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Rolls-Royce Wins 1st Engine Contract for Superjumbo Jet

Aerospace: Deal with Century City-based plane lessor places British firm ahead of U.S. rivals in race for Airbus' business.

August 30, 2000|From Times Wire Reports

International Lease Finance Corp., the giant plane lessor, ordered $910 million worth of aircraft engines from Rolls-Royce on Tuesday in a deal that included engines for the future Airbus Industrie superjumbo A-3XX.

The order by the Century City-based company places the British engine maker ahead of its U.S. rivals General Electric Co. and United Technologies Co.'s Pratt & Whitney unit in the race to provide engines for the new superjumbo jet, Rolls-Royce said.

Airbus Industrie, a European consortium, is developing the A-3XX, which is expected to seat more than 550 passengers, making it the largest airliner in the world. It would dwarf Boeing's 747 jumbo jet, which can carry about 400 passengers.

Rolls-Royce said the deal marked the first time a potential buyer for aircraft selected an engine maker. As such, the deal could influence other customers who are interested in the gigantic plane, Rolls-Royce officials said. ILFC, a unit of American International Group, said last month that it will buy five A-3XXs, which aren't expected to fly until 2005.

"The engine is tailored for the aircraft and today's news gives us a strong position on that program," said John Cheffins, managing director for airlines at Rolls-Royce.

The order helped boost the engine maker's American depositary receipts, which rose 88 cents to close at $13.63 on Tuesday, following the record one-day fall of 24% in its shares last week.

The engines will power 37 Boeing 777 and Airbus A-330 and A-3XX aircraft, ILFC said. ILFC, the world's biggest plane lessor, is Airbus' biggest customer. The order includes Trent 900, Trent 892 and Trent 772B engines, which will power planes to be delivered beginning in 2002.

Rolls-Royce declined to say how many engines were firm orders and how many were options, which don't necessarily become orders.

Also, because Rolls-Royce described its deal as covering "up to 37" firm orders and options, analysts said the British company clearly did not garner all of ILFC's business. Engine contracts for 20 Airbus A-330-200s and 25 Boeing 777-200ER planes were up for grabs.

GE and Pratt also offer engines for those planes. For the A-3XX, they have proposed a joint engine, the GP7000, which has not yet attracted an order.

However, other customers--including Air France and Dubai-based Emirates--have not yet chosen engines for their A-3XXs.

The early orders for an aircraft or aero-engine are important, because the model that gets them will go into development first and will be the one that is available soonest--attracting other customers.

Also, one customer's choice tends to influence others', particularly because aircraft fitted with the most-popular engine type tend to retain the highest secondhand value.

GE and Pratt have also proposed their GP7000 for Boeing's rival superjumbo, the 747X, for which Rolls is offering a different engine, the Trent 600. The 747X, smaller than the A-3XX, would seat about 520 in its most capacious version.

Engines account for between 20% and 25% of the value of an airliner. Industry executives expect a set four engines for each A-3XX to cost roughly $40 million.

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