General Electric is continuing the aggressive expansion of its engine overhaul and maintenance network by forming GE Varig Engine Services, a new joint company to be located at the Brazilian airline's Galeao International Airport overhaul site in Rio de Janeiro.
The company is being formed through its recently acquired Petropolis-based GE-Celma subsidiary and will be owned 95% by GE Engine Services and 5% by Varig. The deal is also linked to the airline's recent $2.7 billion order for up to 39 GE and CFM International-powered Boeing 777, 767 and 737s. Associated with the engine selection is a separately signed $1 billion maintenance agreement between GE and Varig.
The 10-year contract covers CF6-80C2, CF6-50, CFM56-3 and GE90 engines under a maintenance cost per hour (MCPH) agreement which is based on a flat rate per engine flight hour. Tied to the formation of the new joint company, the latest deal is a big boost to GE Engine Services which is on track for sales of nearly $5 billion in 1998. This would represent around a 65% increase over 1997 when sales reached $3 billion, and more than double sales from the previous year, which were around $2.3 billion. Of total GE engine revenues in 1997, some 49% was earned by the services part of the company.
GE's determination to develop its overhaul and maintenance services is partly caused by the huge growth in its installed base. This is due to exceed that of its largest rival, Pratt & Whitney, by 2001.
Source: Flight International
