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 Egon Behle Chief Executive Officer MTU Aero Engines |
2009 is a very special year for MTU Aero Engines as it celebrates the 75th anniversary of the company’s foundation. In 1934, its predecessor, BMW Flugmotorenbau GmbH, was founded on the same site in the north of Munich still occupied by MTU today. From the outset, the German engine manufacturer has marked and driven forward the fortunes of powered flight.
At every stage of its checkered history, taking in several name changes along the way, MTU has developed future generations of engines and new technologies. The likes of the Tornado RB199 engine, and the commercial PW2000 engine that powers the Boeing 757 and C-17, are testimony to MTU’s aircraft engineering expertise. The very latest highlights include the GP7000 for the mega-Airbus A380 and the EJ200 for the Eurofighter.
With the development of each of these engines, MTU has devised and started to implement concepts that were the forerunners of technologies and components that would only see the light of day in the next generation of aircraft. As in its early days, MTU continues to be ahead of its time. Together with our partners we are working on tomorrow’s aero engines that are required to be even quieter, cleaner and more environmentally compatible than today’s models. Our Clean Air Engine (Claire) technology program foresees the development of a three-stage concept for the aero engine of the future that, by 2035, will emit 30% less CO2 and also significantly reduce noise levels. The centerpiece of Claire is the innovative, eco-friendly geared turbofan technology. Here we are once again the technology pacesetter, not least since we will be supplying key technology such as the high-speed low-pressure turbine. The name MTU is therefore not only synonymous with 75 years of German engine manufacturing, but also with a hundred years of aviation expertise – in essence, the future of our industry.
We have mapped out the direction of our company’s future. In 2008, we acquired stakes in a number of new and important programs, which promise to bring in revenues of around € 30 billion. In a single year, MTU has signed a greater volume of new program agreements than it has ever done before in its history.
In the commercial engine sector, these stakes include a 15-percent workshare in the new PW1000G geared turbofan family from Pratt & Whitney and the PW810 respectively, and around 6.6 % in General Electric’s GEnx. The new geared turbofan engines will power aircraft such as the new Mitsubishi Regional Jet and the Bombardier CSeries. This successful aero engine program is running to schedule. In the financial year 2008, flight testing got underway, with tests conducted on a Boeing 747 and an Airbus A340. The low-pressure turbines come from MTU along with the four initial stages of the high-pressure compressors. We are also supplying the same components for the PW810 engine program. This new Pratt & Whitney engine is designed for large business jets. One of the most important engines in the upper thrust-range segment will be GE’s GEnx, the powerplant earmarked for the new Boeing Dreamliner 787 and the Boeing 747-8. We are also involved in building this engine for the important widebody aircraft market, taking on responsibility for producing the turbine center frame and carrying out the related development work.
We have also been successful in the military sector, securing an 18 % program share in the GE38 engine for heavy-lift helicopters. We are extremely proud that for the first time we have been granted development responsibility as a risk-and-revenue-sharing partner in a U.S. engine program. Our remit involves developing and building the power turbine.
MTU is similarly well positioned in the commercial maintenance sector: We acquired many new customers in 2008 and signed additional maintenance contracts with a total value in the region of € 1 billion. These agreements concern in particular the PW2000 engine that powers the C-17, the V2500 deployed in the Airbus A320 family, the CF6 for widebody airliners such as the A330 and the Boeing 747.
Long-term engine programs have several advantages for a company. They provide a solid base for the future and also make MTU relatively immune to economic fluctuations. The effect was clearly demonstrated in 2008. Despite a weakening economy, MTU has been able to increase its revenues and earnings. Revenues increased by 5.8 % to € 2.7 billion; adjusted for U.S. dollar fluctuations, the growth rate was 12.2 %. Operating profit (adjusted EBITDA) increased in the same period by 3.3 % to € 405.7 million. Despite the negative exchange-rate effects and stalling economic growth, we have clearly exceeded the forecast published at the start of the year; the EBITDA margin of 14.9 % was at the top end of our target range of between 14 and 15 %. As our shareholders, you will also reap the benefits of this sound performance in the shape of an attractive dividend. We intend to propose a dividend payment of € 0.93 per share, as in the previous year.
Looking back, we are extremely pleased with our achievements in 2008. However, the capital markets have not rewarded our positive performance; the financial crisis and the global recession are essentially driving the stock markets. The MTU share is naturally not immune from this economic climate. Every company can expect to face major challenges this year as the impact of a contracting economy feeds through. Our industry in particular is also dogged by volatile exchange rates and the heavily fluctuating price of oil.
MTU is, however, well prepared, not least by setting up a new efficiency improvement program dubbed “Challenge 2010”, which was launched in 2008. Key areas include optimizing product design costs, process optimization as well as delivering procurement savings. “Challenge 2010” does not envisage any job cuts. The targets we have set are ambitious: As early as 2010, we aim to generate savings of € 25 to 30 million; from 2011, that figure should rise to € 50 million annually. This program is intended to give us the necessary leeway to further increase the company’s technology lead and thereby continue to improve our market position.
And we have the means to do just that. As the innovation leader in the global aviation market, our annual capital expenditure on research and development amounts to around 7 % of revenues. Through these forward-looking investments we are laying the foundations for our company’s long-term success. Our development departments are working intensively on programs for a new generation of engines. The geared turbofan, for instance, is slated to enter service as early as 2013, while we expect to see production models of the counterrotating geared turbofan in flight from 2025. Both projects illustrate just how well MTU is currently placed to meet the challenges of the coming decade.
All of which is not least thanks to the knowledge and performance of our 7,500 staff worldwide. I would like to take this opportunity of thanking each and every one of them for their dedication and hard work. I would also especially like to thank our customers for their loyalty and the trust they have placed in us throughout the past business year. And I wish to thank you, our esteemed shareholders, for having faithfully supported MTU in spite of the lessthan-favorable economic climate.
Our forward-looking strategy makes me optimistic that MTU will continue to perform well in what will be a difficult environment in 2009. I am confident that the next global upturn is on its way and that MTU will be better able to reap the benefits than its peers. Market researchers agree that global air traffic will once again grow strongly in this kind of environment – and MTU will benefit with its unique aviation expertise.
Dear shareholders, with your investment in MTU and your ongoing trust, you have laid the foundations for sustainable positive development. On behalf of the entire company and the Board of Management, I would like to thank you, safe in the knowledge that we will do our utmost to ensure MTU remains what it has always been – Germany’s leading engine manufacturer and a tried-and-trusted player worldwide.
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 Egon Behle Chief Executive Officer MTU Aero Engines |
