On the Record with DAVE CALHOUN, PRESIDENT & CEO, GE AIRCRAFT ENGINES
General Electric has pumped $9 billion into the faltering airline
industry since 9/11, helping its customers stay in business as
best they can. Dave Calhoun, president and CEO of the world's
largest supplier of powerplants, the $10 billion-a-year GE Aircraft
Engines, explained his views to Show News on the eve of the Paris
Air Show. Calhoun also sits on the board of GECAS, the world's
largest airliner leasing company.
"Every penny is secured. We believe in the industry and the
equipment and the aircraft. These are long term mobile assets-you
can park them anywhere, give them to anybody. You invest in what
you know, and at the same time avoid any credit exposure to what
is a bankrupt industry-there's no other way to describe it.
"This is the best thing that's ever happened-the restructuring
that's been discussed for a decade. It's good for everybody. It's
good for the big nationals (airlines), for American, for United.
For the first time their management teams will get some leverage
in a discussion where they've had none. They need it.
"I hate to think they can operate under bankruptcy for as
long as they can, but I do think the leverage they finally gained
with their employees and with the supply community is probably
going to be healthy. Coming out of regulation they had absolutely
no real leverage in the discussion with labor, they had no financial
backbone to stand on. None. So they were, frankly, sitting ducks.
"I believe in the new models-Southwest, easyJet, JetBlue.
They like playing under an umbrella that's broken. But when that
umbrella goes away a lot of the attributes will begin to transfer
to the new crowd-labor will begin to feel their oats, they'll
start to take them on, but hopefully the financial structure will
be much improved by then.
"In Europe it's a significant issue, but it's different.
Here (in the U.S.) it's a calamity-I mean United, American and
USAir-but it's a near necessary calamity. The model as it changes
will tend to move to our advantage. The new airlines will be more
point-to-point, high-cycle applications that play right to our
strengths. It's the same thing unfolding in Europe but just at
a different pace.
REGIONAL AIRLINES
"I believe in them locally and regionally, and I believe
in them internationally-so that's where we tend to focus all of
our development energy and money. Its partly why, in a funny sort
of way, I view the new Boeing airplane as a bit of a regional
jet, except it's applied to the international market, for point
to point on an international scale.
"It's those dynamics we believe in, and of course we believe
we have exactly the right kind of engine for these aircraft. Embraer
and Bombardier are going to get tested thoroughly but they're
going to be healthier when they get through this. I don't want
them to get fat, dumb and happy and then really hit the wall.
Everyone will get focussed, they'll understand the stress and
then this whole industry will move ahead in an even healthier
fashion. The regionals will benefit disproportionately from all
of this.
BUSINESS OUTLOOK
"In our business we're afforded the opportunity to look ahead.
If that picture wasn't as good as I see, then this (crisis today)
would be terrible. I happen to be with the right gang-I'd hate
to see it from any other perspective. Just imagine if you didn't
have an idea on how to win the next airframe, or how to manage
this transition from long haul to short haul, from widebody to
narrowbody.
"The good news for us so far is that we get to take the long
view-so we get to continue to invest in new engine technology
(at a level) that is still as spectacular as three years ago when
everything was great. We still believe strongly in regional jets
and continue to develop engines for the regional jet family-and
the fact that Embraer's and Bombardier's order books are not as
robust as they would like doesn't phase us a bit.
"I'm very fortunate to have a new chairman (Jeff Immelt)
who has gone to the Street and said technology matters and products
matter, and thank goodness we've got this new engine franchise,
because if we hadn't sold all those new products in the 90's I'd
be sitting here dead. He's been right out in front in supporting
investment in these times.
"Our R&D will still be over $1 billion, and probably up 10% from
2001. That's a big number. My job is to make sure that in this decade
we not only stay leaders but increase that lead. Honestly it's during
times like now you can do that."
