Airbus Seeking More Engines From GE Unit as 737 Max Falters

(Bloomberg) -- Airbus SE is in discussions with General Electric Co. and Safran SA’s airplane CFM International unit to increase supplies of its engines as Boeing Co. halts production of the beleaguered 737 Max narrow-body, people familiar with the matter said.

The engine maker is seeking to ramp up production of the 1A variant of the CFM LEAP engine, which is used on the A320neo jets, the people said, adding that discussions are ongoing and a decision hasn’t been taken. The engine is similar to the 1B version, which goes on the 737 Max. The Max has been grounded since March, following two fatal crashes of the Boeing model in five months.

While the engines are similar, it wouldn’t be easy to switch capacity away from the Max. Since the engines are two different sizes, almost every part is manufactured differently. That would imply big bottlenecks for CFM in areas like casting and forging, and the company wouldn’t be able to quickly ramp up given the complexity of the parts and materials.

This week, Boeing said it would halt production of the Max jets from January for an undetermined amount of time, which has forced suppliers to cut production or to look for alternative customers. Spirit Aerosystems said Friday that it would suspend 737 Max production and expected an adverse impact on its financials as the jet accounted for over 50% of its annual revenue.

Airbus declined to comment, saying that discussions with its suppliers were confidential.

Indigo Orders

One factor affecting Airbus’s discussions with CFM is that Indigo, India’s biggest carrier, is adding planes at a breakneck pace. Indigo has been ordered by the country’s regulator to ground some of its A320neo planes for engine upgrades, following a series of problems on the carrier’s jets including in-flight shutdowns.

The low-cost carrier, which is the world’s biggest customer for the best-selling Airbus model, decided in June to switch away from engines made by United Technologies’s Pratt & Whitney division, ordering $20 billion worth of CFM engines, deliveries of which were due to begin by 2020.

In October, Airbus landed a further 300 narrow-body plane order from Indigo, taking the carrier’s orders for the A320neo family to 730. That’s equivalent to more than 10% of all sales of the model.

--With assistance from Julie Johnsson.

To contact the reporter on this story: Siddharth Philip in London at sphilip3@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Flynn McRoberts

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