JetBlue Extends Bet on Balky Pratt Engine With $2 Billion Deal

(Bloomberg) -- JetBlue Airways Corp. reaffirmed its faith in Pratt & Whitney’s troubled jet engine with an order for another 97 to power new Airbus SE planes.

The airline will take a total of 183 geared turbofan power plants, increasing an earlier decision to buy 86 engines for its A320neo family of aircraft, JetBlue said Thursday. While the carrier didn’t disclose the value of the deal, which also includes a critical 15-year maintenance agreement, the total for the engines alone could exceed $2 billion based on list prices before typical discounts.

JetBlue worked with the United Technologies Corp. unit for months before making the decision and isn’t concerned about problems the new engine has faced over the last couple of years, said Steve Priest, JetBlue’s chief financial officer.

“They’ve been incredibly transparent with us throughout the process,” he said in an interview Thursday. “We wouldn’t be embarking on such a large deal with Pratt if we didn’t have absolute confidence.”

Revising the old order and securing the maintenance commitment spotlights JetBlue’s push to reduce annual spending by as much as $300 million by 2020. The carrier has struggled with high maintenance expenses, which it targeted as the largest component of its cost-cutting effort. For Pratt, getting a key endorsement in its home market gives a boost to its marquee product.

Crucial Component

“The maintenance cost going forward is the most important component of the commercial part of the deal,” Priest said. “We wanted to make sure we had the right partner and had confidence to do that maintenance. We wanted to make sure we had some security in terms of pricing.”

JetBlue has ordered 25 A320neos and 60 A321neos, with deliveries set to begin next year. The Pratt engines will be 16 percent more fuel efficient than the current powerplant “straight out of the gate,” Priest said. The order unveiled Thursday includes 90 new engines and seven spares, added to 80 turbines and six spares from the previous order, which was made in 2012.

Since entering passenger service two years ago, Pratt’s geared turbofan has been plagued by durability issues and delivery delays. The latest glitch, affecting a compressor seal in some recently produced engines, is being addressed by the manufacturer.

GE Competition

Overcoming the engine issues is critical for Pratt, which is counting on the GTF as it challenges General Electric Co. in the market to power narrow-body planes, the workhorses of the global commercial jetliner fleet. United Technologies invested $10 billion to develop the quieter, more fuel-efficient engine.

JetBlue also considered engines made by a GE-Safran SA joint venture, with Priest saying competition “was very strong.”

JetBlue still is evaluating whether to keep Embraer SA’s E190 aircraft in its fleet or replace them with an updated version from the Brazilian planemaker or Bombardier Inc.’s C Series, Priest said. Both the new Embraer plane and the Bombardier option have engines supplied by Pratt. The carrier also hasn’t made a decision on switching some of its A321 orders to a long-range version that would allow it to fly across the Atlantic, he said.

To contact the reporters on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net, Richard Clough in New York at rclough9@bloomberg.net.

To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Susan Warren, Tony Robinson

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