A Bottleneck Over an Engine Part Turns Jets Into ‘Gliders’

(Bloomberg) -- It is aviation’s version of the butterfly effect.

A single jet-engine part small enough to fit in the palm of your hand has worsened factory delays that are rippling from Boeing Co. and Airbus SE to maintenance shops around the globe, according to interviews with more than 20 people conducted by Bloomberg.

The problem centers on production hiccups for a new type of high-pressure turbine blades, engineering marvels that reap energy from a jet engine’s fiery core. Warren Buffett’s Precision Castparts Corp. and rival Arconic Inc. have been struggling to manufacture the airfoils and a handful of other parts for an upgraded engine made by a joint venture of General Electric Co. and Safran SA, said people familiar with the matter.

The bottleneck heightens the risk for Boeing and Airbus as they push output of their highly profitable single-aisle jets to dizzying heights. Dozens of “gliders” -- assembled aircraft that lack engines -- are clustered outside the planemakers’ factories. The concern is that without significant investment in new capacity, the blade suppliers will crimp plans to push deliveries even higher as airlines clamor for planes to serve record travel demand.

The capacity squeeze is so worrisome that Precision Castparts, the leading source of the blades, cast from molten nickel alloys, sent letters notifying customers that it’s not taking new orders -- a move that hasn’t been previously reported. The company, owned by Berkshire Hathaway Inc., faces a double challenge: As it seeks to master a difficult manufacturing process, it must also boost output to meet an unprecedented surge in jet-engine production.

A Bottleneck Over an Engine Part Turns Jets Into ‘Gliders’

“It’s a really wicked brew,” Kevin Michaels, managing director at AeroDynamic Advisory, said of the forces pressuring Precision Castparts and Arconic. Since the companies cast and forge such a large share of the advanced blades, discs and vanes in jet engines, the suppliers can’t be easily replaced.

Precision Castparts is known for its brutal efficiency, along with a $37 billion takeover that is one of Berkshire’s largest deals. While sales for the first half of 2018 grew 6.5 percent from a year earlier, pretax earnings tumbled 8.2 percent -- in part due to “relatively complex manufacturing processes” on new aircraft programs, according to a filing.

A message left with Buffett’s assistant wasn’t returned. But Buffett defended the metals company’s performance during his annual shareholder meeting in May, noting that aerospace manufacturers had turned to Precision Castparts when other suppliers failed to make deliveries.

“And we say, ‘Well, we’d be glad to help you out. But we’d like about a five-year contract, if we’re going to do it because we’re just not going to make up for these other guys’ shortfalls periodically, ’” Buffett said.

Planemaker Risk

The turbine-blade problems at CFM International, the GE-Safran venture, first came to light last year. But the hurdles, which the engine maker had expected to resolve by the end of 2017, have dragged on, said the people with knowledge of the situation, who asked not to be identified because the matter is private.

The four-to-six week delays to CFM’s Leap engine peaked over the summer and should be eliminated before year-end, Safran executives said Sept. 6. Still, there’s no margin for error with output of the advanced engine due to double by 2020. Airbus has stowed about 70 narrow-body planes, down from a peak of 100 in June, while Boeing has parked about 50 of its 737 aircraft as they await Leap engines or other parts.

A Bottleneck Over an Engine Part Turns Jets Into ‘Gliders’

The blade difficulties were the main factor that led Airbus to adjust an early internal target for Leap-powered A320neo deliveries this year, one of the people said. The company has faced even longer delays for a Pratt & Whitney engine that also powers the jet family.

Airbus still expects about 800 aircraft deliveries for the year, a spokesman said, adding that “resources and capabilities are mobilized and the engine manufacturers are working hard to meet their commitments.” Boeing declined to comment and is expected to provide an update on the 737 at a conference this week.

The casting snag has also contributed to a shortage of turbine blades for older CFM powerplants, exacerbating maintenance delays. Adding to the headache for airlines: Rolls-Royce Holdings Plc also has a separate blade shortfall for the engine that powers the Boeing 787 Dreamliner. Scarce turbine components are extending some engine repairs by about one-third for American Airlines Group Inc.

