July 13 (Bloomberg) -- General Electric Co. and Safran SA said their jet-engine joint venture will develop a model to preserve its lead on single-aisle commercial planes when a new generation of airliners arrives late next decade.

The Leap-X engine from CFM International may be certified as early as 2016 and is designed to cut fuel consumption compared with the current CFM56 model, GE and French partner Safran said today in London ahead of the Farnborough International Air Show. The companies also extended their CFM venture to 2040.

With airlines seeking savings amid record oil prices, engine makers are racing to develop technology ready for when Boeing Co. and Airbus SAS design new planes. The market for single-aisle, narrowbody aircraft seating 110 people and upward is the biggest in the industry, with the next generation of engines alone likely to be valued at $40 billion.

``We believe we have to raise the bar because of the importance of fuel,'' William Clapper, CFM's executive vice president, said at a press conference in London, estimating that the Leap-X will offer 16 percent efficiency savings. ``In fuel, we believe that number, in 2016, will be a world-class number and the best in the industry.''

The CFM venture, begun in 1974, powers about half the existing narrowbody segment and accounted for two-thirds of orders as of July 9, according to Ascend Online Fleets database.

737, A320 Options

The CFM56 is the only engine on the Boeing 737, with Fairfield, Connecticut-based GE building cores that are matched with Safran's fan systems. CFM competes with International Aero Engines, a venture of United Technologies Corp.'s Pratt & Whitney unit and London-based Rolls-Royce Group Plc, on Airbus A320 models.

Narrowbody planes to succeed the 737 and A320 series are likely to come no earlier than 2016, according to current thinking at Chicago-based Boeing and Toulouse, France-based Airbus, a division of European Aeronautic, Defence & Space Co. Clapper declined to comment on the two manufacturers' plans.

``The aircraft companies, working with their customers, have to decide what they want to do,'' he said. ``We build the engines. An airline needs an airplane.''

The joint venture agreement also includes service contracts under the CFM name for its future engines, rather than from each partner company, executives said at the press conference.

GE, the world's biggest jet-engine maker, also said it will use Leap-X's core -- the innards where an engine burns compressed air with fuel to create explosive thrust -- as a basis for new engines.

`Heart and Soul'

``A core really represents the heart and soul of the engine,'' GE Aviation Chief Executive David Joyce said in an interview ahead of the show. ``When you set out a core architecture, you set yourself on a journey of a product plan that is going to move forward for 25 years.''

GE's new technology aims to compete with rival Pratt & Whitney's ``geared-fan'' offering, which is focused mainly on improving the fan system that feeds air into a core. Pratt has indicated it will provide a new engine for Airbus and Boeing narrowbodies through the IAE partnership, but has yet to detail its plans.

According to Pratt, the geared-fan engine is already being offered with a core that includes new materials and cooling technologies for the CSeries, a 110-130 seat plane being developed by Montreal-based Bombardier Inc. which today won its first tentative order, from Deutsche Lufthansa AG. A similar core from Pratt is also used without the geared technology for business jets.

Efficiency Gain

Based on current engines for the Airbus A320, GE said in a statement its new ``eCore'' will aid efficiency by 16 percent, while Pratt & Whitney's will give a 12 percent boost. Pratt says the IAE model, the existing V2500, is already 3-4 percent more efficient than the current CFM56-7 model on that aircraft.

The Leap-X will be ground tested in 2012 with a goal of certification by 2016 for narrowbody aircraft, CFM said. It also has new materials for its fan blades, using some technology from GE's Genx engine used on the 787 Dreamliner plane from Boeing, Clapper said at the briefing.

Airbus has a backlog of 3,655 planes, or more than six years of work, and Chicago-based Boeing had 3,645 as of May. The majority are narrowbodies. The eCore will also be the basis for new regional and business-jet engines, GE said.

The eCore uses new materials to let the inner section of the engine -- the compressor, combustor and high-pressure turbine -- run hotter to create more power and improve efficiency. Pratt & Whitney's geared fan instead adjusts the fan speed to lower fuel use and noise.

`Right Architecture'

``We know what the right architecture is for the next generation engine; it is the geared turbofan,'' Steve Finger, Pratt & Whitney's president, said after the CFM announcement. ``The Pratt & Whitney Geared Turbofan is a real engine. It has a brand new core, plus offers an additional 6 percent fuel burn step-change advantage, which is only possible with a Pratt & Whitney patented gear system''

Joyce said the eCore will allow for another leap in development should Airbus and Boeing decide to wait until engines can produce fuel savings of 20 percent or more. Pratt & Whitney, Rolls-Royce and GE are all studying a so-called unducted fan, which has fan blades on the outside of a jet engine turbine. That design may take a dozen years to develop.

``It's not clear what technology is going to be adopted,'' said Nick Cunningham, an analyst at London-based Evolution Securities. ``If oil is going to be $200 dollars, maybe you need to look at moving to turbo props, because they are so much more fuel efficient.''

GE rose 2 cents to $27.66 on July 11, reducing declines this year to 25 percent. United Technologies declined $1.48 to $60.69. The stock is down 21 percent so far this year. Safran's shares rose 63 cents to 12.49 euros and are down 11 percent.

To contact the reporter on this story: Rachel Layne in Boston at rlayne@bloomberg.net.

Last Updated: July 13, 2008 11:44 EDT