THE ABSENCE of vapour trails in a clear sky is an obvious sign that commercial aviation has been hit hard by covid-19. The upshot for the makers of the jet engines that create those ephemeral streaks—fewer planes sold, fewer flying hours and older aircraft retiring early as fleets are pruned—is a triple blow for an industry that mostly profits by keeping them in the air for years after they are sold.
The immediate impact for the business, which is dominated by a handful of manufacturers, was on full display on March 11th. Rolls-Royce, a British company that competes with the aviation division of America’s General Electric (GE) to power long-haul wide-body jets, published grim results for 2020. The hit to commercial aerospace, source of half its revenues in 2019, led to an operating loss of £2bn ($2.8bn). It sold just 264 large engines, down from 510 the year before.
Rolls-Royce is likely to recover most slowly, because it makes engines only for the hardest-hit long-haul market. But Pratt & Whitney, a division of Raytheon, an aerospace-and-defence group, which vies with a joint venture between GE and Safran of France to make engines for short-haul planes, has also revealed a drop in revenues in 2020, of 20%. GE Aviation’s sales slipped by a third to $22bn and it is shedding 13,000 jobs, a quarter of the total.
The slump will have an impact for years. Engine-makers operate more like services firms than traditional manufacturers. They sell engines at cost (or even a loss) to build an “installed base”. For GE, the mightiest of the three, this amounts to 37,700 units. In an engine’s lifespan of 20 years or more, supplying spare parts and maintenance brings in three to five times the sale price, reckons Bernstein, a broker. Production cuts by Airbus and Boeing, which make the planes themselves, mean lower demand for engines. Capacity cuts by airlines are making matters worse. With early retirements and around a third of the fleet in storage, carriers can salvage planes for expensive spare parts or even swap entire engines due for a costly overhaul for those with fewer miles on the clock.
A merger between GECAS,’s huge plane-leasing unit, and Ireland’s AerCap, announced on March 10th, could also disrupt engine-makers. In recent years Airbus and Boeing have preferred to offer just one type of engine for new planes rather than a choice, which cuts their development costs. But it leaves airlines with less room to extract discounts from engine-makers by threatening to go with a rival. GECAS, with a fleet of over 1,000 planes, gave GE more power to insist that the two big planemakers opted for sole sourcing. Under new ownership its strategy may change.
Uncertainty over the next generation of aircraft is another headache. Last year Airbus said it is aiming for a net-zero-emissions plane by 2035, perhaps using hydrogen as a fuel. Boeing is looking into biofuels. Neither company has firm plans just yet. But such announcements worry Rolls-Royce, which has spent £500m on UltraFan, a more efficient engine but one that uses existing technology. If the planemakers are serious about going green, it could struggle to find customers. ■
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This article appeared in the Business section of the print edition under the headline “Losing thrust”