Boeing and Safran have set up a joint venture to design, build and service auxiliary power units for airplanes, marking another big step in Boeing’s drive to build a more integrated supply chain.
“This strategic partnership will leverage Boeing’s deep customer and airplane knowledge along with Safran’s experience in designing and producing complex propulsion assemblies to deliver expanded, innovative services solutions to our customers,” Stan Deal, president and CEO of Boeing Global Services, said today in a news release.
News about the 50-50 joint venture comes a little more than a month after Boeing announced a $4.25 billion deal to acquire KLX Inc., a Florida-based aerospace parts distributor.
Both moves are in line with Boeing’s strategy to grow aviation services into a business that contributes $50 billion annually to the company’s bottom line. They also show that Boeing is willing to move away from traditional supply-chain models.
“This move will strengthen Boeing’s vertical capabilities as we continue to expand our services portfolio and make strategic investments that accelerate our growth plans,” said Greg Smith, Boeing’s chief financial officer and executive vice president of enterprise performance and strategy.
The Boeing-Safran deal is expected to put pressure on Honeywell and United Technologies’ Pratt & Whitney subsidiary, the world’s biggest suppliers of auxiliary power units.
APUs are onboard engines that are used primarily to start an aircraft’s main engines. They also power aircraft systems on the ground when the main engines aren’t running, and can boost onboard power during flight if necessary.
Boeing’s APUs are currently built by Honeywell and Pratt & Whitney, but Safran — which is headquartered in France — is raising its profile in the market.
Safran Aircraft Engines and GE Aviation are partners in CFM International, the company that provides LEAP-1B engines for Boeing’s 747 MAX aircraft. Safran is also Boeing’s partner in MATIS, a joint venture in Morocco that sells wiring products to several airframe and engine companies.
Safran Electrical & Power supplied the complete electrical channel, including an energy-efficient electric power generator, for a FedEx 777 freighter that served as Boeing’s ecoDemonstrator test plane this year.
The joint venture announced today “will represent a new step in the long-lasting and fruitful partnership between Safran and Boeing,” Safran CEO Philippe Petitcolin said.
The deal is expected to close by the end of this year, assuming that regulatory and antitrust requirements are met.
The Boeing-Safran joint venture will be based in the United States. No financial details were released, but both companies said the deal would have no impact on their financial guidance for 2018. Boeing share prices rose slightly today, while Safran shares dipped slightly.