SIC 3724
AIRCRAFT ENGINES AND ENGINE PARTS



This industry includes establishments primarily engaged in manufacturing aircraft engines and engine parts. This industry also includes establishments owned by aircraft engine manufacturers and primarily engaged in research and development on aircraft engines and engine parts, whether from enterprise funds or on a contract or fee basis. Also included are establishments engaged in repairing and rebuilding aircraft engines on a factory basis. Establishments primarily engaged in manufacturing guided missile and space vehicle propulsion units and parts are classified in SIC 3764: Guided Missile and Space Vehicle Propulsion Units and Propulsion Unit Parts; those manufacturing aircraft intake and exhaust valves and pistons are classified in SIC 3592: Carburetors, Pistons, Piston Rings, and Valves; and those manufacturing aircraft internal combustion engine filters are classified in SIC 3714: Motor Vehicle Parts and Accessories. Establishments primarily engaged in the repair of aircraft engines, except on a factory basis, are classified in SIC 4581: Airports, Flying Fields, and Airport Terminal Services; and research and development on aircraft engines on a contract or fee basis by establishments not owned by aircraft engine manufacturers are classified in SIC 8731: Commercial Physical and Biological Research.

NAICS Code(s)

336412 (Aircraft Engine and Engine Parts Manufacturing)

Industry Snapshot

The total value of complete aircraft engines was approximately $6.4 billion in 2002, according to the U.S. Census Bureau. This amount represented a decrease from 2001 levels of $7.3 billion and 2000 levels of $7 billion. In addition to decreasing shipment values, unit shipments also declined during the early 2000s. Although figures were not available for 2002, units fell from 15,626 units in 2000 to 13,571 units in 2001.

The consumption of aircraft engines is obviously a function of aircraft production and usually a multiple function due to the fact that many aircraft have several engines. The health of the aircraft industry is well documented under SIC 3721. However, during the early 2000s the larger aircraft industry was feeling the negative effects of a downturn in the air transportation sector. This downturn affected orders for new aircraft and thus had an impact on the market for aircraft engines.

Although the U.S. Census Bureau recorded nine firms within the industry in December 2002, the world aircraft engine industry is dominated by three companies: General Electric (GE); Pratt & Whitney, which is a division of United Technologies Corporation; and Rolls-Royce. Each of these companies achieved its leading role through the successful development of jet engine models for commercial aircraft, though GE and Pratt & Whitney maintained significant interest in the development of engines for military aircraft. The big three offered jet engines in nearly every thrust range and competed with each other for use on commercial aircraft produced by Boeing and Airbus S.A.S. Several other engine manufacturers, including Textron, Inc.'s Lycoming, were involved primarily with small jet turbines and piston engines, which power propeller-driven aircraft.

Aircraft engine manufacturers enjoyed a long period of industry growth from the end of World War II until the first years of the 1990s, when changes in military spending and changing commercial air travel patterns caused dramatic shifts in industry planning and expectations. By the late 1990s, the future of the aircraft engine market seemed likely to depend on the development of big engines with a thrust of 60,000 pounds or more, according to Interavia. Each of the leading engine manufacturers was expected to develop engines in this category. By late 2002 GE offered its GE90 turbofan engine, capable of generating 115,000 pounds of thrust.

Organization and Structure

The manufacture of aircraft engines was once controlled by the same companies assembling aircraft and operating airlines, but industry regulation initiated in 1934 forced aircraft engine manufacturers to work independently of aircraft manufacturers. This antitrust legislation is partly responsible for the intense competition that characterizes the aircraft engine industry in which each of the leading engine makers seeks to provide engines to fit the requirements of a wide range of aircraft. Engine companies are typically chosen to design an engine at the concept stage of a new aircraft. Once the engine is developed, the engine builder may try to adapt the design for other aircraft. In fact, it is common to find the same engine on a variety of competing aircraft. Engine manufacturers rarely develop an engine that is not capable of multiple applications.

For decades following the end of World War II, military funding supplied much of the research and development money that allowed U.S. manufacturers to continually upgrade their engines. Technical breakthroughs achieved on military projects found their way into commercial engine applications, thus allowing engine manufacturers to achieve substantial profits from commercial engine sales. This arrangement changed significantly after the end of the cold war when the U.S. military budget decreased dramatically. Thus, engine manufacturers were increasingly faced with incorporating the cost of research and development spending into the price of their engines.

The leading American aircraft engine manufacturers are divisions of larger corporations. For example, Pratt & Whitney is a division of United Technologies, GE Aircraft Engines is a unit of General Electric, and Lycoming is part of Textron. Pratt & Whitney and GE are thought to possess an advantage over their British competitor, Rolls-Royce, because of their corporate support, which allows them to better withstand industry cycles.

