Safran CEO holds off on Airbus jet output talk to Q1 2019

[October 11, 2018]   By Tim Hepher

HAMBURG, Germany (Reuters) - Jet engine maker CFM International would be ready to enter negotiations with Airbus <AIR.PA> in the first quarter of 2019 on possible future increases in narrow-body jet production, said the head of French aerospace supplier Safran <SAF.PA>.

Airbus and U.S. rival Boeing <BA.N> are pondering further increases in jet production to keep up with rising demand for air travel but face problems in delivering on their current output plans due to various delays.

"The first quarter of 2019 will be a good time to have a comfortable view on the robustness of the supply chain," SafranChief Executive Philippe Petitcolin told reporters.

Safran co-owns CFM International, the world's busiest engine manufacturer by volume, together with General Electric <GE.N>.

About 60-65 percent of the value of a jet engine comes from parts shipped in from sub-contractors, such as forgings and castings which have seen some bottlenecks in the past year.

Petitcolin said CFM was not grappling with any significant bottlenecks or problems with its own suppliers, though a trickle of smaller difficulties associated with the speed of the ramp-up in production of the new LEAP engine continued to cause delays.

CFM is delivering engines about a month late on average, including a delay of five weeks for Airbus <AIR.PA> and a smaller gap in schedule for Boeing, the larger of the two customers.

The company still believes it can iron out these problems by the end of the year, Petitcolin said.

 Safran Chief Executive Philippe Petitcolin delivers speech during the inauguration of the Safran Aircraft Engines plant in Queretaro, Mexico, February 21, 2018. REUTERS/Edgard Garrido/File Photo

It has not changed its output guidance for 1,100 of its new LEAP engines this year and 1,800 next year.

Pratt & Whitney, a unit of United Technologies <UTX.N> which competes with CFM to supply engines for the Airbus A320 family, has been facing more significant delays on its latest engine.

Airbus plans to increase A320-family output to 60 a month from next year but is studying plans to go first to 63 a month and eventually as high as 73 a month, industry sources say.

Petitcolin was speaking at the opening of a 10-million-euro Safran assembly plant in Hamburg whose future was secured by a deal between Safran and Airbus in 2017 that prevented Airbus taking control of the lucrative nacelles work.

Workers there rotate and tilt the newly designed LEAP engines on special jogs, to fit first their cladding of wires and pipes and then their nacelles or engine housings.

CFM is producing around 30 of its new fuel-saving LEAP engines a week, with plans to reach 35 a week by end-year.

(Reporting by Tim Hepher; Editing by Adrian Croft)

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