IT USED to be the world’s two biggest makers of airliners that would invariably deliver new designs late and over budget. A decade ago the cost of Airbus’s A380 superjumbo soared by about €5.5bn ($6.6bn) after engineers got its 330 miles of cables in a jumble. Boeing’s rival 787 Dreamliner exceeded its forecast costs by a whopping $20bn, give or take; its parts, once assembled, did not fit together properly. But just as both planemakers are mending their ways—Airbus’s A350 and A320neo and Boeing’s 737 MAX arrived in a much more timely and economical manner—manufacturers of the engines which power the aircraft are beginning to stall.
On March 15th Boeing revealed that the new engines, the largest ever made, for its new 777X wide-body airliner had completed their first test flight. But GE, the American engineering giant that built them, is already three months behind with their development, because of hiccups with the engine’s compressor.
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GE is not the only engine-maker with problems. Pratt & Whitney, a rival owned by UTC, an American conglomerate, has had a catalogue of problems with its new engines for the A320neo. The latest, a fault with knife-edge seals on some of them, forced American and EU safety regulators to limit their use. On March 12th regulators in India, where 40% of the world’s A320neos fly, grounded all aircraft with faulty engines. That forced IndiGo, India’s largest airline, to cancel 5% of its flights.
Worse still are errors made by Rolls-Royce. Warren East, the embattled British company’s chief executive, fessed up this month that replacing faulty turbine blades in engines on 787s will cost it £580m ($800m) over the next two years. The defect has forced airlines, including ANA of Japan and British Airways, to cancel flights. Repairs could take four years or more.
Engines are complicated pieces of machinery, so teething troubles are not new, points out Richard Aboulafia of the Teal Group, a research firm. Problems with Pratt engines in 1969 delayed the development of Boeing’s 747 jumbo jet. Rolls had to be bailed out in 1972 because of costs associated with design faults in its RB211 engine. But as technology matured over the next 40 years glitches became rarer.
A new generation of engines is stretching designs and materials to their limit. At Rolls’s new engine factory in Singapore, lightweight titanium fan blades similar to the faulty ones on 787s are baked into shape in ovens. Some 150 measurements are then taken to ensure that the curves are accurate to the width of a human hair. Be off by more than that and you risk a catastrophic failure.
Strict safety rules mean defects have so far been spotted before they have caused an accident. And demand from airlines for the new generation of engines remains robust, thanks to their high fuel efficiency (over 85% of the fuel savings for the Boeing 737 MAX comes from the engines).
However, shifting more motors is not how engine-makers turn a profit. Engines are like razors, explains Adam Pilarski, an economist at Avitas, a consultancy. They are sold at a loss—of £1.6m for each one Rolls churns out, for example. The money is recouped by lucrative service contracts and data analytics, which used to command margins of up to 35%.
No longer. Slight errors in forecasts, such as underestimating repair costs or overpromising how long engines will last, can push a programme into the red, says Sandy Morris of Jefferies, a bank. That could easily happen on Rolls’s 787 engine if, for instance, the replacement blades do not last as long as expected. Moving production to cheaper countries like China or Russia could cut production costs but puts intellectual property at risk.
Airbus and Boeing pose another threat. The planemakers want to grab a share of servicing and analytics contracts to leaven their own margins. They are finding other ways of gouging the engine-makers, too, for instance by forcing them to pay billions of dollars to help develop new planes in exchange for the exclusive right to supply engines for them. For engine-makers, the sky has more limits.