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Reuters Summit-UPDATE 1-Engine makers eye Airbus,Boeing upgrades

(For other news from the Reuters Aerospace and Defense Summit, clickhere)

(Adds details throughout)

WASHINGTON, Dec 14 (Reuters) - Airbus EAD.PA and Boeing BA.N are nearing key decisions on whether to order costly new engines for their best-selling models, but the project is putting strain on a coalition of engine makers spanning three continents.

Pratt & Whitney President David Hess told the Reuters Aerospace and Defense Summit the U.S. firm could go it alone with a version of its geared turbofan (GTF) engine, developed for regional jets, if partners failed to agree to a joint approach.

"This is kind of a dress rehearsal for the Airbus and Boeing narrow-body segment, which we think is starting to heat up," Hess said of the introduction of the GTF engine on the recently launched Bombardier BBDb.TO C Series.

“Airbus and Boeing are both taking a harder look at re-engining programs that could potentially get launched next year,” he said.

Some airlines are pressing for more efficient engines on the Airbus A320 and Boeing 737, two families of jets that make up the backbones of their short-haul and medium-haul fleets.

But with a combined backlog of almost 4,500 such planes worth over $300 billion at list prices, the planemakers can ill afford to risk cancellations by embarking on a complete make-over until engine makers can deliver a dramatic leap in efficiency.

To remain competitive, analysts expect the planemakers to take a half-way step by equipping existing airframes with new engines capable of delivering 10 percent less fuel burn, as opposed to possibly 25 percent gains in a future all-new plane.

“I can’t imagine they would do it (a re-engine project) for less than double-digit gains,” Hess said.

But he said the consortium in which Pratt & Whitney, a unit of United Technologies UTX.N, competes in the single-aisle aircraft market, International Aero Engines, was split over how to tackle such projects.

“We are unable at this point to reach agreement with Rolls on how to do that but we are still talking, but if we can’t agree we are prepared to make an offer as Pratt in partnership with others.”

Rolls-Royce RR.L was unavailable for comment.

ALLIANCES

New aircraft engine developments typically cost about $1 billion and represent major gambles for their manufacturers who have made a web of overlapping alliances to fund investments.

Pratt has 30 percent of the International Aero Engines alliance with Rolls-Royce, MTU Aero Engines MTXGn.DE of Germany and a trio of Japanese heavy engineering companies.

IAE has a roughly 50 percent market share on the Airbus A320 series where it competes with CFM International, a joint venture between General Electric GE.N and France's Safran SAF.PA. CFM is the sole supplier on Boeing's 737 series.

Hess noted that Airbus was confident of maintaining single-aisle production levels in 2010 but that a reduction of 5 percent or so would be “manageable” with six months’ notice.

Risks to narrow-body commercial aircraft production levels look greater in 2011 than in 2010, he said.

Pratt & Whitney, which once dominated the engine market for large commercial jet transport before losing market share to GE and Rolls-Royce, aims to boost its portfolio in the wide-body market, partnering others where it makes sense, Hess said.

The United Technologies subsidiary already partners with GE in an engine for the Airbus A380, the world’s largest airliner, competing with Rolls-Royce.

Hess said there were no signs the superjumbo’s top customer, Emirates, was planning to trim back deliveries as a result of Dubai’s recent financial crisis. Emirates has ordered 58 A380s fitted with the Engine Alliance power plants from Pratt and GE.

(For summit blog: blogs.reuters.com/summits/)

(Additional reporting by Jui Chakravorty; Editing by Phil Berlowitz)

(( +331 4949 5452 paris.equities@reuters.com)) Keywords: AERO ARMS SUMMIT/PRATT ENGINE

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