Sept. 19 (Bloomberg) -- Honeywell International Inc. won a $16 billion contract to build and service mechanical systems for Airbus SAS's A350 wide-body plane, work that will take place over at least two decades.

Honeywell will design and build systems that supply pneumatic and electric power, and that manage all of the air used on the plane. It is the largest systems-and-equipment contract awarded in the A350 project, Morris Township, New Jersey-based Honeywell said today in a statement. Honeywell is the world's biggest maker of auxiliary power generation units.

The A350-XWB is Toulouse, France-based Airbus's planned long-range rival to Boeing Co.'s 787 Dreamliner. The win is a culmination of reorganization efforts begun in 2005 under Honeywell's aerospace unit chief Robert Gillette. His strategy of selling more efficiently by packaging products by customer segments such as commercial or defense was prompted by losses to rivals.

``Our reorganization helped a lot,'' Gillette said in a telephone interview. ``How well we've performed on current programs was a big criteria and demonstrating what we can do in managing other suppliers effectively'' was also a factor.

Honeywell rose 98 cents, or 1.7 percent, to $58.26 at 4:01 p.m. in New York Stock Exchange composite trading. The stock has climbed 29 percent so far this year.

Service Work

The production life of the aircraft is expected to last 20 to 25 years, and Honeywell's contract value estimate includes revenue for servicing the systems. The A350-XWB won't enter service until about 2013, five years after the 787 is slated for its first delivery. Airbus rejected an earlier design, after customers complained it was too similar to its existing A330 model.

As part of the contract, Honeywell will manage secondary suppliers for Airbus. Honeywell had received the systems contract for the earlier, scrapped version of the A350, valued then at as much as $4 billion.

The company's previous contract losses include one to United Technologies Corp.'s Hamilton Sundstrand unit, which was awarded work valued at as much as $15 billion on Chicago-based Boeing's 787. Hamilton Sundstrand decided to drop out of some bidding on the Airbus plane, said spokesman Daniel Coulom.

``Because of our commitments on the 787 and other programs, we elected not to pursue some of the systems on the A350,'' Coulom said. ``We think the A350 will be a successful program and we are offering other packages on the aircraft.''

A350 Orders

He declined to say which systems Hamilton Sundstrand will bid for. Airbus has 154 orders for the A350. The Dreamliner has 710 orders, making it Boeing's most successful product introduction. Neither of those figures include options.

Honeywell's aerospace unit provided $11.1 billion of the parent company's $31.4 billion in revenue last year, and is forecast to post $12.1 billion in sales this year.

The contract is the first ``concrete example'' of Airbus's decision to assign larger, more complete work packages to a smaller number of major suppliers, said Tom Williams, Airbus executive vice president of programs and procurement, in the statement.

``They are fully responsible for the total process from the initial research and development up to manufacturing/production and integration,'' he said.

Today's contract win conflicts with J.P. Morgan Securities analyst Stephen Tusa's view that the company isn't as competitive as he wants it to be.

``This strategy bodes well for prospects for future contract wins with Airbus,'' wrote Tusa, who is based in New York, in a note today to investors. He has an ``underweight'' rating on Honeywell.

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

Last Updated: September 19, 2007 16:12 EDT