Background and Development

The development of powered aviation, which began with the Wright Brothers in 1903, fell mainly to those who understood engines, rather than those who understood flight. In fact, aeronautical scientists—such as Samuel P. Langley, who was perhaps the first to describe the dynamics of lift over a wing—had very little to do with powered aircraft. Instead, a pair of bicycle mechanics, Wilbur and Orville Wright, and a motorcycle mechanic named Glenn Curtiss, were the first to demonstrate propeller-driven aircraft. In fact, Curtiss gained an early lead over the Wrights and a third aviator, Glenn Martin, precisely because he knew how to build lighter, more powerful motors. The first 10 years of motorized flight was pioneered by eccentric inventors working out of their garages by night and flying in air shows by day. These barnstormers relied on show earnings to pay for their building efforts, and many died in the process.

Industrial support for aviation did not materialize until European aviators demonstrated the strategic use of aircraft in World War I. Major industrial involvement in the United States occurred only after the U.S. Army requested funding for aviation projects. Financiers and industrial magnates were drawn to the industry not by their love of aviation, but by the opportunity to enrich themselves with government contracts. Some of the earliest investors in aircraft ventures were automobile manufacturers and automobile fleet owners. They sponsored specific aircraft builders and later pulled dishonest financial stunts to take control of aircraft builders' fledgling companies.

Edward Deeds, founder of Delco and the first to commercialize an electric starter, formed a one-sided partnership with the well-known Orville Wright called the Dayton-Wright Company. The company built engines, but no aircraft. The company was later acquired by William Boyce Thompson, who established the first American aircraft combine. Thompson acquired the patents owned by Wright and later Martin; he bought the rights to a light, European-designed engine called the Hispano-Suiza, and he acquired the facilities of the Simplex Automobile Company in which to build his engines. Shut out from the management of the company by Thompson and unhappy at only building engines, Wright retired and Martin started another company.

Unwilling to allow any single group of financiers to corner the aviation industry, U.S. government officials created the Aircraft Production Board to oversee the development of the American aviation industry. This board was soon dominated by the automobile industry, which assembled an industrial federation called the Manufacturers Aircraft Association. Auto manufacturers, led by the Packard and Hall-Scott Motor Car companies, convinced the Aircraft Production Board to support the mass production of a single type of aircraft motor—a 400-horsepower, 8-cylinder model called the "Liberty." As evidence of the industry's widespread complicity, this huge water-cooled engine featured an unnecessary electronic ignition system supplied by Delco. Completely inappropriate for use on existing aircraft designs, the monstrosity was better suited for a truck or a boat than an aircraft.

Under pressure from auto manufacturers, the government ordered the production of 11,000 Liberty engines. This action so infuriated Donald Douglas, the leading aircraft designer on the board, that he resigned his position and returned to making airplanes for Glenn Martin. Confident of the program's failure, he, like many other aircraft manufacturers, simply ignored the Liberty. Despite problems with Delco's starter and with the reconfiguration of the Liberty into an even larger 12-cylinder engine, the government remained perfectly comfortable entrusting the future of aviation to such experienced transportation pioneers as Packard, Hudson, Nash, and Ford.

An Indianapolis, Indiana, engine builder named Jim Allison recognized the futility of placing the huge Liberty motor in the light aircraft of the day and decided to build a light engine of his own. As he pursued the development of lighter engines, he stumbled across a variety of high-quality manufacturing techniques. Engines, he discovered, ran most efficiently at about 30,000 rotations per minute while propellers generated the greatest amount of thrust at about 2,000 rotations. What was required was a precisely machined reduction gear. Allison was the first major manufacturer to perfect an engine and clutch mechanism with acceptable tolerances. His lead in this area greatly advanced the Allison reputation and provided the company with hundreds of profitable orders.

Another engine builder of the day was Frederick Rentschler, one of the original founders of Wright Aeronautical. Rentschler grew increasingly weary of managerial interference from automobile magnates, whom he thought were interested only in short-term profit. The development of engines required years of expensive and often fruitless experimentation. Rentschler resigned from Wright in 1924 and began searching for a factory and financial backing to develop better engines. Like Douglas and Allison, Rentschler knew the Liberty design was a failure. He learned from a naval officer that the service would soon announce a competition for a powerful, lightweight, air-cooled design.

In 1925, Rentschler acquired the Pratt & Whitney company, a small machine tool manufacturer in Hartford, Connecticut. Rentschler raided the Wright company of its best engineering talent and enlisted the help of Chance Vought, an aircraft builder. By Christmas of that year, Pratt & Whitney completed its first air-cooled radial engine, the 425-horsepower Wasp. The radial design meant that the cylinders were arranged in a circular fashion around the prop shaft, rather than being lined up along the shaft as in an automobile. This design allowed the cylinders to be directly exposed to the thrust of air generated by the propeller. As a result, there was no need for a bulky radiator or heavy liquid coolant, as in the Liberty. Barely one year old, the Pratt & Whitney company secured an order from the Navy for 200 Wasps, providing the capital needed to develop an even larger, 525-horsepower engine, the Hornet.

