Aircraft Engines and Engine Parts

SIC 3724

Companies in this industry

Industry report:

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.

Industry Snapshot

As part of the booming U.S. aerospace industry, aircraft engines and parts were valued at more than $29.5 billion in 2009 by the U.S. Census Bureau. At that time the world aircraft engine industry was dominated by three companies: General Electric (GE), Pratt & Whitney, and Rolls-Royce. Each of these companies achieved its leading role through the successful development of jet engine models for commercial aircraft, although 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., were primarily involved with small jet turbines and piston engines, which power propeller-driven aircraft.

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 anti-trust 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, making it 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 earn 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. Therefore, engine manufacturers increasingly faced with incorporating the cost of research and development spending into the price of their engines.

Most of the leading U.S. aircraft engine manufacturers are divisions of larger corporations. For example, Pratt & Whitney is a division of United Technologies, and GE Aircraft Engines is a unit of General Electric. Whitney and GE are considered to have an advantage over their British competitor Rolls-Royce because of corporate support that 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. 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, two bicycle mechanics, brothers Wilbur and Orville Wright, and a motorcycle mechanic named Glenn Curtiss, were the first to demonstrate propeller-driven aircraft. 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 were pioneered by eccentric inventors working out of their garages at night and flying in air shows during the 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 under the name Dayton-Wright Company. The company built engines, but not aircraft. The company was later acquired by William Boyce Thompson, who established the first U.S. aircraft combine. Thompson acquired the patents owned by Wright and later Martin; bought the rights to a light, European-designed engine called the Hispano-Suiza; and 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 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 U.S. aviation industry. This board was quickly 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. Donald Douglas, the leading aircraft designer on the board, was so infuriated by this action that he resigned and returned to making airplanes for Glenn Martin. Confident of the program's failure, he simply ignored the Liberty, as did many other aircraft manufacturers. Despite problems with Delco's starter and with the reconfiguration of the Liberty into an even larger 12-cylinder engine, the government remained 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 (rpms), while propellers generated the greatest amount of thrust at about 2,000 rpms. 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 Navy would soon be announcing 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 had 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 9-cylinder R-680 radial engine, which was standard on many aircraft.

Pratt & Whitney began to dominate the industry when it gained the attention of Bill Boeing, an aircraft builder in Seattle, Washington. Boeing was also looking for a replacement for the Liberty and considered the Wasp to be the perfect engine for his fighters and mail planes. When Boeing installed the Wasp to his Model 40 mail plane, he discovered the aircraft 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 the most powerful aeronautical combine in the United States. The new company, called United Aircraft & Transportation, acquired amphibious airplane builder Sikorsky, 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 U.S. designs. By 1940, however, with 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 had 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 U.S. wartime horsepower. Allison held 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, which 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 U.S. 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, but did not maintain that position. 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 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 the entirely different principle of scooping air into a chamber and compressing it with 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 back 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 U.S. 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. However, 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 U.S. 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 were used in 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, and eight of the engines were used on Boeing's massive new B-52 bomber, beginning the ongoing battle for ever-increasing amounts of jet thrust.

General Motors' Allison division, initially paralyzed by post-war 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 advances made for 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 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, although 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 triple-sonic 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 small 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 tri-jet 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 twin-jets: 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. However, 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, enabled 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. Nevertheless, 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 to develop 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 U.S. 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 on 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 enabled 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 up to 50 percent more power to an engine. The B-1, and the F101 engine GE developed for it, were canceled in 1977. However, 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. Even so, 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 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, which was 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 to 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 from 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 more than a decade, the turbine engine slowly rebounded in 1996. Airframes manufacturers and engine producing counterparts had a successful year in 1996. Intense competition had threatened profitability in the recent past but had led to further product development. General Electric and Pratt & Whitney joined forces to help reduce the threat of competition to earnings.

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

Cooperative ventures were 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.

One of the biggest shakeups in aerospace industry history occurred in the early 1990s, 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 poured 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 questioned 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. However, engine manufacturers are rewarded for successful development with a lucrative spare parts and upgrade market. Because 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 attempted to obtain completely predictable engine costs and avoid keeping inventories of back-up engines and spare parts. Leasing was packaged with fixed maintenance service costs. However, Steve Forbes argued against IRS decisions to not 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 leased 35 engines in 1996.

