Full interview at inpractise.com
We interviewed the Former Head of Sales, EMEA at Pratt & Whitney on the intricacies of selling aircraft engines to both lessors and airlines.
- Disruption and impact in the narrow and widebody aircraft markets
- The process of selling aircrafts to both airlines and lessors
- How aircraft OEM's negotiate the price of aircraft
- The importance of maintenance contracts for aircraft engine OEM's
- How pricing is set for engine maintenance contracts
What have you learned about sales negotiation, throughout your career, selling aircraft engines?
What I would say is, for engine sales, first of all, you have to know the product and you have to know the culture of the client. You have to believe in that product; you have to believe in the engine. You could sell a GTF engine to India, but there are also some problems that have affected the engines in India. If you don’t know that, you might look stupid, in front of the customer. What I did was, first of all, I have learned how to read more, to follow up more, which is really important, and not to be against your client and not to compete with the technical guy. Five or 10 minutes in, you’ll find yourself arguing with him, instead of trying to sell him something. Don’t try to swim in their pool, unless they let you. Reading is important; knowledge is important and holding your tongue, when speaking to your customer. Yes, you are here to sell, but we have to make sure we are able to buy from you. You cannot just force the customer to buy. They are not stupid. They are engineers, with degrees, after four years at college or university. They are as smart as you are. If you force them, they won’t like it.
How do you negotiate on price of the cost per hour flight or whatever it may be, for the engine?
Let me explain the FHA, flight hour agreement. This depends, very much, on the client’s fleet. If they have 50 GTF engines, the price for maintenance flight hours is going to be a lot more difficult than for other airlines that have 150 GTF engines in the fleet. There is not much to play around with; you just have to submit. But for OEMs, there are some discounts that you could use, based on the quarter of the year, based on what is left from Q1, for example, in Q2. There are some extra margins. If you want to use them, you have to get them approved because the OEM will not let you use all the volume for a customer that is only buying 20 engines, so there is always something in the pipeline, for Q4, for the customers with 200 or 300 engines.
As I said, we have to deliver the message, correctly, to our OEM. In my region, for example, I might have two campaigns at one time. One campaign is very close to completion, with 20 engine sales. The other campaign is maybe going to be closed at the end of the year, with 150 engine sales. But we are not close to that. We know that this client might also purchase LEAP engines or other engines, as well. If you are not that sure, we cannot use all the volume for the 150-engine sale, so we have to use some of it for the 20-engine sale. In that case, if the 150-engine buyer is wanting a 25% discount from you, when the time comes, you cannot do that; maybe you can only give a 15% or 20% discount. It depends on the timing.
With Turkish Airlines, we were lucky to use that volume and margin, so we did it. But for other deals, we weren’t as lucky. We used to always force the customer to buy at the exhibition times, because you always want to sign someone up. Get into the newspaper that this and that customer is buying, because you don’t sell the engine itself; you sell the futures of those engines. As I said, over orders at Boeing now. There is a chance that they are going to be delivered to other customers. Let’s say, flydubai orders 20 aircraft, but in that announcement, it says 150 aircraft, plus 70 more in options. Then, as a client, as an operator, as an airline, you say, goodness, MAX is a good aircraft, they’ve got a lot of orders.
Mitsubishi corporate jet, regional jet aircraft, doesn’t sell any. Why? Because they don’t fly. They haven’t got any orders. But the funny story is, GTF, geared turbofan engine, was first designed for the Mitsubishi corporate jet, regional jet, but it doesn’t fly. If you have orders, over orders or backlog problems, if you have orders for the next eight or 10 years, then airlines already believe in you. They start investing in your aircraft or your engine. This is the same thing. The discount depends on the projects in your pipeline. Sometimes you are flexible, sometimes you are not.