Airbus to recoup some engine nacelle work from suppliers

By Tim Hepher

PARIS (Reuters) - Airbus told European governments on Wednesday that it has made a strategic decision to bring the design of some nacelles or aircraft engine casings inside the company, rather than leaving it with suppliers, according to a presentation on its website.

It also said the troubled A400M military plane project will continue to "weigh significantly" on cashflow in 2017 and 2018 in particular, according to the presentation prepared on Oct. 4 and presented on Wednesday to governments that own shares in the European planemaker: France, Germany and Spain.

An Airbus spokesman said the decision had already been taken to recoup nacelle work carried out by United Technologies for engines supplied by the same company to power the A320neo jet.

United Technologies engine subsidiary Pratt & Whitney was not immediately available for comment.

The A320neo is offered with nacelles from United Technologies (UTX.N) whenever it is mounted with engines made by Pratt & Whitney, or France's Safran (SAF.PA) for engines made by Safran's CFM joint venture with General Electric (GE.N).

Airbus' decision to take control of some nacelles reflects a "strategic decision for competitiveness," according to the presentation, part of a series of investor briefings.

Safran was not immediately available for comment. A person close to the company said talks are under way with Airbus but stressed no decision had been taken.

"Bringing nacelle capability in-house allows Airbus to further improve nacelle aerodynamics to offer extra efficiency and better performance," the Airbus spokesman said.

The move comes amid growing concern among planemakers about the economic power of some major suppliers and an effort by planemakers to pull back more work to boost margins.

It comes weeks after United Technologies agreed to buy Rockwell Collins in a $23 billion deal. Airbus has urged United Tech not to let the merger draw its attention away from fixing industrial problems with the A320neo's Pratt & Whitney engines.

Under the project, industry sources say Airbus will redesign a number of key parts including the Pratt & Whitney engine's thrust reverser. It will also be responsible for integrating the engine housing and the pylon which attaches it to the wing.

One of the main goals is to reduce recurring costs to allow the recently introduced A320neo to be made more cheaply.

Until recently, the trend has been towards asking suppliers to take responsibility for piecing together large sub-systems.

(Reporting by Tim Hepher; Editing by Leigh Thomas)