News
CFM order value up 33%; Rolls-Royce posts record $5.8 billion loss
February 17th 2017
Last year was very good for Connecticut-headquartered engine maker, CFM International, with sales at a “near record” level. It booked 2,677 engine orders: 876 CFM56 engines (commercial, military and spares) and 1,801 LEAP engines (including commitments and spares). Read More » CFM is a 50–50 joint-venture between Safran Aircraft Engines and GE Aviation.
The OEM began its transition to LEAP production last year. To December 31, it had delivered 77 of the new power plant, after its August entry into commercial service with Turkey’s Pegasus Airlines.
“Our results for 2016 were fantastic, to be sure, but one of the most amazing things we saw was the continued strength of CFM56 orders,” said Gaël Méheust, president and CEO of CFM International. “We actually received 140 more CFM56 engine orders in 2016 than we had in 2015.” The CFM56 powers both A320ceo and B737 series.
“On the production front, the ramp-up and transition began in earnest and things are going very well,” he continued. “I would never try to minimize the scope of what is ahead of us with the ramp-up, but I am confident we have the team in place to meet this challenge.”
Already, 2017 is off to a good start, with more than 580 engines ordered in January. At the same time, the LEAP engine has received more than 12,200 orders and commitments, excluding options, valued at more than $170 billion at list prices.
In related news, one of Europe’s most influential activist hedge funds, The Children’s Investment Fund (TCIF), has called on Safran shareholders and its chairman to block the proposed €8.5bn takeover of Zodiac Aerospace.
TCIF told the Financial Times the takeover had “no strategic rationale”, especially considering Zodiac has suffered from crippling production delays that produced nine consecutive profit warnings.
TCIF argued Safran would be “massively overpaying” for Zodiac for “questionable synergies”. Safran shareholders were given no chance to vote on the Zodiac bid.
On Tuesday, Rolls-Royce posted a record £4.03 billion full-year 2016 loss, including a massive £4.4 billion exchange loss as the pound dropped against the greenback following Brexit and £671 million in bribery settlements.
But Rolls-Royce’s civil aerospace division did not fare too badly for the year when it recorded a £1.3 billion year-on-year order increase, to £14.1 billion, for a backlog of £71.4 billion, up £4.4 billion from 2015. The numbers included a £2.1 billion benefit from a 5% decrease in its long-term foreign exchange rate.
In 2016, Rolls-Royce engine orders included a $2.7 billion contract from Norwegian for Trent 1000 engines; a $1.2 billion order from Garuda Indonesia for Trent 7000 engines and a $900 million order from Virgin Atlantic for the Trent XWB.
“Rebuilding trust and confidence in the Group and its long-term prospects remains a key priority for the management team,” said Rolls-Royce CEO, Warren East.
“[For 2017] year-on-year incremental progress will be modest; our medium-term trajectory for revenue, profit and free cash flow remains unchanged … [in the long term], the roll-out of new engines, led in particular by the Trent XWB, 1000 and 7000, together with a growing aftermarket, is expected to drive significant revenue growth over the coming 10 years as we build toward a 50% plus share of the installed wide body passenger market,” he said. In January, the OEM admitted to paying bribes to middlemen to secure contracts for engines in China, India, Indonesia, Nigeria, Russia and Thailand.
