Sunday, May 4, 2003

Engine pioneer predicts crisis

Rowe: Dark skies ahead for airlines

From his home overlooking the ocean in Key Largo, Fla., one day last week, Brian Rowe could see the sky was decidedly gray and ominous.

The view for the retired president and CEO of GE Aircraft Engines was not unlike the storm facing the commercial aviation industry, which is losing billions of dollars and thousands of jobs from a triple whammy of recession, the war in Iraq and fears of Severe Acute Respiratory Syndrome (SARS).

The crisis has triggered a wave of airline bankruptcies, calls for bailouts and even talks of re-regulating the industry. The undertow is forcing key suppliers, such as Evendale-based GEAE, to cut hundreds of jobs.

Rowe, who turns 72 on Tuesday, is a legendary figure in the jet engine industry. For nearly 40 years until his retirement in 1995, he led the development or implementation of every engine program that has built GEAE into the world's largest jet engine maker.

Today, the University of Dayton, as part of Dayton's centennial of flight celebration, presents Rowe with an honorary doctorate of engineering recognizing his contribution to commercial aviation.

Before departing for Dayton, he discussed the state of the airline industry and his career with reporter Mike Boyer.

Question: There's no question in your mind this is the worst crisis the airline industry has ever faced?

Answer: It was difficult after the last Gulf War, but I don't think the airlines were as close to bankruptcy. I think this is much worse.

The industry's salary structure is one thing. But I think the fare structure is another. It's easy to criticize people, but I don't think they're charging enough for their seats.

Traffic declines and they cut prices and then people expect prices to be down all the time.

(Still,) I think for next couple years, people are only going to fly when they have to. Just because fares are cheap, I don't think they're going to fly.

Question: How did the airlines get locked into this cycle of declining traffic and then price-cutting?

Answer: Competition drove it to some extent. You see the lack of competition in Cincinnati where Delta charges pretty good fares. They'd like all their airplanes to go through Cincinnati.

I think there's no question (low-fare carriers like) Southwest Airlines had an impact.

Once one of these guys goes bankrupt and gets forgiven a lot of debt and gets restructured on their (aircraft) lease rights, the other guys almost have to do it to stay competitive.

Question: Short of government intervention, how can airlines break the cycle of cutting fares when traffic declines?

Answer: I suppose the only way it can be achieved is by some of these guys getting out of some of the markets they're in. As long as two or three are serving the same market, there's not much you can do.

Unfortunately they can't talk to one another. If this were a communist country, we wouldn't have to worry about it. They'd be in great shape.

The problem before airline deregulation was that the government set fares, and that set the salary of pilots and others. There's a skill set pilots need and they should be paid well for it. But I think it's out of hand compared to what others get.

I think it would be a mistake to re-regulate the industry, but unless these airlines get it sorted out, the government can't afford for there not to be an airline industry. The economy depends on tourism and business travel.

Question: Is airline industry consolidation inevitable?

Answer: I don't think there will be that many airlines (that) disappear. Maybe one or two. There are five majors now; it may get down to four. And there will be more low-cost carriers like Southwest Airlines. I think the majors that can adapt to that will be better off.

Question: Will the airlines' woes mean consolidation among aircraft suppliers like GEAE and Boeing Co.?

Answer: There's only one U.S. plane builder (Boeing) and one in Europe (Airbus). I don't think the Russians or Chinese are going to be a problem for a few years.

On the engine side, I don't see much consolidation. I think you'll see more joint deals. But I don't think for the next few years, you're going to see many new airplanes either. So there's no need to develop new engines.

Question: Despite the industry slowdown, GEAE continues to spend heavily on developing next-generation technology. The company did much the same during the downturn after the last Gulf War. Why?

Answer: All of us at GEAE felt we had to have an engine that we can talk to the airlines about at least a year and half before they can even order them.

I think engine development leads airplane development. The Boeing 777 was led by our coming up with the GE90 (the world's most powerful jet engine) and then the other guys came up with similar engines.

The next couple years will be tight for everybody, but I don't think it will mean fewer engine suppliers. The U.S. military requires we have two. They work hard to make sure they have GE and Pratt & Whitney.

Once you have the military engine business, you might as well be in the commercial engine business.

Question: Switching gears, of all the engine developments you've been involved in, which are you proudest of?

Answer: All these things are a team effort. But getting back into the commercial engine business with the CF6 program was the cornerstone of what we did from then on.

And making CFM International work ... that was really great. It's been the best program we've had.

Q: I've heard you personally went to the GE board to convince them to spend the money to fit the CFM56 engine on the Boeing 737. (The engine, built jointly with Snecma of France, and the 737 are the best-selling engine-aircraft combination in history.)

A: We were working with Boeing, and we said we could put the engine on the plane but we'd have to make the engine smaller.

I went to GE's headquarters in Fairfield, Conn., and got a lot of harassment for it. After we launched on the 737, it was another year before we got another significant order. So every time I went to Fairfield, I got harassed about it.

But today, everybody says they supported the program. That's life. If you don't fight for things, you don't get them.

In a book I'm writing, I say you've got to have a passion for whatever you're doing. I had a passion for aircraft engines. And I had a tremendous team .

Q: What got you interested in jet engines?

A: I always loved airplanes. As a boy (in wartime England), I always made model airplanes.

After going to technical school, I ended up working with the deHavilland Engine Co. in 1947.

I started as an apprentice and I learned to take engines apart and put them back together again. I was working on engine design when I was 18 and got a scholarship to Kings College.

Without good engines, you don't have good airplanes and vice versa.

Q: And how did you end up in the States with General Electric?

A: After I got married, I saw (a GE) ad in paper. DeHavilland was consolidating, so we thought we'd come over here for a couple years as a sort of a working vacation.

That two years lasted 46 years. I was very lucky.


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