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GE-Safran Engines Said to Gain Major Show Order From AirAsia

AirAsia CEO Tony Fernandes
AirAsia Chief Executive Officer Tony Fernandes. Photographer: Fabrice Dimier/Bloomberg

General Electric Co. and Safran SA are likely to win an order for engines on the revamped A320neo aircraft from AirAsia Bhd, which is negotiating to buy at least 175 aircraft in what may be the biggest deal of the Paris Air Show, three people familiar with the negotiations said.

The order for CFM International, the companies’ joint venture, would be valued at more than $4 billion, based on estimates for list prices for the Leap-X engine. Negotiations between Airbus and AirAsia Chief Executive Officer Tony Fernandes are still continuing, and an accord may be announced later this coming week, said the people, who requested not to be identified because the talks are private.

Fernandes said in February that he aims to buy at least 175 A320neos as he expands the fleet of Southeast Asia’s biggest discount airline. CFM’s Leap-X competes with Pratt & Whitney’s geared turbofan as the engine of choice for the A320neo. The twin-aisle jet was announced at the end of last year and has already won more than 400 orders or commitments.

Airbus said yesterday that it’s confident of gaining more than 500 orders by the end of the Paris Air Show, which commences tomorrow. Morgan Stanley estimated in January that A320neo orders may reach as high as 1,000 at the show.

Higher Price

Both engine makers are listing A320neo engines for about $12 million each, according to estimates from analysts including Teal Group. Airbus has said that the A320neo will cost about $6 million more than its existing variant, which sells for about $85 million at list price. Customers typically get discounts when they order aircraft.

Airbus is making the A320neo available from the end of 2015, promising efficiency gains of 15 percent compared with a new A320 available today. Boeing Co., whose competing 737 aircraft only comes with CFM engines, has yet to decide whether it will upgrade its single-aisle aircraft or design a new jet.

CFM last week won placement of its new Leap-X model on 30 upgraded Airbus SAS jets for Virgin America Inc. as part of an order valued at $1.4 billion, ending rival Pratt & Whitney’s solo run on the more fuel-efficient plane. SAS Group, the Scandinavian airline, is also set to pick CFM when it buys about 30 A320neo aircraft at the Paris Air Show, another person briefed on the negotiations said.

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