In 1929, automotive interests organized yet another company, Curtiss-Wright, bearing the name of aviation's first pioneers. While neither Glenn Curtiss nor Orville Wright was active in the company, it did manage to turn out a successful product, the Cyclone radial engine. General Motors made the switch to air-cooled engines when its Dutch designer, Anthony Fokker, chose Pratt & Whitney's Wasp engine for his aircraft. Ford, meanwhile, dropped out of the aircraft business to concentrate on automobiles. The Lycoming Foundry and Machine Shop, established in Williamsport, Pennsylvania, in 1908, began building aircraft engines during the late 1920s. Its position in the industry was secured by the success of its nine-cylinder R-680 radial engine, which was standard on many aircraft.

Pratt & Whitney gained dominance in the industry when it gained the attention of Bill Boeing, an aircraft builder in Seattle, Washington. Boeing, too, was looking for a replacement for the Liberty and considered the Wasp to be the perfect engine for his fighters and mail planes. When Boeing married the Wasp to his Model 40 mail plane, he discovered the craft could carry an additional 500 pounds of mail or even passengers, making it extremely profitable. Boeing, Rentschler, and Vought later merged their companies into what became America's most powerful aeronautical combine. The new company, called United Aircraft & Transportation, acquired the amphibious airplane builder Sikorsky, the light aircraft manufacturer Stearman, Jack Northrop's Avion experimental aircraft company, propeller makers Hamilton and Standard Steel, and a combination of small airline companies.

United Aircraft grew at an extremely fast pace. While the Great Depression virtually destroyed the industry, United Aircraft continued to expand, taking over the routes of defunct airline companies and providing a stream of exclusive Pratt & Whitney-driven aircraft for the military. In 1934, Senator Hugo Black led an investigation of the industry that resulted in legislation that broke up the aircraft combines. The Boeing Company was separated from United Aircraft, as were the airline services, which were reincorporated as United Airlines in Chicago. Pratt & Whitney, however, remained a division of United Aircraft.

The importance of efficient, powerful engines was well understood by manufacturers in Germany and Japan, who embraced aviation as an instrument of warfare during the mid-1930s. Companies such as Daimler-Benz and Mitsubishi closely studied the advancements in American engine designs and were heavily sponsored by their governments. As a result, during the years leading up to World War II, Japanese and German aircraft advanced beyond the capabilities of American designs. By 1940, however, with the war raging in Europe, the U.S. government began a massive mobilization of its war industries.

Pratt & Whitney, which had developed a 2,000-horsepower Double Wasp engine, was required to vastly expand its production capacity. Still unable to meet the demand for nearly 8,000 of these engines, Pratt & Whitney licensed production of its designs to Ford, Buick, Chevrolet, and Nash-Kelvinator. By the end of the war, Pratt & Whitney and its licensees produced a staggering 363,619 aircraft engines, representing half of all the horsepower used by the U.S. military during the war.

Meanwhile, Curtiss-Wright's R1820 Cyclone was used to power the Boeing B-17 bomber, the Douglas Dauntless dive bomber, and a number of DC-3s. A second design, the R3350, powered Boeing's B-29 bomber and, later, Lockheed's Constellation airliner. Curtiss-Wright provided 35 percent of American wartime horsepower. Allison occupied a special position during the war, producing 70,000 of its V1710 engines for aircraft such as the Lockheed P-38 and Curtiss P-40 Tomahawk. Lycoming, then a division of Avco, built only smaller engines—one of which powered Sikorsky's first helicopter in 1939.

Another manufacturer, the Garrett Corporation, was drawn into engine manufacture during the war. Garrett entered the market first by building intercoolers and turbochargers, devices that heated and concentrated the mix of oxygen and fuel in the combustion chamber for higher engine performance. Garrett turbochargers were fitted to existing engines on American aircraft, vastly improving their performance. Garrett also was active in the production of air conditioning systems and flight controls. Established in 1935 by Cliff Garrett, the company emerged from the war with an excellent reputation among airframe builders and later launched an aggressive diversification that included the development of engines. Garrett's first engine design was the 575-horsepower Model 331 gas turbine, intended for use on helicopters and light aircraft. This engine was later used to power the Beechcraft 18, Aero Commander, and Mitsubishi models.

Curtiss-Wright emerged from the war as the number two engine builder in the industry—a position it did not hold for long. Rather than plow its substantial earnings back into product development, Curtiss-Wright chose to invest its profits in other businesses, thus ceding its position to more enlightened competitors such as Pratt & Whitney and General Electric.

During the war, government war procurement officials had designated Pratt & Whitney, Curtiss-Wright, and Allison to produce only piston-driven engines. Meanwhile, the development of jet engines was given to Allis Chalmers, General Electric, and Westinghouse, since they were experienced with steam turbines. The introduction of the jet engine was the most significant development in aviation since the Wright Brothers' first flight. Existing engines used fuel to drive pistons down, turning a shaft while driving other pistons up for another firing. Jet engines used an entirely different principle: air was scooped into a chamber and compressed by a series of turbine blades. Behind these blades, a highly refined fuel was sprayed into the compressed air and ignited. The resulting blast was channeled out the rear of the engine, where it drove a second turbine that powered the intake compressors. With their enormous thrust, jet engines could propel an aircraft at much greater speeds than conventional propellers.