By 1998 the total value of aircraft engines and parts had risen 20 percent from 1997, a significant percentage of which was exports. Boeing and General Electric, as well as other original engine and parts manufacturers (OEMs) of aircraft engines, formed their own independent service centers. Outsourcing by the major airlines became more popular in an effort to 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 war-fighting aircraft only.

Meanwhile, in the military arena, the Pentagon sponsored a competition between Northrop and Lockheed for a new Advanced Tactical Fighter (ATF). 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.

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 terrorist attacks on the United States on September 11, 2001, and heightened competition from discount airlines, contributed to the air transportation sector's woes.

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 began to introduce in the mid-1990s. Following initial development costs of approximately $2 billion for the GE90, GE invested 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."

During the early years of the first decade of the 2000s, the civil aircraft manufacturing industry, suffering from the sharp decline in U.S. air travel, fell significantly. However, because of the increased focus on national security and the U.S. war in Iraq and Afghanistan, military spending was robust. Defense contracts, which had ranged between $23 and $32 billion annually from 1992 through 2000, topped $40 billion in 2003 and 2006. The civilian aircraft industry had topped $80 billion annually in shipments from 1997 through 2000, when shipments nearly reached $100 billion. After descending under $50 billion by 2003, the civilian sector led the way for a robust industry in mid-decade with $139 billion in shipments in 2005, $161 billion in 2006, and over $170 billion in 2007.

Shipments of U.S. manufactured general aviation airplanes and of piston-driven planes increased about 10 percent annually in the middle of the first decade of the 2000s. Production of business jets increased annually during the period, reflecting a market trend toward single-aisle airplanes, because regional travel was more popular and airlines began to shorten routes. Boeing's industry outlook predicted the industry would ship an estimated 25,000 aircraft by 2023. Of that total, Boeing projected that 58 percent would be single-aisle aircraft; 21 percent, twin-aisle; 17 percent, regional jets; and 4 percent, 747s or larger.

In the aircraft engine and engine parts segment, revenues increased at the end of the first decade of the 2000s. Shipment values rose from just under $28.2 billion in 2006 to approximately $38 billion in 2008. According to the U.S. Census Bureau, the aircraft engine and engine parts industry employed 63,393 in 2009. Of these, 64 percent were production workers.

Current Conditions

According to Dun & Bradstreet, aircraft engines and engine parts were manufactured by 722 U.S. establishments in 2010. Together these firms employed 69,103 people and generated more than $92.9 billion in annual revenues. Although almost 68 percent of businesses were small, employing fewer than 25 people, the larger corporations accounted for a majority of industry revenues.

Challenges for the industry included rising energy and raw material prices and downward price pressure from OEMs in an effort to control costs. Imports also continued to be much higher than exports in the industry. For example, the United States imported $13 billion worth of aircraft and engine parts in 2010 and exported $6.8 billion. Imports of aircraft engines were worth about $3.8 billion, with the majority being turbine engines, whereas exports of aircraft engines were valued at only $368 million.

Industry Leaders

As the manufacturer of the first jet engine, General Electric remained the industry leader in the early 2010s. Its GE Aviation division was the world's largest manufacturer of military and commercial aircraft jet engines. GE Aviation's $18.7 billion in sales in 2010 represented about 40 percent of its parent company's total revenues. The company employed about 39,000 people in 2011.

Rolls-Royce Corp. was a subsidiary of Rolls-Royce plc of London and was the second-largest aircraft engine manufacturer in the world. Rolls-Royce developed and produced the BR700 engine family for corporate jets and transport craft. Rolls-Royce made regional and corporate jet engines, as well as helicopter and turboprop engines. Its parent company had overall revenues of more than $17 billion and 38,900 employees in 2010.

Pratt & Whitney, a division of United Technologies, made and serviced commercial and military aircraft engines, and its rocket engines were used in space shuttles, space probes, and satellites. The company reported 2010 revenues of $12.3 billion and employed 36,000 workers.

Together, the big three provided engine technology, including vertical lift and landing parts, for the U.S. military's F-35 Lighting II fighter plane, also known as the Joint Strike Fighter. The Joint Strike Fighter Program called the plane "the world's foremost stealthy, supersonic, survivable, lethal, supportable and affordable multi-role fighter." In late 2011, the Lighting II made its first at-sea vertical landing, which Marine Corps Col. Roger Cordell called "a huge milestone."

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