UTC sees no big impact from Bombardier engine-test failure

Thu Jun 5, 2014 11:53am EDT

(Reuters) - The failure of a Pratt & Whitney jet engine during testing on a new Bombardier Inc plane last week is unlikely to have a significant impact on Bombardier's testing schedule, an executive at Pratt parent United Technologies Corp said on Thursday.

"We're working now with Bombardier on a plan to resume testing here in the next few weeks," United Tech Chief Financial Officer Greg Hayes told an investor conference.

The engine failure had raised concern about potential further delays for Bombardier's new CSeries jet, which is already 18 to 24 months behind schedule. Hayes' comments confirmed cautious optimism in the industry and on Wall Street that the fallout from the May 29 incident would be limited.

A problem with Pratt's engine that involved its signature gearing system, known as the Geared Turbofan, could have broader repercussions, since the engine is offered on Airbus's A320neo narrow-body plane and other new regional jets. Earlier on Thursday, Pratt announced it had delivered its first GTF engine to Mitsubishi Aircraft for its MRJ90 regional jet.

But a preliminary analysis showed the engine problem during stationary testing on the Bombardier CSeries jet did not relate to the engine's gearing system, Hayes said. He added that the company has confidence in the engine's architecture.

"We think it was something much more simple than that," Hayes said, though he noted the investigation was still ongoing.

"We believe we have an understanding of what occurred and if we’re correct, we think it can be rapidly fixed," he added.

Hayes said he was confident United Tech would not face any significant financial exposure as a result of the incident.

“If all of this comes true, then I would expect that this issue will not measurably impact their testing schedule or their delivery schedule,” said David Tyerman, a Toronto-based analyst at Canaccord Genuity. "It would be removing an uncertainty related to the program, which is important."

The failure occurred last Thursday during stationary maintenance testing of the CSeries, which Montreal-based Bombardier has spent billions developing in an effort to compete in the narrow-body jet market with Boeing Co and Airbus.

A Bombardier spokesman said the United Tech comments were a "positive sign," but reiterated that the airplane maker was still expecting to release an update in the coming days.

Tyerman said demand for the CSeries remained a key uncertainty, and noted that the planemaker has not had orders from "brand-name customers" since Lufthansa and Korean Air.

Pratt itself is banking on the new GTF engine, which offers better fuel efficiency than older models, to provide somewhat of a comeback for the engine maker's commercial jet engine business.

Bombardier shares were down 0.5 percent at C$3.68 late on Thursday morning. United Tech shares were up 0.4 percent at$117.58.

(Reporting by Lewis Krauskopf in New York; additional reporting by Solarina Ho in Toronto; Editing by Alwyn Scott, Lisa Von Ahn and Peter Galloway)

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