The first jet engines were successfully built in Germany and England. Britain's Rolls-Royce held a strong lead in jet engine technology, due to the work of the inventor Frank Whittle. It was several years before American companies assumed leadership in jet technology, using Whittle's designs. General Electric, whose experience in turbine technology originated with steam-driven electrical generators, was given a government contract to develop Whittle's engine for a new jet, the Bell Aircraft XP-59A, which first flew in 1942. A practical jet engine emerged only after the war, however, with the J33 and J35, which were used to power the Boeing B-47 and Northrop B-49 flying wing. GE turned over its licenses for these designs to Allison in 1946.

Westinghouse scored an early coup in jet technology by building the first axial flow engine; earlier models used less efficient centrifugal compression. But Westinghouse lost its early lead in jet technology when the Navy changed its weight specifications for the engines and canceled millions of dollars worth of orders for Westinghouse engines. Unable to adapt quickly, Westinghouse simply abandoned the jet engine market.

Pratt & Whitney was first introduced to jet engines as a subcontractor to Westinghouse. Later, because American law required that foreign designs for military craft be manufactured domestically, Pratt & Whitney built versions of Rolls-Royce's Nene and Tay jet engines, which saw action during the Korean War. Pratt & Whitney's future was secured when it achieved a major engineering breakthrough. General Electric had been planning engines with up to 7,000 pounds of thrust, but Pratt & Whitney decided to leapfrog other competitors by building an engine that would produce 10,000 pounds of thrust. The result, the J57/JT3, was used to power the F-100, F-101, and F-102 fighters while eight of the engines were used on Boeing's massive new B-52 bomber. Thus the continuing battle for ever-increasing amounts of jet thrust began.

General Motors' Allison division, initially paralyzed by postwar labor action, pursued jet engine development with GE's J33 design. Allison manufactured 15,525 of these engines for a variety of fighter aircraft and secured its position in the postwar engine market. Lycoming capitalized on its involvement with helicopters after the war. Under the direction of Dr. Anselm Franz, the company built the T53, the first jet engine designed specifically for helicopters. Nearly 20,000 were produced.

Following World War II, government-led industry coordination ended and free market competition, fueled by cold war military budgets, began. As a result GE terminated its technological partnership with Allison and began work on the J47, which drove the North American F-86 in combat over Korea. A later model, the high-performance J79, powered Convair's B-58, the Lockheed F-104, and McDonnell F-4 Phantom. As in the airframe industry, many of the advancements earned from wartime engine development were applied to commercial markets. Thousands of airliners were retrofitted with more efficient turbo-powered engines.

The advent of jet-powered bombers gave aircraft builders the experience necessary to create jet airliners. After Britain's DeHavilland built the first commercial jet, the Comet, Boeing, Douglas, and Convair scrambled to develop their own jetliners. When Boeing's 707 was introduced in 1954, it was powered by four Pratt & Whitney JT3s. Douglas' DC-8, which took to the air in 1955, used the same engine. A commercial version of GE's J79 powered Convair's short-lived 880 and 990 jetliners.

While jet engine companies had successfully converted military engines to civilian uses, the Defense Department continued to press for even greater advancements in propulsion technology. The leading manufacturers began testing ramjets, engines that were designed for such high-speed flight that they required no compressor fans. General Electric was given a contract to build a nuclear-powered jet engine, and Pratt & Whitney was asked to develop liquid hydrogen-fueled rocket motors. Allison built a counter-rotating propeller engine for Convair's vertical takeoff and landing "Pogo Stick" airplane. All the projects were successful, though only the rocket technology was developed.

Within the conventional jet engine arena, General Electric built a massive new J93 engine in 1963. This boron-fueled engine, rated at 30,000 pounds thrust, was developed for North American's brilliant but obsolete Mach-3 B-70 bomber. Pratt & Whitney had better luck in triplesonic flight, developing the J58 engine for Lockheed's SR-71. Capable of crossing the United States in only 68 minutes, the SR-71 established numerous performance records. Pratt & Whitney also built the J75 for Lockheed's high altitude U-2 spy plane. The J52, however, was the company's military mainstay. In production for 30 years, the J52 powered a long line of naval aircraft.

Among the smaller manufacturers, Curtiss-Wright's sales were declining rapidly by 1960. In 1963, as part of a scheme to bolster its position in the market and acquire a staff of talented engineers, Curtiss-Wright launched a hostile takeover bid for Garrett. Garrett's management remained deeply suspicious of its suitor, however, and enlisted the support of Signal Oil & Gas, a company with the financial resources to thwart Curtiss-Wright's bid. Signal acquired Garrett in 1964, permitting the company to operate autonomously. Garrett was firmly established as a manufacturer of auxiliary power units, small engines that are used to provide power to start main engines. Garrett built this business into a series of successful small propulsion engines, principally the TFE731, which powered the Learjet 25, Cessna Citation, and Hawker Siddeley 125 business jets.

