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Wednesday, April 07, 2004 - Page updated at 12:00 A.M.
Rolls-Royce, GE to supply engines for new 7E7 jet
Pratt & Whitney was the big loser of the day, as the longtime engine manufacturer owned by United Technologies was eliminated as a 7E7 supplier.
GE and Rolls-Royce will divide a business that could be worth as much as $40 billion over 25 years if the 7E7 meets Boeing's sales expectations.
"The engine is a key part of what makes the 7E7 special," said Mike Bair, Boeing senior vice president for the 7E7, in a teleconference announcing the outcome.
The company has promised the jet will be 20 percent more fuel-efficient and cheaper to operate than today's comparable airplanes, particularly the Airbus A330-200.
Bair said the decision had been "very close" but refused to pin down what had made the difference.
"All (three engine manufacturers) either met or exceeded the requirements we put in front of them," Bair said. "We had three very good motors to pick from."
Boeing also considered the business offering put forward by each company, including "how we perceive them in the marketplace," Bair said.
Such considerations had earlier made GE and Rolls-Royce the favorites.
As a British company, Rolls-Royce may help bring in European airlines as 7E7 customers.
GE, with a large airline-financing business, has close connections to many Boeing customers.
Boeing also said the GE and Rolls-Royce engines will have the same airplane interface, giving airlines for the first time the flexibility to switch from one brand of engine on a jet to another.
This flexibility is expected to boost the resale value of the 7E7, making it easier for airlines to ensure a used jet is compatible with its existing fleet.
Bair said Boeing has not yet signed any risk-sharing agreements with its 7E7 supplier partners, and in the end may not do so.
In a risk-sharing arrangement, a partner gets a share of the revenue on sales rather than a fixed price for supplying parts.
It means coming into a program on a more equal basis, sharing losses or profits.
At last year's Paris Air Show, Boeing Commercial Airplanes Chief Executive Alan Mulally said he wouldn't rule out major suppliers becoming equity investors in a separate company to build the 7E7.
From Bair's remarks, it seems this possibility has receded.
Boeing spokeswoman Lori Gunter later clarified that the major 7E7 suppliers will still be expected to entirely fund their own development and to take full responsibility for design and production of their respective parts.
In previous programs, Boeing provided designs for its partners to work from.
Boeing had been conducting a three-way competition between the three engine makers for more than a year.
Pratt & Whitney President Louis Chenevert expressed disappointment yesterday and said his team would try to use elsewhere the technologies developed for its engine, which he said would have been the only "all-new design."
Pratt & Whitney is an equal partner with Rolls-Royce in a joint venture that produces the V2500 engine used on Airbus' narrowbody jets.
The company is well-established in the military market, where it makes engines for Boeing's C-17 transport plane and for the F/A-22 Raptor and the F-35 Joint Strike Fighter attack jets.
If the troubled 767 Air Force tanker program eventually moves forward, those planes will have Pratt & Whitney engines.
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