Tue, Dec 22, 2009 - Page 11 News List

Safran wins US$5 billion China aircraft engine deal

BLOOMBERG

France’s Safran SA said it won a US$5 billion contract to supply engines for China’s first narrowbody aircraft and will consider building a “final assembly line” in the country with its partner General Electric Co.

The deal, which was to be signed yesterday, may be worth three times that amount over 30 years including maintenance contracts, Safran chief executive officer Jean-Paul Herteman told reporters in Beijing yesterday.

Commercial Aircraft Corp of China (Comac, 中國商飛) is planning the single-aisle C919, about the same size as a Boeing Co 737 or Airbus SAS A320, to enter service in 2016. CFM International, the GE and Safran venture, will supply its Leap-X engine for the project, said the people, who declined to be identified.

“The outlook for the C919 remains uncertain and the headwinds it faces are great, but the market just within China is potentially large,” said Douglas Runte, a managing director at Piper Jaffray & Co in New York.

Safran shares rose as much as 0.31 euros (US$0.45), or 3.4 percent, to 13.35 euros, changing hands up 2.3 percent at 13.2 euros as of 9:24am in Paris.

China plans to complete the construction of an assembly plant to make C919 planes in Shanghai by 2012, part of plans to create an aircraft manufacturing industry in the nation’s financial center.

China is developing passenger aircraft to compete with Airbus and Boeing, aiming to gain from the growth in the world’s second-largest aviation market.

China needs to add 3,796 passenger planes in the 20 years through 2028, said a forecast by Aviation Industry Corp of China, the nation’s largest aerospace company.

The Leap-X is designed to reduce fuel consumption by 16 percent from the current model, which powers the two Airbus SAS and Boeing Co planes.

Narrowbody jetliners comprise more than 60 percent of all commercial aircraft. Manufacturers have estimated the market for new engines as replacements or on newly designed single-aisle aircraft at US$30 billion to US$50 billion. CFM’s win comes as Airbus and Boeing consider offering the more efficient engines on existing narrowbody aircraft and push plans for new planes beyond 2020.

As of September, Boeing and Airbus combined had delivered more than 9,000 narrowbody planes since the first Boeing 737 hit the market in 1967, with some 4,500 orders still pending.

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