Q AE's most recent, and arguably most high-profile, order was the British Airways contract to power its new Airbus narrowbodies. What would you say clinched that deal for you?
A I talked to Bob Ayling (BA's chief executive officer) shortly after the order was announced. He told me it was a very simple decision as far as he was concerned and that it was based on economic value and lifecycle costs. First came price. The whole evaluation that BA did was very much based on lifecycle costs and residual value. We also heard that their team remarked on our responsiveness. They were looking for innovation. Airbus and ourselves were working very closely together and BA seemed to like that.
Q What sort of innovations were you able to offer?
A BA does not want to overhaul engines, so we offered our fleet hour agreement - rather like a power-by-the-hour deal. But we played some tunes on it. For example, they wanted to maintain a high degree of technical input into the maintenance of engines because of safety issues they feel strongly about. So we worked out how to do it. It comes down to flexibility. Where they wanted input, we were happy to accommodate them.
Q Is this flexible attitude a key contributor to the company's recent runaway successes?
A I think we have always run the V2500 engine programme as a three-legged stool with our partner companies. IAE focuses on the customer interface, which means we are a small team. It is an extremely motivated and close-knit team. But that has always been the case.
I think what we are seeing now, and what has helped us in 1998, is that the V2500-A5 is beginning to mature. It has more than 17,000h on the wing. So we are now beginning to see that -A5 engine reliability standards are right up there.
In the case of the Europeans, who are very conscious about environmental issues such as noise and emissions, this engine is simply the best in its class.
Put all those things together and there is a realisation in the marketplace that this is the most advanced engine available.
Q Your market share in 1998, on the A320 series, has now gone over the 60% mark. How will this affect production?
A We will produce 272 engines this year - that's a dramatic increase. Up until 1995, we were only producing 65 a year. We are going to see a slight dip in 1999 because of the end of the MD-90 programme. But it goes up again in 2000 and onwards because of this year's A320 sales.
We are beginning to see a very healthy tailback in orders into the first half of the next decade. But in all reality, we are getting to the point now where we cannot sell an engine until Airbus sells a 'plane, so the future depends on that.
Q Does it concern you that you are ramping up so steeply before the next industry downturn?
A The cyclical nature of the industry is always a concern. But the next downturn will be tempered by the fact that there is still a large single-aisle replacement need because of noise and age regulations. What we have is a healthy commitment to orders up to 2002/3. After that, it is options, but many of those will be taken up because they are related to replacement issues and not growth.
Q How is the Asian crisis affecting IAE?
A Over 60% of our sales there have been delivered so the backlog is down to 13%, so it's relatively small exposure.
Q What are your chief thoughts as you bid farewell to IAE?
A This has been a gangbuster year for IAE and I'm proud to have been part of that. I have spent some eight years involved with the V2500 programme, which is 30% of my working career, so I am very close to it and of course I am sad to leave IAE. But I look at it this way - I was very lucky once in my career to get involved in the launch of a new programme. Now I get really lucky and get to do it again.
Source: Flight Daily News
