After having strong footholds in commercial and military markets for decades, the centre of gravity for MTU Aero Engines' business is shifting firmly to the civilian arena.
In 2011, the Munich-based engine manufacturer and maintenance, repair and overhaul (MRO) provider generated 15% of its €2.9 billion ($3.6 billion) revenues via military programmes. The share has been shrinking for years - it was down 8.3% in 2011 - while the overall business is growing thanks to wider activities in the commercial field.
In addition to increased MRO services, MTU plans to double revenue to €6 billion in 2020 through involvement in new engine programmes such as Pratt & Whitney's PW1000G geared turbofan (GTF), increasing its share in the International Aero Engines (IAE) consortium, and via income from involvement in current-generation engines such as General Electric's CF6. Chief executive Egon Behle says the target is not based on above-average growth estimates but regular, organic increases.
The medium-thrust IAE V2500 makes the greatest sales contribution to MTU's balance sheet. The company manufactures the low-pressure turbine (LPT) and supports the complete powerplant at its overhaul shops in Hanover and Zhuhai, China.
In July, MTU increased its IAE shareholding from 11% to 16% after the withdrawal of founding partner Rolls-Royce from the consortium and sale of its 32.5% stake to Pratt & Whitney.
MTU's site in Rzeszów, Poland, which specialises in manufacturing turbine blades and integrating subassemblies, will take over all additional V2500 work. Existing production tasks will also be transferred to Poland as the main production site in Munich gears up for the PW1000G programme.
Rzeszów is set for further expansion, says Behle, as it focuses on labour-intensive part and subassembly production, while the high-cost location in Munich will concentrate on higher-value tasks. MTU is building a hall in the Bavarian capital for the largely automated production of blisks. The operational start of 8,100m2 (87,000ft2) facility is planned for the end of the year and probably the biggest boost for the Munich site will come with the production of the PW1133G from 2015.
A third of the production volume for the Airbus A320neo engine is to be assembled at the headquarter plant on the city's northwestern outskirts. While the integration of a commercial engine will be a new task for MTU - the company assembled the ill-fated PW6000 at its Hannover overhaul shop, although that series remained on a limited scale - it will not lead to large expansions in Munich. The required capacity is currently used for military programmes and will be reallocated to the new commercial type.
The PW1100G will gradually replace the V2500 production between 2015 and 2017, says Anton Binder, executive vice-president commercial programmes at MTU. But aside from maintaining the company's foothold in the crucial, high-volume narrowbody market, the GTF will also offer access to a broader range of new aircraft types. MTU will participate at varying degrees - between 15% and 18% - to the PW1000G variants for the Bombardier CSeries, Mitsubishi Regional Jet and Russia's future Irkut MS-21 narrowbody family, albeit not as a risk and revenue-sharing partner as in the case of the A320neo engine. But given that the clean-sheet developments have yet to prove themselves in the market, it might have been a wise move to put the company's full weight behind the A320 update.
Hinting at a likely re-engining programme for Embraer's 170/190-family, Behle sees potential for an additional GTF application on "new aircraft which have yet to be launched" by the Brazilian airframer; the current-generation of the regional jet is exclusively powered by General Electric CF34 engines. He also expects "some growth" for the small thrust PW800 "over the next years on [heavy business] aircraft which do not exist yet". The in-development PW800 will share the core with the PW1000G family but not the geared fan its larger siblings have.
In the widebody arena, Behle foresees a possible participation in an engine for a 777 successor. While he has no doubt that the long-haul twinjet will be updated at some point, he says it is "utterly unclear" when this will happen. MTU currently manufactures the turbine centre frame for the GEnx high-thrust turbofan for the 747-8 and 787, for which production is just being ramped up. The manufacturer has established two flow lines for the complex part with a high production volume. For the Engine Alliance GP7000 engine for the A380, MTU produces the turbine centre frame, too, as well as the LPT.
FUTURE TURBOPROPS
Based on its experience with the Europrop International TP400-D6 engine, which powers the Airbus Military A400M - MTU is a joint parent company of Europrop International alongside ITP, Rolls-Royce and Snecma - Behle also sees potential to become involved in a future turboprop development. "There are no concrete evaluations or agreements yet [for a 70-90 passenger turboprop aircraft by ATR or Bombardier]," he says. "But I am convinced that there is certain potential in the turboprop arena, and that either of the two engine manufacturers [GE and Pratt & Whitney] will join such a programme."
MTU is contributing the intermediate pressure compressor, turbine and shaft to the TP400 as well as conducting final assembly. With deliveries of the A400M due to begin in 2013, production is just ramping up now. But with the company's other main military engine programme - the Eurojet EJ200 for the Eurofighter/Typhoon - well under way, it is unclear what will happen from 2017, when deliveries for the ordered fleets for both types should be largely completed.
Behle expects the military business to remain "more or less stable" during the next few years. The company immediately felt the pinch of the German armed forces' structural reform programme which began in 2009, involving a significant reduction in the overhaul volume. "MTU has adjusted to this by transferring capacity to the civilian sector," he says. "I think this process is irreversible."
An 18% shareholding in General Electric's GE38 turboshaft powerplant for heavy helicopters such as the Sikorsky CH-53K - MTU's first development role for a module in a US military engine programme - should also help to stabilise the segment. But Behle says there is little prospect for growth in the foreseeable future. Export contracts for the Eurofighter/Typhoon and A400M could sustain the production lines to some extent, but have yet to be secured.
POTENTIAL PARTNERS
A year ago, MTU agreed with China's AVIC Commercial Aircraft Engine to study a potential partnership to develop an indigenous powerplant for the Comac C919 narrowbody - the type will initially employ the CFM International Leap1-C engine from its planned service entry in 2016.
"It is still open how this [engine development] should be taken, whether this should be taken in one step from the beginning and what our involvement will be," says Behle. "We need to define together what is feasible if we take available technologies in China as well as technologies, which have yet to be developed." Comac has indicated the change to the projected CJ-1000A engine could take place in 2020.
While Behle sees no need to expand the OEM footprint beyond Munich and Rzeszów, the outlook is different for the MRO segment. Aftermarket support generates about 40% of MTU's revenues, and is expected to grow 7% in the near future. The company is extending its 156,000m2 overhaul shop in Zhuhai - a 50:50 joint venture with China Southern Airlines - to increase capacity from about 200 V2500 and CFM56 engine annual visits to 340.
As proximity to customers is a decisive factor in the MRO field, MTU is evaluating new facilities in growth markets, notably the Middle East and Latin America. While there are "no concrete plans at the moment", Behle says the maintenance provider is evaluating business potential in these regions and he cannot rule out opening a plant within the next three years.
Last year, MTU took over 75% of Dallas-based on-wing engine maintenance specialist Retan Aerospace to increase its presence in the North American market and broaden its spectrum to services which do not require a shop visit. While MTU has been doing such work with mobile teams from existing facilities, Behle says on-wing support will be gradually expanded in other regions, although this will not necessarily mean acquiring companies, as in the Retan case.
Source: Flight International
