Olivier Andries highlights long wait for profit as Airbus looks to revise partnership structures for next-generation single-aisle aircraft.
Safran chief Olivier Andries insists that any discussion on a revised business model between airframers and engine suppliers must be all-encompassing, rather than focusing on individual parts.
Speaking during Safran’s first-half briefing on 28 July, Andries said: “Any potential discussion on business model has to be holistic, taking into account the [original equipment] side and the aftermarket.”
Safran is a partner with GE Aerospace in the CFM International engine venture, which supplies single-aisle powerplants to Boeing and Airbus.
Airbus commercial aircraft chief Lars Wagner told investors on 21 July, in relation to a proposed next-generation single-aisle aircraft, that there was “probably a once-in-a-lifetime opportunity to rebalance the business model” and to participate in the “three or four decades of aftermarket”.
Wagner says a new platform presents a range to think about the actors, the business model, and new partnerships – although he says that the timeline for a new single-aisle development means specific detail would be “premature”.
“We are mostly exposed to a line-fit – to an [original equipment] sales-driven company, but there are a couple of players that are involve in a 30-year aftermarket exposure,” he says.
“And we’re discussing with them [what] the merger of this business model [could] look like. So we participate also from the aftermarket exposure.”
Airbus chief executive Guillaume Faury added that there was a window for “views and ideas on how we could also embark our engine partners on a different way of doing business…and where we could do better on tapping into the long-term value created by aircraft and engines and systems”.
Andries acknowledges the Airbus comments, and stresses that there is a significant investment-return cycle in the powerplant business.
“When we invest in brand-new engine development, we have to be quite patient to get our return,” he says.
“Because not only do we spend a lot of money for the development of the engine – industrialisation, ramp-up, getting into service and all that – on top of that, for years and years, when we deliver engines to airframers, we do that at a loss. And we only make profits at the time when shop visits come up.”
Andries says the scope of discussions on a business model will depend on the nature of the engine supply decision.
“If we are in a single-source discussion…then topics could be on the table that would not be on the table if we are in a typical dual-source situation,” he says.
“At the end of the day, we will make sure that, in terms of internal rate-of-return, our ambitions are going to stay identical and remain the same before we launch a new development.”
CFM rival Pratt & Whitney’s parent, RTX, has recently indicated that it intends to shake up the business model.
RTX chief Chris Calio, speaking on 23 July, similarly referred to the heavy up-front investment and poor margins on delivery, and the reliance on aftermarket for returns.
“I don’t think that is the best model going forward,” he says. Pratt & Whitney is planning to offer an updated version of its geared-fan GTF engine, and Calio states that the business model will “need to change”.
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