In what may shape up to be a battle of the titans, Boeing Co. (NYSE: BA) and French aerospace giant Safran announced a 50/50 joint venture to design, build and service auxiliary power units (APU) for aircraft engines. The APU is a small, onboard engine used to start the main engines and to provide power for systems when the aircraft is on the ground or, if necessary, in flight.
The two current primary suppliers of APUs are Honeywell International Inc. (NYSE: HON) and United Technologies Corp. (NYSE: UTX). The partnership with Safran gives Boeing an opportunity to carve out its own place in the market for APUs and, more important, the market for servicing the engines.
Stan Deal, Boeing’s president and CEO of Global Services, said as much:
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.
Safran subsidiary Snecma is a long-time partner with General Electric Co. (NYSE: GE) in CFM International, an aircraft engine design and manufacturing firm. A CFM56-7B engine on a Southwest Airlines flight exploded last month, killing one passenger and forcing the 737 to make an emergency one-engine landing.
United Technologies’ acquisition of Rockwell Collins last year was a signal that the consolidation in the airplane building business was ratcheting up. Honeywell has built up a war chest of some $21 billion that it may use to make its own acquisitions, according to a report at CNBC. Boeing itself spent $3.2 billion recently on an acquisition of KLX, a parts distributor to the aerospace industry.
Boeing stock traded up about 1.3% Monday morning, at $361.28 in a 52-week range of $186.39 to $371.60, and hit a high of $363.39 earlier in the session.