Positive reaction for Rolls-Royce, Pratt & Whitney deal

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Reaction to the deal between Rolls-Royce and Pratt & Whitney appears positive for both parties.

Although P&W is paying a large sum up-front, it gains control of the V2500 programme, allowing it greater flexibility in sales campaigns when chasing contracts for carriers ordering both A320 and A320neo aircraft.

Andrew Shilston, finance director at Rolls-Royce Group, said: "This will allow IAE to focus on the success of the re-engined A320 and will enable [the engines for] both the old and new versions of the A320 to be marketed through the same vehicle. It's much more efficient for Pratt & Whitney."

One industry source added: "The main driver for this appears to have come from Pratt & Whitney. They are desperate to win both basic [A320] and Neo orders. Rolls has no interest at all in supporting discounting that helps the GTF."

For Rolls-Royce's part, it receives a $1.5 billion lump sum along with the remaining years of income from the installed base and future sales of V2500 compressed into 15 years.

The joint venture with P&W also means it will have an offering for narrowbody aircraft due to enter service in the middle of the next decade. It sees a potential market during the next 20 years for 45,000 new narrowbody engines.

However, Howard Wheeldon, senior strategist at BGC Partners, a London-based brokerage company, is less convinced that Rolls-Royce is actively going after that segment. "They have taken the lock out of the door but have not yet opened it very wide," he said.

"Rolls have given themselves their own version of a new engine option," he added.

As for Airbus, it sees the consolidation of IAE's shareholding as a positive move.

Tom Williams, executive vice-president of programmes, said it was "excellent news" because Airbus was "concerned" over the commitment to the IAE V2500.

It's "something that needed to be done" because IAE was "disadvantaged" against GE, he said.

"It's better now that the active partner takes control. It puts IAE in a very strong position to sell more engines," he added.