Boeing forms joint venture with Safran, taking another step away from outsourcing

Boeing Co. will form a joint venture with French engine manufacturer Safran to make auxiliary power units for its airplanes, indicating that the aerospace giant will continue to venture into sectors it traditionally outsourced to suppliers.

The partnership, announced Monday, is expected to put more pressure on Honeywell International Inc. and United Technologies Corp., the two major manufacturers of auxiliary power units. These gas turbine engines are used primarily to start the aircraft’s main engines; in an emergency, they also can provide power to secondary systems on the plane, such as lighting.

“Boeing is trying to integrate more and more in its jetliner business,” said Richard Aboulafia, aviation analyst at Teal Group. “They clearly know their limits.”

Last year, Boeing created an in-house avionics unit to develop electronics for its aircraft. The Chicago company also has pushed to make more of its money by performing aftermarket services such as maintenance, repairs and overhauls — jobs that have long been done by suppliers.

Boeing’s move toward doing more in-house work has partially driven major mergers of suppliers, such as United Technologies Corp.’s $23-billion acquisition of aviation communications and electronics supplier Rockwell Collins Inc. announced last year.

Boeing’s partnership with Safran will “strengthen Boeing’s vertical capabilities” as the company looks to make “strategic investments that accelerate our growth plans,” Boeing Chief Financial Officer Greg Smith said in a statement.

Safran is already a supplier to Boeing and produces engines for its 737 MAX aircraft. It has also been involved in manufacturing engines for other Boeing planes. A joint venture owned by Safran Aircraft Engines and General Electric manufactured the CRM56-7B main engine that failed during a recent Southwest Airlines flight, resulting in the death of a passenger.

Under the terms of the agreement, Boeing and Safran will each have a 50% stake in their partnership. The deal, which is still subject to regulatory and antitrust clearances, is expected to close in the second half of this year.

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