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GE, Safran, FTAI, and the Modular Design History of the CFM56

This interview with a Former Chief Engineer at GE, who spent over 35 years at the company, shares a history of the CFM56 engine design and how the architecture informs its maintenance program. We explore the complex history and partnership tensions between GE and Safran:

Safran, formerly known as Snecma, has a complex relationship with GE. The American side focuses on the core, including the compressor, combustor, and HP turbine, which are GE's responsibility. Safran is responsible for the LPT, booster, and fan, but GE Aircraft Engines provides significant oversight. Although it's a 50/50 partnership, Safran doesn't proceed without GE's agreement on designing turbines, fan blades, and aerodynamics...GE doesn't want to give away the HP turbine and compressor technology. One of the reasons for tremendous improvement in performance is GE's knowledge of fan blade design. -  Former Chief Engineer at GE

The modular engine design aims to achieve long LLP lives to reduce the total cost of ownership:

The reason for this approach is straightforward. Our goal with the low-pressure turbine (LPT) design is to achieve really long LLP lives. Typically, the requirement was to have three shop visit turns before any LLP maintenance on the LPT is needed. Initially, the high-pressure (HP) turbine disks required replacement after about 15,000 cycles. However, over the years, with usage data and collaboration with the FAA, that number has increased to about 25,000 cycles. This varies with different applications and thrust levels, but that's the average.-  Former Chief Engineer at GE

We also explore how and when FTAIs module swap offering is attractive and how GE aims to combat the threat of PMA. GE has many tricks up its sleeve to push out engine PMA parts:

That's how the game is played. You try to keep the PMA parts out. One big argument is if you put in a PMA part and the engine fails, who's responsible for the warranty? It's a touchy point. I did an investigation at Lufthansa a few years ago where there was a failure in the low-pressure turbine or the transition from the HP to the LP. The airline, although it had a CFM logo on it, had a large percentage of PMA parts inside the engine. You get into issues with blades and other components. We were also patenting every engine to protect against PMA, so you can't install PMA parts because you're violating our patent. Various games have been played to protect the parts, but typically, we offer discounts on service contracts to keep the PMA market out. That's the game. - Former Chief Engineer at GE

One potential risk with FTAIs module swap is the administrative challenge tracking LLPs to ensure parts don’t run beyond the registered life. This becomes a risk if LPT or Fan modules from different environments are swapped to match different cores:

There are about 22,000 engines out there. I don't think owning 400 engines makes a strong business model argument. There's also a significant bookkeeping issue with module switches. You need perfect record-keeping because LLP parts can't fly beyond their registered time.- Former Chief Engineer at GE

The interview forms part of our coverage of FTAI which includes various research to understand how a module swap really works, FTAIs addressable market, and potential maintenance risks:

  1. FTAI Aviation; a curation of all our work on FTAI
  9. FTAI Aviation: Short Report Review w/ Former FTAI Engineer

A History of Amazon Business

In 2023, Amazon Business reportedly generated over $35bn in GMV, a 30x increase since 2016. Formerly Amazon Supply, Amazon Business is a B2B distributor of commercial, industrial, and healthcare products. It’s estimated that over 50% of the division is selling a variety of long-tail commercial products with the remainder split between healthcare and industrial end markets. 

This interview with a Former Leader of the division explores how the company enters new markets and which verticals Amazon is best positioned to disrupt. Amazon is taking share in the commoditized long-tail of each end-market because it's cheaper, faster delivery, and individual plant managers or maintenance technicians are easily ordering directly from Amazon. 

For instance, a maintenance technician in a facility might need supplies, find them easily on Amazon Business, and make a purchase. The relationship can start there and potentially expand. You might also see a scenario where a K-12 teacher or a university lab technician with a consumer account realizes they could have a business account. They notice the SKUs are available, create a business account, start making purchases, and the relationship grows from there. - Former Senior Executive at Amazon Business

But the big question is how Amazon can adapt its fulfilment network to distribute more complex medial or industrial products:

There is still a lot of untapped opportunity for Amazon, but pursuing these opportunities will require Amazon to decide if they want to engage in more heavyweight white glove services. Does Amazon want to delve deeply into that? Are they willing to have employees manage big accounts or offer these services? If they choose to do that, I think you could see significant developments. If Amazon decides to create specialty delivery fulfillment networks for highly regulated products and offer white glove services, I imagine there would be customers interested in using it. However, it's really up to them to decide.  - Former Senior Executive at Amazon Business

This interview is best read in parallel to the interview below that covers how Amazon is approaching healthcare distribution:

Amazon Business: Healthcare Product Distribution

Over the next few months, we plan to cover in more detail how AMZN is impacting industrial and healthcare distributors like McKesson, Cardinal, Fastenal, MSC, and others.  

AppFolio: Challenges Winning Enterprise Customers

This interview with a 6,000-unit Property Manager, and current customer of Yardi, explores the challenges for AppFolio to move upmarket. A major sticking point seems to be AppFolio’s accounting reports and ability to customize data for large customers and owners. It’s unclear whether this is a real architecture issue or is something that can be solved relatively easily? 

Some of the sticking points with AppFolio, I actually just had another demo yesterday in preparation for this. It is a very linear product. You move through the prospect module, then the resident module, then the accounting module, and finally the reporting module. It's a linear flow and doesn't allow for much customization, especially with businesses in the multifamily space experimenting with different ways of working. For example, we've taken first-party collections, which was traditionally a site-level responsibility, and assigned it to a home-sourced employee. I have employees in the Philippines handling lease file accounting and compliance work. I also have a revenue manager working from home, managing rents across our entire portfolio of over 6,000 units. This is one reason why AppFolio is perceived as being more suitable for smaller companies. - 6,000 Unit Property Manager, Yardi Customer

The interview also explores how owners use Yardi, how Bilt can be disruptive, and what APPF needs to change to attract larger property managers. 

Cettire: Boutique Inventory Allocation Strategy

Over the past few months, we've been exploring a lesser known side of the luxury industry: the gray market. We recently published research on Gray Market Distribution and various interviews on Luxury Marketplaces like Farfetch, now owned by Coupang, and Cettire.

Over the next few weeks, we plan to share our learnings on why Farfetch struggled and how Cettire could be different. One difference between the two companies surrounds inventory management:

When all those articles have completed this step, they are put aside and another person from the product team that is specialized for Farfetch analyzes the product and checks if this article, the exact article, is already live on Farfetch. Step A. If the article is already live, they just duplicate the article. So they match it, they decide the retail price and the article is already live. This way is the fastest method. But obviously, it needs a person to do it. So it's this bag and this trouser, this weather. Imagine this for 7,000 SKUs in every season. Honestly, they sell quite everything. Even if I receive the article today and the production team is still shooting or waiting to shoot, I can already send it to Cettire, and in 24 hours, they have it live. It's a whole different method. It has no control, but it's super fast. - E-commerce Manager at Italian Boutique

Boutiques can sell inventory at a ~20% average discount on Cettire vs >40% take for Farfetch historically. This contributes to pricing downstream where Cettire is 20-30% below local RRP.

Farfetch goes from 40% to 55%, depending on the amount. It's challenging to create a strategy with that. Cettire has no commissions, but you pay for shipping fees. Poizon has no commission and no shipping fees. - E-commerce Manager at Italian Boutique

We plan to share further learnings on the history of Farfetch and luxury marketplaces over the coming weeks.