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Boeing may be close to picking maker for 7E7 engines

By Rachel Layne and Matthew Fletcher
Bloomberg News

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General Electric, Rolls-Royce Group and United Technologies' Pratt & Whitney unit, the world's three-largest engine makers, are competing for the order, the biggest of its kind in at least a decade. Boeing will likely name two of the three to supply power plants for the 7E7, analysts said.

Boeing spokeswoman Lori Gunter declined to give a specific date for the engine decision, though she said Boeing expects to announce its choices in mid-April.

Boeing is counting on the 7E7, designed to use 20 percent less fuel than similar-sized aircraft, to take back market share from Europe's Airbus, which last year passed Boeing to become the world's largest maker of commercial aircraft.

The engine winners would supply motors, spares and service, said Robert Thomson, an analyst at Roland Berger & Partners in London, who valued the contract at $40 billion over 25 years. For engine makers, securing a spot on an aircraft line is important because profit isn't usually made on the sale itself, rather on maintenance contracts stretching over decades.

"Pratt has the most to lose; they've seen sales disappear to rivals," said Klaus Breil, who helps manage $5.9 billion at Cominvest Management in Frankfurt and owns shares of General Electric and United Technologies. "For Rolls-Royce, it would cement its position as the No. 2 maker of civil jet engines."

General Electric, based in Fairfield, Conn., is the world's biggest maker of jet engines, followed by London-based Rolls-Royce and Pratt & Whitney, whose parent company is based in Hartford, Conn.

Rolls-Royce has leapfrogged Pratt by selling newer engines. Losing the competition for the 7E7 would "leave Pratt with a big hole in its product lineup on Boeing aircraft," said Thomson of Roland Berger & Partners.

Rolls-Royce is also competing against a venture of General Electric and Pratt to sell engines for Airbus' A380, which will be the world's largest passenger aircraft when it enters service in 2006.

The 7E7 award is crucial for Pratt. Its decision in the 1980s not to offer an engine for Boeing's 737, the world's best-selling jetliner, has led to the erosion of its once-dominant market share.

Pratt is developing a new engine for the 7E7.
 
General Electric and Rolls-Royce are developing engines based on new technology and current engine designs.

At General Electric, the engine will be derived from the GE90 developed to power the long-range models of the 777. At Rolls-Royce, the engine will be an upgrade of the Trent series.

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