General Electric Co. and Rolls-Royce Group were selected by Boeing Co. to supply engines for the new 7E7 aircraft, beating United Technologies Corp.'s Pratt & Whitney for a contract worth as much as $40 billion over 25 years.
"GE probably had an interest in putting an eight-inch nail in the coffin of Pratt & Whitney's large aircraft engine business," said Brian James, an analyst at Loomis Sayles & Co. in Boston, which owns more than 4 million General Electric shares and about 9,000 United Technologies shares. "This is the last opportunity to produce a new model or family of engine models for a decade."
Boeing is counting on the 7E7, designed to use 20% less fuel than similar-sized planes, to win market share from Europe's Airbus, which passed it to become the world's No. 1 commercial aircraft maker in 2003. Naming an engine maker paves the way to win orders, said John Rogers, a D.A. Davidson & Co. analyst.
"It was a very, very difficult decision for us to make, and quite frankly a very close decision," said Michael Bair, senior vice president and head of the 7E7 program.
General Electric and Rolls Royce will supply motors, spares and service for the 7E7, said Robert Thomson, an analyst at Roland Berger & Partners in London. He valued the contract at $40 billion over 25 years.
"It's not surprising that they haven't gotten any orders because they're trying to finalize all the specifications first," said Rogers.