Yesterday Reuters reported that American Airlines is close to announcing selection of CFM LEAP engines for their Airbus neo orders. The order is for engines on 100 aircraft and reported as worth $2.6bn. What might be driving the selection of the CFM engine over the competing Pratt & Whitney GTF?
Let’s take a look at the combined American and US Airways fleet as a start. The table lists the fleet by aircraft and engine types.
The combined fleet has well over one third using CFM56 engines. That is a critical mass right there. When one looks at the total share of the fleet, GE has 48.2% of the fleet. With at least 998 (there are surely spares as well) engines, GE is the company with the most impact at American.
Looking at the combined airline’s orders, we can see that CFM is the near certain winner. With all the 737’s coming with CFM engines, it makes sense to expect CFM to offer an irresistible deal. Moreover, CFM is able to also sweeten the deal by making a great deal on the legacy CFM56s. With the potential of nearly 1,700 CFM engines at American, there is no doubt that CFM is able to offer an unbeatable deal. We are uncertain if the A321s will have LEAP, so we excluded these from our estimate. Clearly the number could go much higher.
American Airlines, CFM and Pratt & Whitney did not provide any insight (we did ask) into the deal which could be reported before, or at, the Farnborough air show next week. But, at least to us, the selection seems to be straightforward and based on commercial terms.