Historical category analysisHARRISON XUE
MGMT 731 – TECHNOLOGY STRATEGY, FALL 2015
PROFESSOR KARL ULRICH
Executive summary12 companies have manufactured commercial turbojet engines, since the first turbofan engine was produced in 1941 and jet engines were invented in in the late 1930s
◦ 5 manufactures are joint ventures between other leading players, combining best-in-class technology
◦ Few companies have exited the space, likely because the massive investment required limits entrants
Both the number of airline passengers and the number of aircraft in service has increased steadily from the 1960s to the present, driven by a growing middle class that can afford air travel
The high-bypass turbofan engine is the dominant design of commercial jet engines and follows a performance S-curve, measured in energy output per unit fuel (foot lb. hours per lb. fuel)
◦ The current design displaced turboprops due to superior performance at high speeds and altitudes
Turbofan manufacturers large, diversified companies with strong staying power
Manufacturer Parent companiesCountry of
orginEntry date
Exit
dateDisposition
Avic Commercial Aircraft Engines - China 2026 Current Current
Aviadvigatel - Russia 1963 Current Merged with Perm Engine Group
CFM International 50:50 JV between GE and Safran France, United States 1982 Current Current
Engine Alliance 50:60 JV between GE and Pratt & Whitney United States 2008 Current Current
General Electric - United States 1971 Current Current
Honeywell - United States 1992 2003 Exited category
International Aero Engines Pratt & Whitney, Rolls Royce, MTU, JAEC US, UK, Japan 1989 Current Current
Ivchenko Progress - Ukraine 1974 2004 Exited category
Lycoming - United States 1983 1995 Exited category
Power Jet 50:50 JV between Snecma and NPO Saturn France, Russia 2011 Current Current
Pratt & Whitney - United States 1960 Current Current
Rolls Royce - United Kingdom 1964 Current Current
Source: “Commercial Engines: Turbofan Focus,” Flight Global, 2015, “List of aircraft engine manufacturers,” Wikipedia, https://en.wikipedia.org/wiki/List_of_aircraft_engine_manufacturers
0
1
2
3
4
5
6
7
8
9
10
Number of companies
12 companies manufactured commercial turbofan engines, 3 have exited
Source: “Commercial Engines: Turbofan Focus,” Flight Global, 2015, “List of aircraft engine manufacturers,” Wikipedia, https://en.wikipedia.org/wiki/List_of_aircraft_engine_manufacturers
0
2
4
6
8
10
12
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
Number of companies
Cumulative entrants
Cumulative exits
Number of commercial turbofan engine manufacturers over time 1960-2030 (forecast)
Number of active manufacturers
Number of commercial airline passengers maintained a ~6% CAGR for 1970-2014
0
5
10
15
20
25
20051990 1995 2014
+6%
2010200019851980
Number of passengers
carried (Billions)
19751970
+5%
+7%
Commercial airline passengers carried, billions 1970-2014
Source: “Air transport, passengers carried,” World Bank, 2015
Aircraft manufacturers, airlines and passengers
may all represent turbojet “users,” number of
passengers shown here to illustrate penetration
of turbojet-powered transportation
Number of commercial jet aircraft in service has grown exponentially to ~23,500 in 2014
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2025
Number of commercial
jet aircraft in service
20101960 19951965 2005200019901985198019751970 2015 2020
Number of commercial jet aircraft in service, 1960-2026
Note: Analysis involves extrapolation of yearly data from 1995 to 2014
Source: “Statistical Summary of Commercial Jet Airplanes Worldwide Operations: 1959-2014,” Boeing, 2014, “Jet Airplanes in Service,” Jet Information Services, 2014
Source: http://www.thestreet.com/story/12851078/1/how-will-ge-ge-stock-respond-to-35-billion-aircraft-engine-investment.html, http://www.geaviation.com/company/aviation-history.html
For assessing product performance vs. cumulative investment, investment assumed to be proportional to the number of aircraft in service, a key revenue driver
2014-2019 turbofan jet engine investment projected to be $1.4 BB annually
1960-2026 investment estimated from $1.4 BB, proportional to aircraft in service
◦ Cumulative investment calculated from estimated annual investment
Commercial turbofan efficiency has improved approx. +80% from 1941-2010
Source: “Guide to Aviation Efficiency,” Air Transport Action Group, 2010, “Air Transport and Energy Efficiency,” Transport Papers, 2012, “Air Freight: A Market Study,” World Bank, 2009
Efficiency gain of commercial turbofan engines
over time
For passenger aircraft, efficiency gains separated into gains from engine improvement vs. gains from aircraft design
◦ 59% attributable to engines
◦ 41% attributable to aircraft
Engine efficiency difficult to measure◦ Efficiency varies by application, e.g. wide vs.
