Companies could team on workshare package and request government funding, depending on Boeing choice

Japanese engine suppliers are seeking to build components for the Boeing 7E7 powerplants and are considering asking the Japanese government to help cover their development costs.

All three Western engine manufacturers competing to power the 7E7 are already discussing possible supplier deals with the Japanese. Ishikawajima-Harima Heavy Industries (IHI) is seeking the largest deal and could manufacture the low-pressure turbine and high-pressure compressor. Mitsubishi Heavy Industries (MHI) and Kawasaki Heavy Industries (KHI) also have expressed interest in supplying components for the new engine.

If Boeing selects just one of the three candidate engines for the 7E7, the Japanese companies plan to team on a workshare package and request funding from the Japanese government. If this occurs, the 7E7 powerplant would become the third engine programme to receive national project status following the International Aero Engines V2500 and General Electric CF34-8/10. Japan has a 23% share in the V2500 and a 30% share in the CF34-8/10, led by IHI with 13% and 27%, respectively.

The 7E7 has already won national project status, which ensures government loans will be provided through the Japan Aircraft Development Corporation (JADC) to five aircraft manufacturers, including MHI and KHI. IHI, KHI and MHI are independently evaluating 7E7 engine opportunities, but ultimately their request for government loans would be channelled through the engine equivalent of the JADC - the Japanese Aero Engines Corporation (JAEC). However, this request will not be made until after Boeing selects a 7E7 engine contractor.

Boeing plans to choose between GE, Pratt & Whitney and Rolls-Royce around mid-year. JAEC says if two engines are selected, the Japanese companies would be split up and national project status would not be feasible.

IHI says it has rejected requests from GE, P&W and R-R to forge partnerships before Boeing's engine selection because it is not prepared to commit funds this early. But IHI believes it will be able to partner with the competition winner and secure national funding by the end of 2004. MHI says it is still considering partnering P&W before the engine selection and government funding will be difficult to secure.

Tokyo denies subsidy charge

Japan has rejected suggestions by Airbus that it is subsidising the 7E7 programme and says it plans to offer loans with commercial terms.

The Japan Aircraft Development Corporation (JADC) says it is seeking government loans to cover 70% of the development costs its five member companies will incur as 7E7 suppliers. But it stresses that all these loans will have to be repaid, similar to the ¥60 billion ($560 million) in previous loans the companies are still repaying.

Airbus has been prompting the European Commission to launch an investigation in Japan's funding for 7E7 suppliers. "They don't know the details of the scheme," JADC says.

JADC is negotiating a master programme contract with Boeing on behalf of Fuji, Kawasaki, Mitsubishi, Nippi and ShinMaywa. Boeing has already tapped these companies to build 35% of the 7E7. JADC believes the loan scheme will be similar to what was offered for the 777. In that case, a government investment bank provided the loans. JADC acknowledges that some of the interest on these loans was covered by the government, but it says even this portion of the interest must ultimately be paid back.

Source: Flight International