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Analysis: Rolls Royce woes could boost GE, Pratt & Whitney
November 5, 2010 / 6:03 PM / 7 years ago

Analysis: Rolls Royce woes could boost GE, Pratt & Whitney

BOSTON (Reuters) - The failure of a Rolls-Royce plc engine on a Qantas Airways flight could present an opportunity for rival jet-engine makers, particularly No. 3 Pratt & Whitney, to gain market share.

Given the aviation industry’s long order cycle and the lengthy testing that follows incidents like Thursday‘s, when one of the engines on a massive Airbus A380 jet appeared to break apart in flight, it could take years for the changes to play out.

“Things move slowly in the engine business, but there is no question that you have a series of events that really put Rolls-Royce’s reputation at risk,” said Richard Aboulafia, vice president at aviation consultancy Teal Group. “Unless they can get ahead of this and prove that they can solve their many challenges, you can see an opportunity for Pratt to get back to No. 2.”

Pratt & Whitney, a unit of United Technologies Corp, has long trailed No. 1 jet engine maker General Electric Co and No. 2 Rolls.

A GE-Pratt joint venture, the Engine Alliance, makes the other engine used on the A380. That venture said on Friday it was not recommending aircraft owners take any special steps to inspect its engines, which would not be affected by Rolls’ troubles.

“There is opportunity in someone else’s misfortune and people will step into that,” said Peter Klein, senior portfolio manager at Fifth Third Asset Management, who oversees funds that hold both GE and United Tech shares. “My guess is that until (the airlines) figure out what caused this problem on the engine, they’ll probably stick with what they’ve got.”

Qantas and Singapore Airlines on Thursday grounded their A380s while they looked into the cause of the failure of the Trent 900 engine, which Qantas officials said may have been due to a “design issue.”

Singapore Airlines resumed flying its A380s on Friday, saying the planes were safe. The A380 -- produced by a unit of France’s EADS -- went into service in 2007 and is the world’s largest passenger plane.

GE through the first nine months of 2010 earned $2.48 billion on $12.82 billion in revenue at its aviation arm. Pratt & Whitney earned $1.51 billion on $9.44 billion in revenue over the same time period.

Both companies’ aviation revenues include commercial engine sales, service contracts and military engines.

DIFFERENT FOCUSES

Pratt’s major push in recent years has been its geared turbofan engine, a design that saves fuel and makes less noise than traditional jet engines.

The geared turbofan is aimed at smaller, single-aisle jets -- airlines’ workhorses on short flights -- rather than massive aircraft like the A380.

The troubles of Britain’s Rolls may mean that Pratt has one less rival to worry about as it looks to boost its share of the single-aisle jet market.

“Rolls is probably going to focus on repairing its position in the twin-aisle business,” Teal’s Aboulafia said. “They have their plate full.”

Rolls officials could not be reached for immediate comment.

Another Qantas flight, a Boeing 747-400 headed from Singapore to Sydney, turned back on Friday after experiencing engine troubles. Reuters could not immediately learn what maker’s engines were used on that plane.

Neither GE nor Pratt gloated about their rival’s problems.

“We don’t look at this as a competitive advantage. The engine makers are all united when it comes to safety,” said Rick Kennedy, a spokesman for GE Aviation. “We want to compete on the cost of operating the engines.”

Reporting by Scott Malone; Editing by Phil Berlowitz

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