Opinion: How Engine OEMs Hold Airframers Captive

The launch of a new clean-sheet aircraft by Boeing or Airbus might be years away, but if it is to be a financial success, incentives and profit drivers need to be realigned between the airframers and the engine OEMs—GE Aerospace, Safran, Pratt & Whitney and Rolls-Royce. In the current large commercial aircraft industry structure, engine OEMs’ profit drivers are in direct opposition to those of Boeing and Airbus. Everyone is in the same boat, but they are rowing in different directions.

Engine OEMs are razor-razorblade businesses. Developing, certifying and industrializing the production system for a new engine program can cost more than $10 billion. After working through the development process, engine OEMs often must address teething issues and typically lose money on engines sold to Boeing and Airbus. That means the business case for a new engine program is predicated on the ability to generate high margins in the aftermarket through the sale of spare parts and maintenance services. Most engines undergo three overhauls during their 25-year useful lives; the final overhaul typically occurs 18 years after the engine enters service. For engine OEMs, new aircraft deliveries that grow the installed base are a positive, but deliveries that drive the replacement of older aircraft and engines are a negative.

Boeing and Airbus generate their profits and cash flow primarily from the delivery of new aircraft. They are largely agnostic as to whether an airline allocates a new aircraft for fleet growth or to replace an older, maintenance-hungry aircraft. With nearly 15,500 aircraft in their collective backlog, Boeing’s and Airbus’ goals are to ramp up deliveries as quickly as possible to increase their profits. To do so, they need the cooperation of the engine OEMs. After all, an aircraft cannot be delivered without its engines.

Engines have been a bottleneck to higher aircraft delivery volumes since before the COVID-19 pandemic, and that is unlikely to change anytime soon. In 2018-19, when Boeing and Airbus combined were producing roughly 110 narrowbodies per month, gliders were accumulating. Even with aircraft delivery volumes still below prior peaks, engine availability remains a constraint, particularly for Airbus. Four years ago, Airbus planned to increase A320 production to 75 aircraft per month by 2025. That target has since been pushed back to 2027 and appears ambitious, given that A320 production rates were in the low 60s per month at the end of 2025. Moreover, Airbus and Pratt have yet to reach an agreement on future volumes for the geared turbofan (GTF) engine program.

CFM has made significant progress ramping up Leap engine output in 2025, but it has fallen short of delivery expectations in recent years, too. CFM’s Leap engine delivery guidance from 2018 through 2024 is illustrative. Had CFM met its initial targets each year, 10,165 Leap engines would have been delivered in that period. However, only 8,627 Leap engines actually were delivered, 1,538 fewer than planned. If 10%, or 153, of those undelivered engines would have been sold as spares, the remaining 1,385 could have gone to the airframers to support production of about 692 additional narrowbodies.

Legendary investor Charlie Munger once said, “Show me the incentive, and I will show you the outcome.” That saying rings true in the commercial aerospace industry. Publicly traded companies are required to disclose management compensation structures in their annual proxy statements. No engine OEM’s management compensation is tied to Boeing and Airbus aircraft deliveries, and likely they never will be. While revenue growth is partially driven by new engine deliveries, it carries only a 20% weighting in GE Aerospace’s annual executive incentive plan; operating profit and free cash flow each carry 40% weightings, and commercial aftermarket sales are a key driver of both metrics. At RTX, executives have no annual or long-term incentives tied to revenue or GTF engine deliveries.

In an environment where output is constrained by skilled labor and material availability, it is economically irrational for engine OEMs—and other aerospace suppliers that derive the lion’s share of their profits from spare parts sales—to prioritize Boeing and Airbus production ramp-ups over the aftermarket. Until an agreement can be reached to align the profit drivers of airframers and engine OEMs, Boeing and Airbus should refrain from launching a new clean-sheet aircraft program. If they do not, the airframers will remain captive to the engine OEMs’ willingness to increase engine output.