Jet Engine Makers Losing Power
United Technologies’ CFO said the Pratt & Whitney division is seeing weak jet engine parts sales, attributing the weakness to airlines conserving cash.
UTX shares took a dive in midday trading after the comments but recovered by the closing bell, finishing up 0.8 percent.
A spokesperson for GE Aviation said the GE Aircraft Engine division has also seen softness in the market, though he wouldn’t quantify the slowdown.
As jet fuel prices soared late last year and early this year, airlines around the world dialed back their profit forecasts for the year. On average jet fuel accounts for about a third of the annual costs for airlines.
While jet fuel prices have moderated in recent weeks, they remain relatively high and are a key factor behind the cut in forecast airline profits. Just this week the International Air Transport Association almost doubled its forecast for the amount of money European airlines will lose this year. IATA also cut its profit outlook for airlines in Asia. Earnings for airlines in North America are expected to grow in 2012 as carriers cut capacity and control costs.
The commercial jet engine market is primarily divided between GE, Pratt & Whitney and Rolls Royce. GE has approximately half the global market for commercial plane engines while Rolls Royce has approximately 25 percent and Pratt & Whitney has the other 25 percent.
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