General Electric, Rolls Royce win contract for 7E7

Boeing Co chose General Electric Co and Rolls Royce PLC to supply the engines for its planned new 7E7 Dreamliner airplane, striking deals that could be worth billions of dollars to the two companies.

The announcement Tuesday was a blow to Pratt & Whitney, the No. 3 commercial engine maker, which analysts had said needed the business the most. Richard Aboulafia, an analyst with the Teal Group, had called the contract Pratt's "best chance for a renaissance."

The contracts to supply the engines could be worth a total of US$40 billion if Boeing's projections for the airplane market are correct, said Paul Nisbet, an analyst with JSA Research.

The fuel-efficient, 200-plus passenger jet is slated to compete with rival Airbus' A300 and A310 airplanes and to replace Boeing's older 757 and 767 airplanes. It is expected to fly in 2008.

Mike Bair, Boeing's 7E7 senior vice president, said the newly designed engines "will enable the 7E7 to fly higher, faster, farther, cleaner, quieter and more efficiently than comparable airplanes."

The decision also could pave the way for Boeing's Seattle-based commercial airplanes division to announce a first customer for the 7E7. Boeing has yet to announce any takers for the 7E7, which it formally offered for sale in December. Analysts said airlines may have been waiting for the engine announcement before deciding whether to buy the new plane.

Boeing has said it believes there could be a market for 2,000 to 3,000 airplanes similar to the 7E7.

"It could be a very big deal, depending of course on the success of the 7E7," Nisbet said.

Aboulafia said the engine makers could expect as much as US$1 billion in revenue each year from the 7E7 deal.