General Electric Company’s (GE) aviation division, GE Aviation signed a 12-year OnPointSM engine service contract with Emirates for its fleet of Boeing 777 aircraft. The agreement includes maintenance and inventory support services of various avionics, electrical power and mechanical products for the Boeing 777 aircraft.
Through this program, GE will also provide maintenance and support services for Emirates’ B777 fleet by strengthening its local program management and stock support in Dubai, supported by its global repair and overhaul facilities in the U.K., the U.S. and Asia.
On November 13, 2011, Emirates, the flag carrier for the United Arab Emirates, announced its intention to buy 50 long-range, twin-engine jet 777-300 Extended Range aircraft for $18 billion. The aircraft would be powered by GE's (GE) GE90-115B engines.
In addition, the two companies have also signed an agreement whereby GE will supervise the design and construction of Emirates' new technologically-advanced Engine Overhaul Shop to be built in Dubai using the most advanced technology, equipment and best practices in the industry. The facility will have the capability of repairing 300 engines per year on GE90 and GP7000 engines that power the Boeing 777 and Airbus A380 aircraft, respectively.
The new 21,000 square feet state-of-the-art Engine Overhaul Shop to be built adjacent to the current Test Cell facility, is expected to cost $120 million dollars.Construction is expected to commence by the first quarter of 2012, with the plant becoming operational by the end of fiscal 2014.
In the recently reported quarter, GE aviation, had service orders worth $2.9 billion, which was up 18% year over year. Overall revenue for the aviation segment grew $4.8 billion, up 10% year over year. Commercial engines were the strongest, driving the 11% year over year increase in volume.
For the third quarter of 2011, service revenues were $0.2 billion. The company is set for a strong performance in the fourth quarter as well with service agreements worth $23 billion already in hand.
The primary competitors of GE aviation include Rolls-Royce, United Technologies’ (UTX)-Pratt & Whitney division and Honeywell (HON). GE has a significant backlog, we think that the current market uncertainties increase the possibility of cancellations or push outs, which make us cautious about it. While, marginal growth of commercial spare orders at United Technologies makes us cautious. This is reflected in the Zacks Rank of #3 allotted to them.
Honeywell International on the other hand is seeing good momentum in its commercial aerospace spares and residential and commercial retrofit businesses. A strong retrofit business is a big positive in uncertain market conditions, since it is likely to hold up better than new product sales. We are therefore slightly more positive about Honeywell, as indicated by the Zacks #2 Rank allotted to the shares.
GENL ELECTRIC (GE): Free Stock Analysis Report
HONEYWELL INTL (HON): Free Stock Analysis Report
UTD TECHS CORP (UTX): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment