GE Venture to Build More Airbus Engines to Help Offset MAX Shutdown

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.

The statistics from Flight International predicts that over the next two decades, 42,800 cargo and civilian aircraft will be delivered worldwide. This means that at least 86,599 new engines will be delivered in the global market by 2035, and the number of active engines will grow from the current 60,000 to about 100,000. With the number expected to jump from 28,500 to 61,000 by 2035, especially in the region of Asia Pacific, which is anticipated to grow with the highest CAGR during the forecast period.

The "Made in China 2025" issued by the State Council clearly proposed to "establish an industrial system for the independent development of engines", and during the 13th Five-Year Plan period, China launched a major special project for aviation engines and gas turbines. Today, the Chinese aviation industry continues to exert its strength and is closing the gap with world-class engines. In the worldwide stage, the development and breakthrough of aircraft engine requires wide range of solutions and multi-disciplinary collaboration of suppliers, transnational discussion and the groundbreaking technology exploitation. There are still some technical difficulties that China is facing such as the titanium alloy or composite material of aircraft engine, the whole leaf disk manufacturing and repair technology, the manufacturing technology of single-crystal hollow turbine blade etc. Furthermore, there are some other technology will also be discussed and applied in the aviation engine design and manufacturing such as 3D Printing, Digital twin technology.

Commercial Aero Engine Shanghai International Forum, based on China National Special Project of Aero Engine & Gas Turbine, is located in Shanghai, China. This forum aims to support aero engine industry development through information exchanges and business cooperation. Initiated by Shanghai Society of Aeronautics and AECC Commercial Aircraft Engine Co., Ltd., this annual forum has been successfully held in the past four years.

The 5^th Annual Commercial Aero Engine Shanghai International Forum will be held on March 25^th - 26^th, 2020, in Shanghai.

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