December 21, 2009 / 6:34 AM / 10 years ago

Safran/GE venture wins lucrative China plane deal

BEIJING (Reuters) - The CFM International aero-engines joint venture of French group Safran (SAF.PA) and General Electric Co (GE.N) has won a multibillion-dollar deal to supply engines for China’s future C919 plane, Safran said on Monday.

The contract, initially worth $5 billion for each company, could eventually generate $15 billion to $25 billion in revenue for each company over the next three decades. GE, the largest U.S. conglomerate, forecast more revenue potential than did its European partner.

“The first part is worth around 5 billion. Afterwards, with the services bit of the deal, such as maintenance and change, it could be worth three times or even more than that, but over a 30-year period,” Safran Chief Executive Jean-Paul Herteman said in Beijing.

“Our Chinese partners reckon they can make 2,000 planes. Each time they make a plane, we’ll be the suppliers,” he added.

Officials with Fairfield, Connecticut-based GE said the contract could be worth $15 billion to $25 billion to each company over its life span. The high end of its estimate presumes more aircraft sales and higher maintenance revenue.

The deal was announced during a trip to China made by French Prime Minister Francois Fillon and business leaders.

Safran’s shares were up 4.1 percent at 13.44 euros on the back of the China contract. The stock earlier touched a year high of 13.49 euros and was among the top gainers on the Paris market.

“It’s great news,” said Mandarine Gestion fund manager Fabienne Girard-Tokay, who added she was considering adding Safran shares to her portfolio.

GE shares rose 13 cents to $15.72 on the New York Stock Exchange on Monday.

The C919 plane is expected to be the largest passenger jet to be produced in China and is slated to start deliveries to customers in 2016. It would compete with similar planes made by EADS’s EAD.PA Airbus and Boeing (BA.N).

“The first new generation engine will be made in 2012, certified in 2014 and will enter into service in 2016,” said Herteman.

Additional reporting by Sudip Kar-Gupta and Scott Malone in Boston; Editing by Greg Mahlich and John Wallace

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