Qatar Airways has announced that it has purchased CFM International Leap-1A engines to fuel the new 50 Airbus (EADSY) A321neos fleet. The request is worth $4 billion at list prices, including service contracts.
"Based on its proven performance in commercial operations, we choose the Leap unit," said Qatar Airways Chief Executive Akbar Al Baker in Wednesday's announcement. This year and next, the rapidly growing airline is expanding routes in Africa and Japan.
In 2020, the carrier said, the first Leap-1A equipped A321neos are scheduled for delivery. CFM International is a 50/50 joint venture between GE and Safran Aircraft Engines from France. Leap engines also power Boeing (BA) 737 Max jets, which after two fatal crashes are still grounded.
Last year's sources claimed Qatar Airways and Delta Air Lines (DAL) encountered performance issues with geared turbofan engines from the Pratt & Whitney subsidiary of United Technologies.
Qatar Airways purchased an initial order of A320neo jets from the Pratt & Whitney engines. Yet production problems postponed the expected entry into operation of the A320neo in 2015 and strained the loyalty of customers such as Airbus and Qatar Airways, who also threatened to cancel the contract. The order was subsequently updated to the wider A321.
Last year, in its geared turbofan engines, Pratt & Whitney examined excessive turbulence after pilots received strong vibration warnings during takeoff, sources told Bloomberg at the time. This added to problems with the combustor of the geared turbofan engine.
Meanwhile, a joint venture between General Electric and competitor United Technologies was inked for a large jet-engine contract in the face of delays. GE's stock fell and there was no improvement in the inventory of United Technologies, either.
GE stock in Thursday's session closed flat at 11.28. Shares hit a 10.88 buying point on an Oct. 30 earnings miss. In a multi-year downtrend, the relative strength column, assessing the quality of a share against the S&P 500, has risen to its best level in a year.
The United Technologies stocks trading at Dow Jones Industrial rose by 0.5 percent, while Honeywell (HON) was down at 0.7 percent. At the Paris Air Show in June, GE Aviation reported a solid $50 billion in sales, boosted by the new Leap-1A engines with more functionality and fuel efficiency.
"The business appears to be operating on all cylinders," Citi analyst Andrew Kaplowitz wrote shortly afterward, citing purchases of Leap engines, service agreements, and military growth.
