SIA, P&W to form engine overhaul joint venture

SIA, P&W to form engine overhaul joint venture

SINGAPORE (Reuter): Singapore Airlines (SIA) and Pratt & Whitney (P&W) have agreed to form an engine overhaul joint- venture to tap opportunities in the Asia-Pacific region, senior company officials said yesterday.

P&W, a unit of U.S.-based United Technologies, will own 51 percent of the venture with SIA Engineering, a wholly-owned subsidiary of SIA, holding the balance.

The initial focus of the joint venture would be on the PW4000, JT9D and the CFM56 engines, all which are currently used to power aircraft in the SIA fleet.

The venture would be P&W's exclusive overhaul facility in Asia Pacific and the Indian subcontinent, James Taiclet, vice president of P&W Eagle Services, told reporters after the signing ceremony for the venture.

"We expect over US$200 million in revenues a year in 1998 and by 1999, it would be up to $300 million," he said.

Chief executive of SIA Engineering Robert Tan said the venture with P&W will give it access to the most advanced technology in the engine overhaul businesss.

"Given Pratt & Whitney's technological prowess and marketing reach, this joint venture with them will allow us to grow at a much faster rate, and secure a much larger share of the engine overhaul market, than we could achieve on our own," he said.

SIA Engineering's current revenue, which will be transferred into the venture, is about $185 million.

"We will grow the business overtime...we plan to bring in business from other airlines into the venture," Taiclet said.

Initially, SIA will contribute to about two thirds of the business but this should eventually be reduced to half as business from other airlines increase.

Taiclet said the Asia Pacific market for engine overhaul business in the three engines covered in the venture is worth about $600 million a year.

The yet to be named venture, expected to start in November 1997, will have a team of about 650 people mostly from SIA Engineering, he said. P&W will also bring in three to six staff for top management positions for the venture.

Both companies will have scope in the future to add other engines into the venture if there "was an economic opportunity", he said.

"The best part of this joint venture is that it is independent. It works for the best interest for the two companies," he said.

Taiclet also said the venture will effectively double P&W's engine overhaul revenues.

In addition, P&W will look to set up another engine overhaul venture in Europe to service customers in Europe and the Middle East region, he said.