Lycoming regained its position in the fixed wing market in the mid-1960s, after developing its own small turbofan. This design evolved into the ALF502 which, like Garrett's design, was popular with a variety of business jets. The engine was chosen to power the Hawker Siddeley 146, which eventually emerged as the popular British Aerospace BAe 146 commuter jet.

In the airliner market, Allison briefly extended the life of turboprops by developing a T56 power plant for a family of Convair airliners, the 440, 540, and 580. Meanwhile Boeing was developing a new medium-range trijet called the 727 and asked for an engine similar to Rolls Royce's Spey. Allison formed a partnership with Rolls-Royce but lost the 727 business to Pratt & Whitney, whose JT8D became a bestseller in the industry. In addition to the 727, the versatile engine was used on four twinjets: the Boeing 737, Douglas DC-9, Sud Aviation Caravelle, and Dassault Mercure.

While Pratt & Whitney and its JT8D dominated the commercial market, General Electric's J79 derivative declined with the increasingly unpopular Convair jetliners. But General Electric expanded its market for jet engines well beyond the aircraft industry. Variations on the company's engines powered missiles, helicopters, hovercraft, speedboats, and even electrical power generators. GE's J85 series became a favorite among the growing ranks of private jet manufacturers. The company scored a major coup in 1965 when it was chosen to develop the engines for Lockheed's super transport, the C-5 Galaxy. To lift the massive freighter into the sky, GE had to develop a more efficient high-bypass "turbofan" engine.

With early turbofans, about half the air taken into an engine passed concentrically around its combustion chamber, providing additional thrust and allowing the engine to operate more efficiently. GE's high-bypass design, the TF39, increased the bypass ratio to eight to one. Four of the engines, which generated 41,100 pounds of thrust, would enable the C-5 to carry 132 tons of cargo. Airline companies immediately embraced the quieter, more fuel-efficient turbofan, which was perfectly suited for subsonic passenger aircraft. But because the engines were considerably fatter, it was impossible to retrofit the thousands of existing aircraft that were designed for the long, skinny JT8D turbojet. Instead, turbofans were reserved for the new line of jumbo jets. The TF39 gave GE the lead in engines for large passenger aircraft such as Boeing's 747, McDonnell Douglas' DC-10, and Lockheed's L-1011. A commercial version of the high-bypass turbofan, the CF6, was developed for the DC-10 in 1971 and Airbus' A300 in 1974.

Pratt & Whitney began development of its own high-bypass engine in 1960. The company's TF30 was used aboard General Dynamics' F-111 and Grumman F-14 and led to a civilian version, the JT9D, which could generate more than 43,000 pounds of thrust. The JT9D entered service with the 747 in 1969 and was the only 747 power plant until 1975, when GE developed a CF6 for the jumbo jet.

Meanwhile, Lockheed's L-1011 Tristar, a competitor to the DC-10 and 747, was powered by RB211 engines from Rolls-Royce. Allison, Rolls-Royce's American partner, wisely elected to steer clear of the RB211, sure that its pricing was flawed. When problems later arose with the engine, Allison avoided the brush with bankruptcy that nearly ruined Rolls-Royce and Lockheed. Allison did, however, convert its production of Rolls-Royce's Spey into its own TF41, which went on to power Vought's A-7 Corsair. In addition, Allison's T56 turboprop was chosen for the Lockheed C-130 transport, Grumman E-2C, and Lockheed Orion.

During the late 1960s, GE was asked to apply its experience with the J93 toward the development of an engine for Boeing's supersonic transport. The resulting design, the GE4, generated nearly 70,000 pounds of thrust. Four of these engines would enable the SST to reach 1,800 miles per hour. However, Boeing canceled the program after airlines lost interest in the SST.

General Electric was awarded a contract to develop a new engine for Rockwell's B-1 bomber in 1970. Unlike the B-52, which the bomber would replace, the B-1 was fitted with afterburners. A common feature of fighter jets, the afterburner was a mechanism that detonated a second spray of fuel into an engine's exhaust thrust. The resulting blast could add as much as 50 percent more power to an engine. The B-1, and the F101 engine GE developed for it, were canceled in 1977. But the engine went back into production when the B-1 program was revived in 1981.

Engine manufacturers benefited greatly from drastically increased defense spending under the Reagan administration. But the heavy investment in defense industries during those years led to several scandal-ridden cases of overcharging and non-performance. While few of these cases involved engine manufacturers, the laws put in place to correct the abuses still applied to them. These laws were meant to extract more economical and responsible development by mandating strict competitions for government business, particularly between General Electric and Pratt & Whitney.

