and longest super-cycle of sustained commercial airline profitability, one would think OEM boardrooms would be popping champagne bottles triumphantly celebrating their world dominance.

Sadly, this is not the case.

In both the airline and MRO industries, to earn loyalty from customers and employees, the conventional wisdom mantra for decades has been “under promise, over deliver.”  

This mantra clearly does not apply to many of the major commercial aviation OEMs that have consistently over-promised and under-delivered in recent years.

For evidence, I offer you Exhibit A:

OEM Product & Impact
Airbus The European Union Aviation Safety Agency (EASA) has recently alerted operators of the A321neo of a potential “excessive pitch” problem and issued an airworthiness directive to address the concern, in addition to significant A320neo delivery delays (see Pratt & Whitney below).
Boeing Nothing more to say about the 737 MAX that hasn’t already been said, but it should be noted that Boeing has also recently announced that the long-awaited entry into service (EIS) date for its next-generation widebody aircraft, the 777X, continues to experience on-going delays.
General Electric GE/CFM has recovered from early issues with their latest narrowbody engine (LEAP 1-A/B) that had experienced a spike in premature engine removals—only to recently admit problems with its new generation widebody engine (the GE9X), which is driving EIS delays in Boeing’s 777X program.
Mitsubishi After accepting significant MRJ orders from major regional carriers, several years of production and certification delays has led Mitsubishi to reluctantly rebrand the aircraft as “SpaceJet.”
Pratt & Whitney Ongoing delays in delivering its new geared turbofan (GTF) engines are disrupting airline fleet and network optimization plans (e.g. JetBlue, Wizz Air, IAG, Lufthansa, etc.)
Rolls-Royce Dozens of Boeing 787 aircraft remain grounded as Rolls-Royce addresses the Trent 1000 engine issues (e.g. LOT, ANA, Norwegian, etc.), costing their customers millions in foregone revenue or capacity replacement costs.
Sukhoi The lack of SuperJet aftermarket support caused severe operational disruptions at Interjet, the only major non-Russian customer.

With OEM public relations departments working overtime to temper the damage caused by the so-called “teething pains” of their respective new product portfolios, the repercussions for their customer airlines feels more like a root canal.

While many industry observers and pundits blame a toxic elixir of hubris, arrogance and/or duopolistic complacency, with virtually every major global airframe and engine OEM struggling, this cannot be coincidental, and the industry clearly has an underlying structural issue that must be addressed.

Celebrity CEO Jamie Dimon of banking giant JP Morgan recently declared the end of the long-held view that shareholders’ interests should come first. “The purpose of a corporation is to serve all of its constituents, including employees, customers, suppliers, investors and society at large,” stated Dimon.

For the past half century these same OEMs enabled the miracle that is today’s modern commercial aviation, and they are responsible for what is, without a doubt, the safest mode of transportation the world has ever seen. By refocusing their attention to supporting the needs of their customers, employees, suppliers and community first, only then can they achieve their shareholder value objectives.

OEMs, are you listening?

Jonathan M. Berger is managing director of Alton Aviation Consultancy, a global aviation and aerospace advisory firm. The views expressed are not necessarily those of Aviation Week.

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