Plane and engine makers in tug of war over future jet servicing profits

• Engine makers currently sell engines at or near a loss but profit from high-margin aftermarket services over three to four decades, while planemakers earn most revenue upfront from aircraft sales
• RTX CEO called for a 'different business model' with smoother cash flows for next-generation engines, while Airbus CEO Lars Wagner pushed to participate in decades of aftermarket revenues
• Rolls-Royce may be a wild card as it seeks to re-enter the narrowbody market after 15 years and has more incentive than rivals to accept new business arrangements

Market Summary: Aircraft Industry Revenue Battle Over Next-Gen Servicing

Key Development

The aerospace industry is heading toward a major business model confrontation as planemakers and engine manufacturers clash over dividing billions in future aftermarket service revenues tied to the next generation of narrowbody aircraft, expected around 2040.

Main Players and Positions

Planemakers (Airbus, Boeing) are demanding a share of engine aftermarket profits, arguing they provide the "route to market" for engines with limited alternative uses. Airbus Commercial CEO Lars Wagner called this a "once-in-a-lifetime opportunity" to participate in "three to four decades of aftermarket" revenue.

Engine makers (GE Aerospace, Pratt & Whitney/RTX, Rolls-Royce) currently sell engines at or near losses, recouping investments through high-margin repair and service contracts over time. RTX CEO Chris Calio indicated openness to restructuring, stating "we need to smooth out some of those cash flows and investment."

Wild card: Rolls-Royce, excluded from narrowbody markets for 15 years, is developing UltraFan technology and may be more willing to accept alternative business models to re-enter the market.

Market Implications

• Current model: Planemakers profit upfront from aircraft sales; engine makers wait years for aftermarket returns
• Industry dynamics only allow leverage during new program launches
• CFM (GE-Safran venture) is pursuing radical "open-fan" designs potentially suited to risk-sharing arrangements
• Target: 20% fuel savings through technologies including hybrid-electric engines
• GE demonstrated commitment by flying a hybrid-electric demonstrator across the Atlantic at the Farnborough Airshow

Analysts suggest shared R&D and capital investment may be the most realistic compromise in this fundamental industry restructuring.