Airbus (EPA:EAD) recently announced to set up its first manufacturing facility, an assembly plant for its A320neo family of aircraft, in the US. We covered the development’s effect on Boeing (NYSE:BA) in a previous article that concluded that Airbus A320neo is well-positioned to occupy a larger share of the U.S. single-aisle aircraft market, which is currently dominated by Boeing’s 737.
However, another U.S. firm, United Technologies (NYSE:UTX) stands to benefit from the development and welcomed Airbus’ manufacturing facility to the US.  As, Airbus A320neo uses Pratt & Whitney engines, owned by United Technologies, along with CFM International’s LEAP-X engines. Thus, if A320neo’s sales rise in the U.S., then Pratt & Whitney will aid revenue growth for United Technologies.
Pratt & Whitney aircraft engines constitute nearly 23% of the Trefis price estimate for United Technologies. We have a Trefis price estimate of $102 for United Technologies, approximately 35% above its current market price.
- What Percentage of UTC’s Stock Price Can Be Attributed To Growth?
- UTC’s Expected Revenue And EBITDA Growth For 2016: Trefis Estimate
- UTC Q1 2016 Earnings Review: Results Beat Consensus Estimates; Revenue And Earnings Up Year-Over-Year
- Did United Technologies Help Honeywell Dodge Its Own Bullet?
- United Technologies Drop Merger Discussions With Honeywell
- UTC Earnings: 2015 Was Good, But 2016 Could Be Even Better
A320neo, one of the best-selling single-aisle aircraft globally
Airbus A320neo claims to provide 15% fuel savings, 8% lower operating costs and lower levels of noise production and emissions in comparison to the A320. As a result, the aircraft has received one of the best customer responses to a commercial aircraft launch in history. The plane has received over 1300 orders since its launch in December 2010.
Pratt & Whitney’s contribution to A320neo’s success
A large portion of credit for A320neo’s success goes to Pratt & Whitney PW1000G engines that reduce fuel consumption and air emissions. The engine uses a larger fan that rotates slower, as a result air moves at a lower speed allowing the same thrust but with less energy used, resulting in fuel saving.
To date, Pratt & Whitney has received 976 firm engine orders for its PurePower PW1100G-JM engines from the A320neo family of aircraft. The engines are also exclusively used by Mitsubishi Regional Jet (MRJ), Bombardier CSeries and Irkut MC-21 aircraft. Notes:
- Pratt & Whitney Welcomes Airbus A320 Family Assembly Line to United States, July 2nd 2012, www.pw.utc.com [↩]
- Pratt & Whitney’s Award Winning PurePower® PW1000G Engine, www.pw.utc.com [↩]