Rumored Big Engine Order From American Could Boost GE Aviation's Bottom Line

Forbes said General Electric GE’s aviation wing was “poised for solid growth in coming years.”

Reuters sources seemed to agree Tuesday indicating the company and fellow CFM International partner, Safran SA of France were on the cusp of an order for 200 CFM International engines to American Airlines Group AAL

The Airbus Connection

The engines, valued at $2.6 billion, would equip 100 Airbus Group A320neo jetliners American has on firm order, according to Reuters’ sources.

The win for GE and Safran becomes a loss for United Technologies’ UTX Pratt and Whitney division, maker of the other engine available on the Airbus A320neo.

Start Of Something Bigger

This American Airlines order could be the tip of an “engine” iceberg since it represents only part of an order for 460 Airbus and Boeing BA planes sealed in July 2011.

Orders for Boeing’s 737 MAX, which utilizes only the CFM LEAP-1B engine, represent 160 planes in that groundbreaking 2011 order.

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Part Of Aviation Upcycle

The latest order, assuming it happens, would represent part of what Forbes called an upcycle in global commercial aviation. This “upcycle” has helped drive demand for new aircraft and resulted in GE Aviation realizing compounded revenue growth of eight percent (to almost $22 billion) in 2013.

The CFM link to both Boeing and Airbus, Forbes said, would continue to drive revenue growth in coming years since the majority of airplanes sold and delivered moving forward will come from those two manufacturers.

Role Of 3D Technology

Technology, specifically 3D printing technology, has been a major factor in GE Aviation’s contribution to CFM LEAP engines. According to Bloomberg, the company has made plans eventually to build more than 85,000 fuel nozzles for LEAP engines using a 3D additive manufacturing process.

Typically, fuel nozzles are made from 20 different parts. Using 3D printing technology the units could be made in one piece. More importantly, the process is much more efficient, which could ultimately result in a better product at lower cost.

Staying Focused

Meanwhile, GE’s aviation wing announced Monday that it had sold its Yakima, Washington-based facility to Triumph Group TGI for $70 million. Triumph is an aerospace manufacturer based in Pennsylvania.

GEAviation had said in October that sale of the Yakima facility was being considered because GE believed the plant would be a better fit for a company with core operations more closely aligned with the focus of the Yakima factory.

At the time of this writing, Jim Probasco  had no position in any mentioned securities.