General Electric's F404 engine, developed for McDonnell Douglas' F-18 fighter, was fitted to Grumman's X-29, an experimental high-maneuverability aircraft with forward swept wings. The engine was later used for Lockheed's F-117 Stealth fighter—which flew secretly as early as 1981—and SAAB's Gripen fighter.

Pratt & Whitney developed the F100 in 1970 for McDonnell Douglas' F-15. The engine, which could send an F-15 to 98,000 feet in only three minutes, was later fitted to General Dynamics' F-16. However, turbine wear on the F100 took years to correct, enabling General Electric to step in with an alternative. GE combined the finest elements of the F101 and F404 to produce the versatile F110. This engine powered all U.S. leading fighter jets, including the F-15, F-16, and F-14. Eventually, GE's F110 gained 75 percent of the F100's market.

The loss convinced Pratt & Whitney to pay closer attention to the Pentagon's needs. The company developed variants with special new capabilities and by 1990 had won back a quarter of the government's Fighter Engine Competition business. Meanwhile, Pratt & Whitney developed a second derivative of its F101, the F118, which was chosen to power Northrop's B-2 Stealth bomber.

Strong growth in airline traffic during the 1970s led aircraft manufacturers to create a new family of airliners to replace the aging DC-8, DC-9, and 727. Boeing designed two large twin-jets, the 757 and 767. The European Airbus consortium introduced a new line of A310, A320, and A330 aircraft. McDonnell Douglas, however, elected to update its existing models. The DC-9 became the MD-80, and the DC-10 became the MD-11. Development centered on improved avionics and control functions, but the greatest advancement occurred with engines, which were now quieter and far more fuel-efficient.

Pratt & Whitney's position in the commercial markets started to wane in the 1980s. The company was reviled for its growing arrogance and lack of customer focus and had rested too long on the laurels of its successful JT8D. General Electric's deliveries surpassed Pratt & Whitney's in 1986. General Electric captured a large portion of the new market through its CF6 series and a partnership with the French engine manufacturer SNECMA called CFM International. The company's CFM56 was used to re-engine the old fuel-guzzling DC-8 and military versions of the 707 and was the standard engine on Airbus' A320. In 1987, GE formed a second partnership with Garrett called the CFE Company. This company developed the CFE738, a 6,000-pound thrust turbofan for the small jet market, specifically the Dassault Falcon 2000 business jet.

Eager to remain in the game, Pratt & Whitney established its own international partnership with the German Motoren und Turbinen Union and Italy's Fiat Avianzione. The company developed the PW2037 for Boeing's 757, and the PW4000—designed specifically to compete with the CF6—for the 747. The PW2037 caused General Electric to abandon its entry for the 757, but Pratt & Whitney still faced competition from a modified version of Rolls-Royce's RB211. Pratt & Whitney later formed a second consortium, called International Aero Engines, with MTU, Fiat, Rolls-Royce, and Japanese Aero Engines. The company's V2500 engine was used to power Airbus' A320. The partnerships helped preserve Pratt & Whitney's position in the industry until it could mend its relations with airline companies and aircraft manufacturers.

While manufacturers were often able to convert military engines into commercial versions, the two markets held fundamentally different requirements. Airline companies wanted highly reliable, fuel-efficient engines that were quiet and did not pollute. The military, on the other hand, wanted powerful lightweight engines that remained cool enough to avoid detection by enemy tracking. During the mid-1980s, demand grew for a new type of commercial engine with little or no military use. Conventional high-bypass jet engines burned too much fuel for the increasingly cost-conscious airline industry, which requested development of a new hybrid propjet.

General Electric and Pratt & Whitney immediately began work on elaborate jet engines whose turbines drove two rear-mounted counter-rotating propellers with crescent-shaped blades. This "propfan," while slightly slower than conventional engines, was twice as fuel efficient as turbofans. The propfan was an unducted pusher propeller design, intended for installation on the rear fuselage of aircraft. Accordingly, Boeing and McDonnell Douglas tested propfans on a 727 and MD-80 and began development of two new twin-propfan designs, the 7J7 and MD-91. In England, Rolls-Royce began work on a ducted propfan, with its blades enclosed within a large shell, called the contrafan. Such a propfan would be suitable for the thousands of aircraft whose engines were wing-mounted.

During the late 1980s, a vicious cycle of competition drove airlines into near bankruptcy while fuel prices dropped. Airline companies canceled orders for hundreds of new aircraft, choosing instead to squeeze a few more years of service out of their existing fleets. As a result, airframe and engine manufacturers were forced to shelve the propfan indefinitely. Despite this, Boeing began planning a larger super twinjet, the 777, intended to compete with the MD-11. Pratt & Whitney's PW4000 was chosen as the launch customer for the 777.

After the worst recession in over a decade, the turbine engine slowly rebounded in 1996. Airframes manufacturers and engine producing counterparts had a successful year in 1996. Intense competition threatened profitability in the recent past but also led to the development of products. General Electric and Pratt & Whitney teamed to help reduce the threat of competitiveness to earnings.

