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Aviation History
1991
1991 - 2235.PDF
MR TRANSPORT BA opts for 777/GE90 combination... BY DAVID LEARMOUNT Strategic British Airways (BA) fleet replacement decisions have shocked the industry with their timing and content. BA's choice of the Boeing 777 rather than Airbus Industrie's A330/ 340 to replace its Lockheed TriStars and Douglas DC-lOs was not unexpected; but its re jection of Rolls-Royce (R-R) as engine supplier in favour of General Electric (GE) with its new GE90 shocked R-R and industry observers. Simultaneously with the $2.2 billion order for 15 777s and options on another 15, BA placed orders for 24 more 747- 400s and five additional British Aerospace ATPs with six op tions. BA's 747-400 orders now stand at 31 firm and 38 options — all to be R-R powered — and the ATP finally replaces its pred ecessor, the 748, in BA's Scottish operations. To cap a busy day, BA an nounced that it had made "an agreement in principle" to sell to GE its profitable Wales-based British Airways Engine Overhaul (BEOL), which carries out all BA's own overhaul work and a significant quantity for others. BA and GE deny that there is Boeing 777 will fly in BA colours by 1995 a connection between the BEOL and GE90 deals. Analyst Sandy- Morris at County Natwest ob serves, however, that the City finds the no-connection line dif ficult to believe saying: "This is a brilliant piece of management by GE. They have launched a new engine, got into BA, and acquired an engine overhaul facility which could be quite useful." The BA order launches the GE90, and is the 777's first prestigious sale in Europe. The airline decribes the aircraft/ engine agreement as "... a signif icant commercial advantage in the context of the total deal, which does not include the BEOL deal". Airbus comments: "We are not surprised. This is not the Air Canada/USAir agree alliance Air Canada and USAir have agreed in principle to an alliance which will include oper ational, marketing and potential investment opportunities. The two companies are nego tiating the details of the alliance, which could involve sharing maintenance resources, joint ad vertising and marketing cam paigns and feeding passengers into the partner's services. There will also be the possibility of an equity swap. Air Canada has been seeking a partner actively for some time, and has held talks with nearly all the major US air carriers. The alliance with USAir is the first step in its strategic plan to develop an international net work of alliances. The Canadian carrier says: "We were looking for a partner that was very strong in the key areas that we have identified for future travel patterns" — east of the Mississippi and east of Lake Superior. "Because two-thirds of the US population is east of the Mississippi and the vast majority of the Canadian population is in Quebec and Ontario, the major links with the USA for air travel will most likely take place in that area." In return, USAir gains access to Air Canada's international markets. In addition, by teaming up with the major Canadian carrier, USAir does not have to worry about securing northern routes and can concentrate its future marketing efforts on gain ing more access to the American south and mid-west. D first time that BA has turned its back on Europe. We are disap pointed because we worked hard on a package for BA." R-R expressed "... great disap pointment. We made a highly competitive commercial offer. It would have been imprudent to have gone any further." R-R's chief executive, Sir Ralph Rob- bins, adds: "We can only assume that the competition went below that level". The first five 777s — delivery commencing in September 1995 — are to be "A-market" ver sions, the short to medium- range model, which BA will use to serve the US East Coast and the Middle East. The remaining firm orders and all the options will be the long-range "B- market" models, which BA plans to operate on its intercontinental routes. Delivery will be complete by 2002. All will seat 313 pas sengers in the three-class layout. GE puts the GE90 sale to BA at a potential value of S1.4 billion. The engine is to be certificated in November 1994 at 388.8 kN (87,4001b) thrust and will go into service at a slightly lower power on the 777. BA chairman Lord King says the engine was chosen after the airline "...had looked very hard indeed at all the aircraft and engines in this highly competi tive market, and the outcome represents, by a clear margin, the best decision". • ...GE buys BA engine overhaul centre Simultaneously with British i Airways' (BA's) announce ment that it had chosen General Electric's GE90 turbofan to power its Boeing 777s, the air line revealed that it had sold its engine overhaul centre at Nantgarw, near Cardiff, Wales to General Electric (GE). BA and GE claim that the GE90 and British Airways En gine Overhaul (BEOL) deals are completely Independent of each other. BEOL has been on the market for some months as part of a wider BA plan to sell non-core businesses. BA sees the sale as strengthen ing its balance sheet at a difficult time and providing funds for investment and expansion. GE has offered about $440 million for BEOL, which has 1,200 employees and carries-out repair and overhaul work-, on aircraft turbine engines and»aux- iliary power units. BA is the main customer, but "a substantial amount" of work is carried out for other airlines. Although operated as a BA cost centre, the carrier estimates that BEOL would have reported a pre-tax profit of £11 million on a £177 million turnover last year if all the work had been carried out on "arm's-length contracts". GE will operate the overhaul centre as a wholly-owned sub sidiary with exclusive rights, in the early years, to continue maintenance of BA equipment. The engine manufacturer says that Nantgarw will extend its current overhaul business, and will serve as the initial European GE90 overhaul centre. "Our avi ation service has had a strategy of growth over the period 1981- 91, which has seen sales growth in excess of 250% in component repairs and overhaul. We've been looking for opportunities, and this gives us an ideal site in Europe," says GE. The US company currently has GE-engine overhaul sites in Kansas, Ontario, California and Virginia. It also has a GE com ponent repair shop in Singapore and a test cell in Thailand, but there are "no immediate plans" to expand the the latter two. • FLIGHT INTERNATIONAL 28 August - 3 September, 1991 9
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