Safran Says Talks Ongoing With Boeing, Airbus on Raising Output

  • LEAP engine for Airbus, Boeing planes goes according to plan
  • Aircraft engine-maker reaffirms earnings forecasts for 2015

Safran SA is still talking to Airbus Group SE and Boeing Co. about the French aircraft-engine manufacturer’s capacity to accelerate production as the world’s two big planemakers press suppliers to help them increase output of single-aisle planes.

Safran reaffirmed its 2015 forecasts Thursday, though it cautioned that development of its Silvercrest engine for corporate jets is having difficulty meeting fuel efficiency targets and will require further investment. The new LEAP engine for single-aisle airliners is going according to plan, the Paris-based company said.

The airliner units of Airbus and Boeing are both considering plans to boost production to 60 or more narrowbody planes a month, though they can’t move ahead before securing commitments from suppliers including Safran.

Safran’s Snecma unit, together with General Electric Co., is developing the LEAP as the sole powerplant for Boeing’s 737 Max, set for first delivery in 2017, and as one of two for Airbus’s A320neo, which has its first delivery scheduled for this year with engines from Pratt & Whitney. Boeing is ramping up to 52 narrow-bodies monthly by 2017 from 42 now, while Airbus is increasing to 50, also from 42. Both planemakers say demand from airlines requires higher rates.

“We’re in discussion with both of them to try and do this in a way that won’t put at risk our ramp-up and supply chain,” Chief Executive Philippe Petitcolin told analysts on a call today. “We try to satisfy our customers, but as I said in July, we could not accept to jump to 60 planes a month, at the speed Airbus wanted, because we thought it was too risky. We can not go beyond a certain level of risk.”

Safran will deliver the first two LEAP engines to Boeing by the end of this month for initial flight tests in the first quarter of 2016. Before the end of the year, it will deliver two more engines, he said.

The company is studying a new schedule and further development work for the Silvercrest engine, where fuel burn has become an issue. Delays on the Silvercrest won’t affect cashflow targets for 2015, the company said.

“We all know what to do” to improve the engine, Petitcolin said. “It’s a question of time and money.”

Safran fell 3.1 percent to 67.30 euros at 10:15 a.m. in Paris. The stock has gained 31 percent this year.

Third-quarter revenue rose 15 percent to 4.14 billion euros ($4.7 billion), the company said, beating analyst estimates. Safran confirmed 2015 targets, which include a “mid-teens” percentage gain in recurring operating income.