narrow-body
◦ Performance characteristics vary by environment e.g. temperature, pressure, humidity
Specific full consumption (SFC) in lbs. fuel per hour * foot lb. force is a general measure that can be converted to approximate efficiency in work per lb. fuel
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
1940 199019701950 19801960 20102000
Year
Fuel efficiency (hr*lbf/lb fuel)
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80
Cumulative
investment ($ BB)
Fuel efficiency (hr*lbf/lb fuel)
Turbofan efficiency S-curve demonstrates diminishing returns from current investment
Source: “Guide to Aviation Efficiency,” Air Transport Action Group, 2010, “Air Transport and Energy Efficiency,” Transport Papers, 2012, “Air Freight: A Market Study,” World Bank, 2009
Efficiency gain of commercial turbofan engines versus
cumulative investmentCurve combines efficiency over time with estimated cumulative investment
◦ Each year on the time graph converted to the corresponding cumulative investment
Investment before 1960 difficult to estimate
◦ Lack of commercial applications before the BAC Comet-4
◦ Military and government investment difficult to quantify and sensitive to inflation assumptions
◦ Total R&D before 1960 assumed to be 3x cost of US Air Force F-22 program
Turbofan engines are a mature
technology that has followed a
performance s-curve when accounting
for government investment
High-bypass turbofan design maintains domination of commercial jet engines
Dominant design centered around combination of a large fan upfront with a relatively small jet engine
◦ High-bypass design includes large fan portion with a much higher bypass ratio than other types of jet engines
◦ Fan and diffuser designed for high volume air flow to minimize exhaust velocity and reduce waste
◦ Exotic alloys are used for turbine blades with vane cooling technology to allow higher temperatures
◦ No afterburners in the exhaust nozzle
Modifications further improve the dominant design◦ Multi-spool compressors allow higher compression
◦ Geared turbofans increases maximum efficiency envelope
◦ Ceramic matrix composites used to allow even higher temperatures
Source: “Turbofan,” Wikipedia, https://en.wikipedia.org/wiki/Turbofan
With evolution of air travel, ramjets and propfans may displace turbofans
Turbofan engines are themselves a disruptive technology, replacing the turboprop
◦ Turboprops cannot match turbofan efficiency at high altitudes, speeds
◦ For turboprops, a gas turbine drives a propeller blade and exhaust gases provide negligible thrust
◦ Shift in airline industry towards longer routes made propellers less efficient due to low pressure at high altitudes and inefficient and turbulent flow at high fan blade speeds
Ramjets and un-ducted turbojets (propfans) may displace turbojets ◦ For supersonic speeds, ramjets do not require a compressor or fan
blades and can potentially be more efficient
◦ For speeds below 450 mph, un-ducted turbojets combine the performance of a turbofan with the fuel economy of a turboprop
Best jet engine technology is application-dependent
Source: “Turbofan,” Wikipedia, https://en.wikipedia.org/wiki/Turbofan, “Propfan,” Wikipedia, https://en.wikipedia.org/wiki/Propfan, “Ramjet,” Wikipedia, https://en.wikipedia.org/wiki/Ramjet
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