GE Venture to Build More Airbus Engines to Help Offset MAX Shutdown-Update
December 20 2019 - 12:57PM
Dow Jones News
By Benjamin Katz
General Electric Co. and France's Safran SA have struck a deal
to increase production of engines for Airbus SE's rival to the 737
MAX, helping the pair deal with Boeing Co.'s production halt of its
embattled plane, according to people familiar with the matter.
The agreement -- made via the GE-Safran joint venture CFM
International -- will increase the volume of the LEAP 1A engines,
one of two turbine options for the Airbus aircraft, to around 58%
of total A320neo deliveries, with Pratt & Whitney, a unit of
United Technologies Corp. due to slow output to about 42%, the
people said. The share has previously been closer to a 50-50
split.
The timing of the deal is crucial for GE. The extended MAX
grounding coupled with the production halt ordered this month have
already strained GE finances, cutting cash flow by as much as $1.4
billion this year as factories produce fewer engines and GE can't
get fully paid for them.
"We have regular discussions" with plane builders "about
potential rate increases," a spokesman for CFM said in a
statement.
CFM has seen its market share on the Airbus craft gain in the
last year amid a series of design glitches with the UTC engine that
has disrupted operations for airlines. The enginemaker scooped a
major order from Pratt-customer Indigo in June to provide engines
for some 280 aircraft for the Indian carrier. Deliveries are slated
to start next year.
While the mix of engines being produced has changed, Airbus's
overall output of its A320neo will remain at 63 a month, the people
said. The European plane maker, which has been studying the
feasibility of increasing its total output rates, is still being
plagued by its own production issues.
The delivery delays on the A320neo, which is sold out until late
2024, have been a frustrating constraint for Airbus at a time when
its rival is facing its biggest crisis in decades.
Instead, the delays have forced it to cut back its 2019 delivery
target by as many as 30 aircraft. Still, the company plans to
deliver 860 aircraft this year. With Boeing hampered by the MAX
grounding, Airbus will overtake its U.S. rival in total deliveries
for the first time since 2011.
Write to Benjamin Katz at ben.katz@wsj.com
(END) Dow Jones Newswires
December 20, 2019 12:42 ET (17:42 GMT)
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