GE Engine Venture May Oust Rolls From Emirates A380 Contract

(Bloomberg) -- General Electric Co.’s A380 engine venture with Pratt & Whitney may be poised to muscle back in on the double-decker jet following Airbus SE’s deal to sell 36 superjumbos to Gulf carrier Emirates.

While Rolls-Royce Holdings Plc is supplying Trent 900 turbines for the last 50 A380s ordered by Emirates, the Dubai airline is leaning toward a rival powerplant offered by the so-called Engine Alliance of GE and Pratt for the new batch, according to people familiar with the matter who asked not to be named.

Airbus sales chief John Leahy told Bloomberg TV it’s perfectly possible that Emirates will switch to the U.S. companies, whose GP7200 powered its first 90 A380s. “Absolutely EA has a chance of getting back in,” he said Friday. “The fact is that in the contract it’s clear that they have an engine choice.”

A victory for the Engine Alliance would revive a production line that has all but run out of work, since Rolls-Royce-powered jets account for almost all outstanding A380 orders. Rolls has balked at offering its turbines on the same keen terms with which it won the initial Emirates business, and made clear that there’s no prospect of developing the much more fuel-efficient Neo -- or new engine option -- model for which the carrier has lobbied.

Leahy said Emirates may take “several months” to choose between the two engine providers. A spokeswoman for the airline said the decision is subject to competition and didn’t give a date for reaching a conclusion. Rolls, which still counts 2015’s A380 order with the Gulf carrier as its biggest ever, said it welcomes the opportunity to be reselected.

‘Tooling’

The Engine Alliance told Bloomberg that it’s well-positioned to meet A380 engine-selection requirements, adding that GE, Pratt and their partner companies and suppliers have “retained the tooling and capability” to build the GP7200 and are prepared to adjust production accordingly.

Shares of GE and United Tech fell about 1 percent and 1.3 percent, respectively, at 9:40 a.m. Monday in New York. Rolls-Royce was down 1.5 percent as of 2:40 p.m. in London.

Emirates will ask EA to deliver a step change in fuel efficiency for the four-engined A380, seen as vital for it to remain competitive with the newest twin-engine wide-body planes, though the venture is likely to offer only incremental upgrades given the limited market, one of the people said.

Emirates, already by far the biggest customer for the A380, handed the slow-selling plane a lifeline with last week’s $16 billion order, which should extend the program by at least a decade. The purchase had been expected at the Dubai Air Show in November but was delayed amid concerns at the airline about the commitment of manufacturers to the program. That included engine development, according to two of the people.

The order, currently in the form of a 15-page memorandum of understanding, will be finalized no later than Feb. 15, Leahy said in the interview.

--With assistance from Guy Johnson

To contact the reporters on this story: Benjamin Katz in London at bkatz38@bloomberg.net, Richard Clough in New York at rclough9@bloomberg.net.

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

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