Back in April, Boeing (BA 4.24%) CEO Dave Calhoun made a bold prediction. After noting that most new aircraft models have been designed around new engines that are 15% to 20% more efficient than the ones they replace, he opined, "I don't believe the next generation of engines can deliver that kind of performance." He concluded that new aircraft designs from Boeing and Airbus (EADSY -1.44%) will be differentiated primarily by innovative engineering and manufacturing processes that can reduce costs.

Top engine maker General Electric (GE 5.68%) and its partner Safran (SAFRY 1.57%) disagree. On Monday, their CFM joint venture revealed plans for a new engine program that could deliver a 20%-plus fuel efficiency improvement over its current LEAP family of engines.

Chasing big fuel efficiency gains

The global aviation industry has an official target of reducing carbon emissions by 50% by 2050. To meet that commitment -- even as global air travel volumes continue to grow -- future aircraft will need to have 90% lower emissions than today's fleet, according to Safran CEO Olivier Andries. Shifting to sustainable fuels could significantly reduce carbon emissions over time, but engines will also have to become much more efficient.

The CFM RISE program aims to address this need for the largest and fastest-growing segment of the global airline industry: narrow-body jets. It entails deploying a slew of new technologies to reduce fuel consumption, including advanced materials and new additive manufacturing techniques.

The most notable feature of the RISE program is that CFM will develop what it calls an open fan architecture. Current jet engines are housed inside protective casings called nacelles. Doing away with the nacelle represents the biggest opportunity to boost fuel efficiency, putting CFM's target of a 20%-plus fuel efficiency improvement over today's engines within reach. (This design choice makes the CFM RISE concept look more like a turboprop than a traditional turbofan engine.)

A rendering of a CFM RISE open fan engine.

Image source: General Electric.

Historically, engine noise and safety have been two key barriers to adopting open fan architecture. GE Aviation CEO John Slattery claims that technological improvements will make the RISE engine no noisier than today's cutting-edge CFM LEAP engines. Most importantly, the use of carbon composites to make the engine blades eliminates the risk of metal fatigue causing dangerous blade failures.

To enhance the RISE program's sustainability potential, CFM will also incorporate hybrid electric capabilities and design the engines to be fully compatible with sustainable aviation fuel and hydrogen.

A timeline that works for Airbus

GE and Safran expect to begin testing a demonstrator engine for CFM's RISE program by the middle of the current decade. Flight tests would begin shortly thereafter. However, maturing the technology and getting new engines certified will take a lot longer. CFM anticipates that engines developed under the RISE program could enter service in the mid-2030s.

Thus, Calhoun's prediction that jet engines won't get much more efficient will likely prove off-base. But the next leap in engine technology may not come soon enough for Boeing.

Right now, Airbus holds a huge advantage over Boeing in the narrow-body jet market. Its A220 is far more efficient than the smallest 737 MAX. Meanwhile, the A321neo and its longer-range variants can fly further and boast better performance than the largest 737 MAX jets. As a result, Airbus has amassed a firm backlog of more than 6,100 orders for narrow-body jets. Boeing's competing 737 MAX family has fewer than 3,300 firm orders in the backlog.

An Airbus A320neo flying over water.

The Airbus A320neo is the fastest-selling jet family of all time. Image source: Airbus.

Boeing's best bet for countering Airbus' advantages would be to launch an all-new narrow-body jet family sooner rather than later. However, if it brings a new product to market before 2035, CFM RISE engines won't be ready yet. That would give Airbus an opening to best Boeing on narrow-body jet performance again by waiting a few extra years for next-generation engines.

A solid roadmap

Today, CFM dominates the engine market for small narrow-bodies. CFM LEAP engines power all Boeing 737 MAX jets and nearly 60% of Airbus A320neos. The LEAP will also power the COMAC C919: a Chinese-built narrow-body jet that is on track to enter service within the next year.

The RISE program gives CFM a good shot at delivering the performance improvements that could enable it to maintain its dominant market share on narrow-body jets for decades to come. Considering the long-term growth of this market segment and the lucrative nature of selling and servicing jet engines, CFM remains well positioned to power strong long-term earnings growth for GE and Safran.