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Aero-engine makers seek boost from major Airbus China deal

(China Daily)    11:09, July 02, 2015
Airbus's company logo is pictured at the Airbus headquarters in Toulouse, December 4, 2014. [Photo/Agencies]

After Airbus's success it was the turn of engine makers to seek a boost from China's spending power on Tuesday as a major plane order generates lucrative follow-on opportunities.

China placed an order for 45 A330 wide-body passenger jets on Tuesday, with plans for a possible further 30 aircraft in a deal worth between $11 billion and $18 billion.

The order has now unleashed a battle between engine makers to win contracts with Chinese airlines who may ultimately benefit from the the aircraft purchase, industry sources said on Wednesday.

Engines are generally sold separately from aircraft.

The aircraft ordered by China are current-generation A330s, which are available with a choice of engines from three manufacturers: General Electric, United Technologies' Pratt & Whitney unit and Britain's Rolls-Royce.

Rolls-Royce is currently the market leader with its Trent 700 engine, but the Chinese order presents one of the largest available opportunities for rivals, notably GE, to jump in before Airbus switches to an exclusively Rolls-powered version of the A330, with a new engine, from late 2017.

Rolls-Royce appears to have the edge going into the sales battle, a person closely watching the discussions said.

The outsider is seen as Pratt & Whitney which is focused on completing a new engine design for smaller jets and has not been forceful in pushing its A330 engine in recent years.

Pratt & Whitney said it continued to support the PW4000 engines designed for aircraft such as the A330, and that it did not as a policy comment on specific order discussions. GE and Rolls did not immediately respond to requests for comment.

Shares in Airbus rose as much as 5 percent on the aircraft order, which eased uncertainty over future production rates for one of its most profitable models.

South African swap

Airbus has won orders for 71 A330 aircraft in recent weeks and is on course to lift this beyond 100 if the second part of the China order and other pending deals are completed.

It had an unfilled order backlog for 168 current-version A330s at end-May and analysts say it needs to increase this to around 300 to make a smooth transition to the new A330neo.

After 20 orders from Saudi Arabia and at least 45 from China, it is closing in on a deal with South African Airways to swap an order for 10 smaller A320s for five A330s, industry sources said.

Airbus has also won six orders for a military air tanker version of the A330 in the past week, including four from South Korea and two more from Australia.

In addition it will seek to finalize a draft order for two A330s from Rwandair after the airline was reported to have won a loan from an African regional bank to finance the deal.

After a renaissance in sales driven by delays in deliveries of rival Boeing's new 787 Dreamliner, which have since abated, the 20-year-old A330 has also been helped by lower oil prices.

But industry sources say squeezing out the remaining sales is complicated by fragile second-hand values for the current A330 model as Airbus gets ready to develop the new A330neo.

Airbus may need to discount sharply, but by doing so it risks alienating those existing owners who depend on solid secondary market values to realize their investments, a senior aircraft market executive said.

Airbus has meanwhile carried out a cut in A330 output to nine a month from 10, originally planned for the fourth quarter, a spokesman said. It plans to reduce this further to six a month in the first quarter of next year, but the major Chinese order has dispelled concerns that it could have to cut even more.

(For the latest China news, Please follow People's Daily on Twitter and Facebook)(Editor:Ma Xiaochun,Zhang Qian)

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