Rolls wins pounds 1.2bn Singapore power deal
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Boeing has fought off tough competition from Airbus to win one of the largest aircraft contracts ever signed in a deal that will provide spin- off work for several UK firms.
The $12.7bn (pounds 7.9bn) order from Singapore Airlines is for 77 Boeing 777- 200 passenger planes, which will be powered by Rolls-Royce's Trent engines. The UK company, struggling to win orders against its two main US rivals, estimates that its share of the contract will be worth about pounds 1.2bn. The contract is a blow for Airbus, the European consortium 20 per cent owned by British Aerospace, which had hoped to sell its A330 aircraft to the fast-growing Asian airline.
Singapore Airlines said the bidding was close, but that the Boeing aircraft offered 10 per cent larger capacity and therefore more revenue potential.
Singapore Airlines said it was buying 157 Rolls-Royce engines, including spares, to power 61 of the Boeing aircraft. John Rose, managing director of R-R Aerospace, called the order a significant endorsement of the Trent engine. Singapore Airlines is the ninth customer for the Trent and this order takes the order book for engines in the range to pounds 2.5bn.
R-R, whose shares rose 10p to 171p on yesterday's news, now has a one- third market share for the Boeing 777, introduced earlier this year by the US manufacturer. It increases the number of Trent-powered 777s on order to 87.
An analyst at Lehman Brothers said the deal would help to secure the long-term future of R-R, which has never supplied engines to Singapore Airlines before. He believed R-R would make a "marginal" profit on the deal as well as benefiting from economies of scale from doubling the production of the Trent 800 engines.
But the real benefits can be expected in around seven years, with the spare parts business and the maintenance of the engines and refits.
NatWest Securities analyst Sandy Morris said: "Singapore Airlines' decision was a very pleasant surprise following Monday's news of a pounds 100m order from Gulf Air to supply Trent 800 engines for Airbus A330 aircraft. The two other companies in the race to secure engine orders for 777s are General Electric and United Technologies Corp's Pratt & Whitney, both of the US.
Smiths Industries, the UK aerospace company, said the aircraft order was worth pounds 500,000 per plane in components supplies. Its shares rose 14p to 596p.
The aircraft will be delivered over the next nine years for use on Singapore Airlines' thriving Asia-Pacific routes, where the airline passenger market is expected to grow rapidly over the next 10 years.
The planes will preserve the youth of the airline's fleet by replacing some of the Airbus 310s and older generation B747s. SIA has the right to substitute any of the 300-seat B777-200s with other members of the Boeing family. Of interest to the airline is the stretch version B777- 300 with around 350 seats, and the super long range version, the B777- 100.
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