“It’s a worldwide issue with no engine manufacturers immune from it,’’ David Seymour, American’s senior vice president for integrated operations, told pilots in a meeting last month. “That’s put a lot of strain on not only the new engine production but also overhauling engines,” he said. American’s flight schedule hasn’t been disrupted, he added.

Declining Orders

Precision Castparts said it was meeting production goals on “most” parts for CFM’s Leap engine, including “the difficult Leap stage 1 double-walled blade.” The company has sufficient capacity to meet its current contractual share and support future production rate increases, said Chief Operating Officer Al Power. He confirmed that Precision Castparts isn’t taking new orders for spot purchases.

“Numerous customers have been trying to tie up additional capacity over and above current contractual share by submitting spot purchase orders” for a range of parts, Power said in an email. Now Precision Castparts is evaluating those requests against its capacity and commitments to other customers and “in many cases, we’ve been able to accommodate the additional volume,” he said.

Arconic said it continues “to partner closely with our customers to ensure supply that supports their production and service needs.” The metals company expanded capacity with a LaPorte, Indiana plant in 2015. Arconic said in July that it would spend $100 million to boost production at factories in Michigan and Tennessee “to meet growing demand from aerospace engine customers.”

CFM declined to comment on the parts issue except to reiterate that the world’s largest maker of jet engines expects to get Leap deliveries on track by year-end.

To get back on schedule, the company has sent in squads of experts, known internally as “tiger teams,” to help improve suppliers’ production processes, Sebastien Imbourg, a CFM executive vice president, told reporters in July.

“It was not a technology issue,” he said, without identifying the suppliers that have struggled. “It was more a first-time yield issue on some very small number of parts, on forgings and castings.”

Production Pressure

It would be challenging enough for Precision Castparts to speed a process known as investment casting. The procedure starts with a wax mold dipped in a ceramic slurry, and ends with a turbine blade made from a single metal crystal capable of withstanding enormous forces and temperatures of 2,800 degrees Fahrenheit (1,540 degrees Celsius).

But to handle the Leap’s hotter temperatures, GE created a more complex high pressure turbine blade. While the design is a closely held trade secret, a person familiar with it described a double-wall casting with a special core and advanced inner-wall cooling.

The new engine also has two high-pressure stages, said Michaels, the consultant at AeroDynamic Advisory, which means it has about double the 80 high-pressure turbine blades on an older model, the CFM56. That increases the workload for Precision Castparts and Arconic, and inconsistent quality can make things worse.

For a mature engine, the percentage of blades produced that meet a manufacturer’s standards are typically in the 90 percent range, Michaels said. But the so-called first-time yield can be half that for a new and complex design like the Leap until production techniques are honed.

While the foundries have made progress, their yields can still fluctuate from week to week, and the inconsistency is affecting the smooth flow of parts like turbine blades, one of the people said.

Added Complexity

Since the Leap blades and the CFM56 blades are wholly different products, “yield rates are not expected to be comparable due to the significant difference in complexity,” said Power of Precision Castparts. “Our current yield rates for Leap blades are meeting planned levels for this point of production.”

The pressure is acute for CFM, which is building different versions of its all-new Leap engine for the Max, Airbus’s A320neo and Commercial Aircraft Corp. of China’s C919. CFM delivered the first of the engines in 2016, and by 2020 must churn out 2,000 of them a year. That means the venture has less than five years to fine-tune production processes for the Leap that it finessed over a quarter-century for the engine’s predecessor.

“In the past, the engine ramp-ups have been gentle. There’s time and forgiveness,” Michaels said. “Here, there’s this unprecedented change in tempo.”

Since CFM provides about 75 percent of the engines for the new Boeing and Airbus single-aisle models, the planemakers have a lot riding on whether the engine producer’s castings and forgings suppliers quickly perfect highly complex work, said George Ferguson analyst with Bloomberg Intelligence.

“In the longer run, the only limitation on the number of engines they can supply is their desire to make the investment,” he said.

©2018 Bloomberg L.P.