Safran, Rolls-Royce tie-up on small jet engines?

Bloomberg

Safran SA Chief Executive Officer Philippe Petitcolin said he is open to partnering with Rolls-Royce Holdings Plc to power a new generation of regional and business jets. Safran views the market as potentially lucrative but not one that can be addressed via its CFM International venture with General Electric Co., which specialises in bigger engines for single-aisle jetliners, Petitcolin said. “We don’t have an agreement with GE for this category of engines,” he said in a briefing with reporters during Paris-based Safran’s capital markets day in London. “If there are opportunities where we think that in terms of market it’s good to share the risk, then we would look at it. We are totally open.”
A partnership on regional engines, requiring thrust below the 18,000 to 50,000 pound range of the turbines CFM makes mainly for the Airbus Group SE A320 and Boeing Co. 737, could take the form of a joint venture, or a looser accord of the kind Safran has on GE’s GE90 and GE9X wide-body models.
A new engine type would supersede the French company’s existing Snecma Silvercrest turbine which powers Dassault Aviation SA corporate jets and produces between 10,000 and 12,000 pounds of thrust. While a new offering could potentially be based on a similar engine architecture, the
Silvercrest option isn’t capable
of powering regional jets,
Petitcolin said.

Rolls Losses
Rolls-Royce said in November that a slowdown in sales and maintenance revenues for corporate and regional jets would contribute 100 million pounds ($143 million) of an anticipated 650 million-pound hit against 2016 earnings. Reduced use of Rolls-powered regional planes is being driven by retirements in North America, while for business aircraft a slump in Russia, Brazil and China has been only partly offset by sales of the new Gulfstream 650ER.
Petitcolin also said that Safran wouldn’t be in a position to increase output of the new LEAP engine it’s supplying to the upgraded 737 Max and A320Neo to make up for any shortfall at Pratt & Whitney, which is producing a competing powerplant on the Airbus plane.
Pratt’s geared-turbofan model has suffered cooling issues requiring operators to idle the engine to help modulate the temperature, a glitch that has impacted customer handovers, with one buyer, Qatar Airways, saying it won’t take the plane if an acceptable fix isn’t found.
Niche Model
The CEO added that the Max and Neo could be the mainstay of short-haul operations until 2035, rather than 2025 as Boeing and Airbus have indicated, and that a new mid-market plane that the U.S. company is working on would probably fill a gap in the lineup rather than herald a new generation of jets.
Boeing said March 3 it’s still studying how best to tap the midrange market, where a void was created when the 757 ended production more than a decade ago. Officials have said that single- and twin-aisle models are being considered as they seek to fill the gap between the largest 737 Max and smallest 787.
Shares of Safran closed down 6.3 percent, the biggest drop since 2011, after it said that earnings as a proportion of sales will be little changed from last year’s 14 percent until 2020. Margins at the engine business will be “in the mid to high teens,” it said, a forecast that Bank of America Merrill Lynch said was at the low end of estimates.