Safran rules out single-aisle rate hike proposals until 2019

A key engine supplier for Airbus and Boeing will not entertain until after January any proposal to further increase production rates for single-aisle aircraft engines beyond planned increases through 2019.

An analyst on a first quarter earnings call on 25 April questioned whether another round of production volume increases was coming, but Safran chief executive Philippe Petitcolin dismissed the idea completely.

Safran forms half of the ownership of CFM International, which is already six weeks behind committed production volumes on the Leap engines that power Boeing 737 Max and Airbus A320neo aircraft.

“We think that at the level we are today it would be crazy to accept additional quantities when I just told you we are six weeks late,” Petitcolin says.

CFM’s owners, Safran and GE Aviation, secured an agreement with Airbus and Boeing last year to hold off on further production rate increases until at least the end of next year.

“We’re not ready and we are not going to negotiate anything,” Petitcolin adds. “We want to stick to what we said 12 working months ago.”

Petitcolin’s response came only hours after Boeing chief executive Dennis Muilenburg repeated a familiar company line during his company’s first quarter earnings call with analysts.

“We continue to assess upward market pressure on the 737 production rate,” Muilenburg says.

Only months after making a similar comment in a 2015 earnings call, Boeing announced a plan to raise 737 production to a monthly rate of 57 by 2019. Boeing is already preparing to increase monthly output from 47 to 52 on the 737 line later this year.

In February, Airbus executives also acknowledged interest in increasing A320 production past a planned hike to 60 per month next year.

Those plans by Airbus and Boeing are straining an already tenuous situation for certain suppliers. Spirit AeroSystems acknowledged falling behind on deliveries of 737 fuselages to Boeing’s final assembly centre in March.

But CFM has one of the hardest challenges in the industry. The company’s members plan to deliver 1,000 CFM56 engines for 737NG and A320s, plus another 1,100 Leap engines for the 737 Max and A320neo.

As CFM56 deliveries ramp down and Leap production ramps up, CFM has fallen behind schedule. Leap engine production rates are continuing to grow almost every week, but not as quickly as the joint company had committed to customers for the A320neo and 737 Max, Peititcolin says.

Safran and GE are both dealing with a shortage of castings and forgings, he says, but they’re on track to recover by the third quarter. Safran expects to be caught up on parts by the end of June and CFM follows behind in the third quarter, Petitcolin says.

Meanwhile, GE also is implementing a solution to a technical glitch that appeared on Leap engines last year. A new ceramic matrix composite coating within the engine was wearing out faster than expected. CFM has developed a new coating that restores the engine’s durability, Petitcolin says.

“We are back to normal in terms of performance we are expecting on this part,” he adds.

(Evangle Luo of TTFLY shared with you)