Transatlantic joint ventures could throw up obstacles to European propulsion shake-out
Europe's aero-engine manufacturers are positioning themselves for the onset of a long-awaited round of consolidation likely to be sparked by an expected French government decision to float 20% of Snecma.
The French Snecma and its smaller German rival MTU are each courting Italy's FiatAvio and Volvo Aero of Sweden. Meanwhile, industry sources suggest that Snecma and Europe's largest player Rolls-Royce are showing renewed interest in bidding for MTU although the latter's parent company DaimlerChrysler insists that it is not looking for a buyer.
General Electric and Pratt & Whitney are also believed to view MTU as a key acquisition target.
Complicating efforts to restructure Europe's fragmented propulsion sector, however, is the web of transatlantic joint ventures. MTU works primarily on P&W projects, while Snecma has strong ties with GE. MTU, P&W and R-R are linked through the International Aero Engines company.
A source within Snecma suggests the sale of 20% of the company could raise around $5.7 billion. Investment banks Credit Lyonais and Credit Suisse First Boston are widely expected to be appointed to handle the disposal.
Snecma chief executive (CEO) Jean-Paul Bechat says he sees little scope for co-operation with R-R. "There is a limit to the partner loyalty commitment," he says. "We are a partner with GE for civil aircraft engines and a partner with R-R for helicopters. Our ethic is to stay with GE."
R-R is staying tight-lipped about its own consolidation options but expects initial moves to be made among the second tier players.
"This is a high consolidation industry. It is possible there will be further consolidation, although it is more likely to be at the smaller end of the market," it says.
FiatAvio CEO Saverio Strati says his company is in "daily and direct contact" with Snecma. He adds: "We are interested in a consolidation process with the European engine industry [but] are not interested in a take-over - FiatAvio is in good health."
Strati believes, however, that Europe is "at a crossroads of continent-wide consolidation".
Volvo Aero president Claes Malmros remains coy on a possible future partnership with Snecma but says that "there may be opportunities" following the latter's partial privatisation.
MTU chief executive Klaus Steffens says his company is a "very robust and profitable company on its own but we would not want to be left out of a European consolidation".
Source: Flight International
