Graham Warwick/WASHINGTON DC
Honeywell is to sell its helicopter engines business as a condition of US Government approval for its merger with General Electric. Rolls-Royce and Textron are front runners to buy some or all of the business, which had sales of $200 million last year - about 0.1% of the combined company's revenues.
Divestiture of the helicopter engines business, and authorisation of an additional third-party maintenance provider for Honey-well TFE731 business-jet engines and auxiliary power units (APUs), are the only conditions imposed on the $42 billion merger by the US Department of Justice (DoJ).
GE is now awaiting a European Commission (EC) ruling on the proposed merger. The EC had flagged up concerns over the combined company's domination of the regional-jet engine market, but is considered unlikely to require divestiture of Honeywell's AS900 and LF507 product lines.
The DoJ cites competition concerns with the US Department of Defense's planned Common Engine Programme (CEP) as its reason for requiring divestiture of Honeywell's helicopter engines business.
The CEP is the next-generation helicopter engine to replace GE's T700, and GE had already teamed with Pratt &Whitney to bid for the $5 billion programme, which is scheduled to be awarded in 2004.
"Without this divestiture, the US military would likely have faced higher prices, lower quality and reduced innovation in the design, development and production of the next generation of advanced US military helicopter engines," says the DoJ.GE's memorandum of understanding with P&W is on hold until a buyer is found for the Honeywell business.
The other expected bidder for the CEP, Rolls-Royce, is considered a likely buyer for Honeywell's share of the T800 programme. It would give it total owership of the engine, which powers the US Army's Boeing Sikorsky RAH-66 Comanche next-generation combat helicopter.
Textron is believed to be interested principally in Honeywell's T53 engine, which powers AH-1 and UH-1 helicopters originally produced by Bell Helicopter. Bell and Honeywell have formed an alliance to support these helicopters after they are retired from US Army service in 2004. Acquiring the T53 line allows Textron to provide a total support package.
Honeywell's Phoenix, Arizona-based helicopter engines business is also responsible for the LT101 and T55 turboshafts which, along with the T53, were originally acquired from Textron Lycoming by AlliedSignal. The T55 powers the BoeingCH-47 Chinook and efforts are under way to find new applications for the LT101.
The DoJ also requires the approval of a third-party maintenance provider, as Honeywell and GE's Garrett Aviation Services unit are two of the three North American firms authorised to service the TFE731 turbofan and related APUs. The third is Standard Aero. "A range of business aircraft users would have suffered increased prices and reduced quality in repair and overhaul" as a result of the merger, says the DoJ.
Source: Flight International
