Boeing has gotten into a joint venture that will build and service a critical part of all commercial plane engines. This new union promises to take on aerospace giants, Honeywell and United Technologies.
French aerospace company Safran and Boeing a 50/50 joint venture will enable them to design, manufacture and service auxiliary power units (APU) for aircraft engines. The APU, which is a small onboard engine, is used to power systems when a plane is on ground, by starting the main engine.
Boeing is optimistic that its partnership with Safran will help it capture a significant market of the APU industry. Honeywell International Inc and United Technologies Corp have been the main suppliers of the auxiliary power units. The target market for the APUs is mainly airlines and cargo operators.
Since Honeywell and United Technologies have been the two main players in the APU markets, they have been growing their companies. As a way to safeguard profits and maintain customers, both companies have expanded the products and services they sell. Honeywell has made known their intention to spend around $21 billion buying companies in the next three years.
According to the CEO, of Boeing Global Services, Stan Deal, Safran’s experience in the designing and production of complex propulsion assemblies combined with Boeing’s rich airplane and customer knowledge is sure to deliver expanded, innovative services solutions to their client.
Acquisitions And Mergers
If recent acquisitions are anything to go by, then it means consolidation in the aircraft building industry is the way to go.
Safran through their subsidiary Snecma has for a long time partnered with CFM international. Just like Snecma, the latter is a subsidiary of General Electric’s aviation unit. It designs and manufactures aircraft engines.
Last year United Technologies acquired aircraft electronic equipment maker, Rockwell Collins. The deal between the two U.S firms was touted as the biggest merger in aerospace history.
Boeing itself seems to be on a strategy to grow its airplane business. It seems to be focusing on the aircraft services business. As recent as last month, Boeing announced it will spend $3.2 billion in cash to buy KLX, which is an aerospace parts company.
At an annual meeting last month Boeings CEO, Dennis Muilenburg, said that the company continues to see their growth opportunities in the global services sector.
Boeing expects the deal with Safran to be closed by the end of the year even though, the cost of the deal was not made public.