Fundamental forces have reshaped the jet engine market. Solutions to the challenges posed by developing near perfect engines and competition have resulted in alliances between competitors, new pricing mechanisms, increased participation in aftermarket, and a reduction in the number of engine types per platform.

Cooperative ventures are being forced because of competition. Two rivals—GE Aircraft Engines and Pratt & Whitney—had joined to develop a power plant for the Boeing 747-500X primarily in reaction to GEAE, Rolls-Royce, and Pratt's price competition for the Boeing 777. Boeing subsequently decided to cancel the 747X program. Airbus remained committed to the super jumbo, however. Several joint ventures such as GE Aircraft and Pratt & Whitney, Rolls Royce and Pratt & Whitney, and GEAE and Snecma had varying degrees of success. In the past several fell apart over strategies or details.

The early 1990s saw one of the biggest shakeups in aerospace industry history, as military budgets shrank and fewer people chose to fly. Commercial airlines canceled or postponed their orders for airplanes, and aircraft manufacturers, in turn, canceled their orders for aircraft engines. The industry recession proved particularly challenging for the aircraft engine industry, which was in the process of developing a number of engines for the expected orders of large jet-powered aircraft. General Electric, which had been pouring money into the development of its GE90 engine for the Boeing 777 aircraft, was the most severely affected of the big three engine manufacturers, but all three companies faced dismal short-term prospects. Industry analysts wondered if the intense competition that had characterized the aircraft engine industry through the 1980s could continue through the 1990s.

One difficulty faced by engine manufacturers involved development timeframes. Dozens of years are needed to develop an engine and expand it across a wide range of aircraft, and dozens more to realize that engine's impact on the market. Luckily, engine manufacturers are rewarded for successful development by a lucrative spare parts and upgrade market. Since aircraft engines represent such a large investment for airlines, those airlines seek to extend engine life up to 25 years through frequent maintenance and upgrading.

Leasing engines became increasingly popular as airlines sought to obtain totally predictable engine costs and to avoid stocking inventories of back-up engines and spare parts. Leasing was packaged with fixed maintenance service costs. However, Steve Forbes argued against IRS decisions not to allow regional carriers to expense the cost of inspecting aircraft engines and a proposed technical change regarding leasing rules that could cost the industry millions of dollars. Willis Lease Finance Corporation was leasing 35 engines in October 1996 and expected to increase this number to 40 by the end of 1996 with additional increases in 1997.

By 1998, the total value of aircraft engines and parts had risen 20 percent from 1997; an increase of approximately 3 percent was expected for 1999. The industry was expected to continue a 3 to 4 percent annual increase through 2003. Exports accounted for nearly 40 percent of 1996 shipments, increased 25 percent in 1997, and had a forecasted increase of 20 percent for 1998.

Boeing and General Electric, as well as other original engine and parts manufacturers (OEMs) of aircraft engines, formed their own independent service centers. Outsourcing was becoming more popular by the major airlines to help reduce costs. The U.S. government also saw this as a means for savings by shifting civilian and military personnel from non-combatant support to warfighting aircraft only.

Meanwhile, in the military arena, the Pentagon sponsored a competition for a new Advanced Tactical Fighter (ATF), between Northrop and Lockheed. Similarly, General Electric and Pratt & Whitney were asked to compete for the engine to drive the ATF. In this test, Pratt & Whitney's F119 would challenge GE's F120. The successful model could be worth more than $1 billion to the winner.

Current Conditions

By 2003, the aircraft industry was struggling in the wake of downturns in the air transportation market. The leading U.S. airlines lost more than $7 billion in 2001 and more than $3 billion through the first half of 2002. A number of factors—including a slack economy, a decline in travel following the attacks of September 11, and heightened competition from discount airlines—contributed to the air transportation sector's woes. United Airlines, which accounted for some 20 percent of U.S. flights, filed for bankruptcy in December of 2002, after losing $4 billion over two years and laying off roughly 20,000 employees.

In February 2003, Aerospace Industries Association (AIA) president and CEO John W. Douglass commented on what these conditions meant for the aircraft industry: "The effects of the downturn in airline activity since 9/11 have rippled through the aviation manufacturing base of the United States, resulting in lower deliveries of aircraft and related equipment. At the same time, the downturn has masked long-term system capacity problems that will re-emerge as the airlines return to long-term growth."

In addition to reduced orders for new engines, the bleak conditions within the aircraft industry also meant a decline in parts and repair revenues. However, this situation did not prevent manufacturers from investing in research and development initiatives that led to more powerful engines. One example was General Electric's GE90-115B. Capable of generating a massive 115,000 pounds of thrust, the engine was the latest in a series of engines the company first introduced during the mid-1990s. Following initial development costs of approximately $2 billion for the GE90, GE was investing an additional $600 million in the GE90-115B.

In the December 30, 2002 issue of Fortune , Philip Siekman said that GE's engineers considered the GE90-115B to be the "most ambitious product and technology development program in their history." In addition, he explained: "At a time when the airlines, GE's principal customers, are nosediving toward bankruptcy, trailing plumes of burning cash, the company has a dozen new or updated engines under development. Outsiders might well wonder whether GE has jettisoned common sense. But it doesn't have a lot of choice. Engines, often sold at breakeven or at a loss, are not where this business makes its money. They are a means to an end: parts and service revenues … will account for 40 percent of the business's $10.6 billion in sales this year and possibly as much as two-thirds of its $2.1 billion in operating profit."

According to Airline Business , the leading aircraft engine manufacturers were putting increased pressure on suppliers of parts and components during the early 2000s. This pressure applied to everything from individual fasteners to more complicated modules. In addition, these suppliers faced competition from other companies—including firms in the forging and casting industry—that were trying to encroach upon their market. However, given the strategic partnerships that existed between the leading three engine manufacturers and their suppliers, as well as high technological requirements, this was no easy task for new, would-be competitors.

Industry Leaders

As manufacturer of the first jet engine, General Electric still held the title as the world's leading manufacturer of military and commercial aircraft jet engines in the early 2000s. The company also produced, as well as serviced, small jet engines for airlines, charter and leasing companies, and the military. GE Aircraft Engines reported $11.1 billion in revenue for 2002. GE's CF6-80C2 engine was used to power Air Force One, the 747 airplane used by the U.S. president. In addition to developing its GE90-115B engine, which was capable of generating an incredible 115,000 pounds of thrust, by 2003 GE was in partnership with Rolls-Royce to create an engine for the F-35 Joint Strike Fighter.

Headquartered in London, Rolls-Royce plc's customer base included some 500 different airlines and 160 armed forces. The company acquired Indiana's Allison Engine Company in 1995. The Rolls-Royce companies developed and produced the BR700 engine family for corporate jets and transport craft. The company's former BMW Rolls-Royce division was responsible for development, production, and repair/overhaul of small gas turbines and components for civil and military engines. For almost 30 years, it manufactured engine parts for the German military at its Oberursel facility in Germany. By 2003 Rolls-Royce was involved in a number of different joint ventures including International Aero Engines and Industria de Turbo Propulsores. The company recorded 2001 sales of $9.2 billion.

Pratt & Whitney, a division of United Technologies, supplied engines to more than 50 percent of the world's commercial airliners in the late 19990s and early 2000s. Pratt & Whitney partnered with General Electric in the late 1990s to create The GE-P&W Engine Alliance. This program was designed to upgrade the performance of the GP7000 series of engines for Airbus A3XX and the Boeing Growth 747. By 2003, an increasing number of aircraft with Pratt & Whitney engines were being retired, and the company was losing market share to its competitors. In 2002, the company recorded revenues of $7.6 billion.

Workforce

In 2000 there were 81,961 employees in the aircraft engine industry, 47,153 of whom were specifically engaged in production. This number represented a decline from 1997 levels of 84,373 employees and 49,122 production workers. Production workers earned an average of $21.25 per hour in 2000, down from $19.52 in 1997. By 2002 the larger aerospace industry was suffering its largest downturn in 50 years, which was not good news for the aircraft engine industry.

Further Reading

Aerospace Industries Association. "Aerospace Employment Hits 50-Year Low," 4 March 2003. Available from http://www.aia-aerospace.org .

——. "AIA Releases Top Ten Issues for 2003," 26 February 2003. Available from http://www.aia-aerospace.org .

Carpenter, Dave. "United Airlines Files for Bankruptcy." Associated Press, 9 December 2002.

Commission on the Future of the U.S. Aerospace Industry. "Commission on Aerospace Delivers Final Report and Findings to President Bush and Congressional Leaders Concerning Air Transportation, Homeland Defense, and Space Sector Health." 18 November 2002. Available from http://www.aerospacecommission.gov .

General Electric Aircraft Engines. History, 1999. Available from http://www.ge.com .

Osborn, Graeme. "Under Pressure." Airline Business, 3 December 2002.

Pinkham, Richard. "Under-Powered." Airline Business, 9 December 2002.

Siekman, Philip. "GE Bets on Jet Engines: Despite Airlines' Woes, It Is Counting on Efficiently Produced New Models to Generate Decades of Profits." Fortune, 30 December 2002.

U.S. Census Bureau. U.S. Department of Commerce, Economics and Statistics Administration Annual Survey of Manufactures, February 2002. Available from http://www.census.gov .

——. "Civil Aircraft and Aircraft Engines: 2001.". Current Industrial Reports, September 2002. Available from http://www.census.gov .

——. "Civil Aircraft and Aircraft Engines: December 2002.". Current Industrial Reports, February 2003. Available from http://www.census.gov .

U.S. Industry and Trade Outlook 1999. McGraw-Hill, 1999.



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