Honeywell bags $23 billion jet engine contract for Embraer planes

April 9 - Honeywell International Inc. won its biggest business jet engine order, beating two rivals for a $23 billion contract from Empresa Brasileira de Aeronautica SA.

Honeywell will build engines for two new Embraer planes over the next decade, the companies said after the close of U.S. stock markets yesterday. The contract is the Brazilian company’s first engine order with Morris Township, New Jersey-based Honeywell and includes repair parts and services.

“We’ve worked very hard to make sure we’re in the right place at the right time,” Honeywell Chief Executive Officer David Cote said in an interview after a Washington press conference.

Deliveries of business jets have climbed for four straight years amid rising corporate earnings and increased orders from international customers. Honeywell, the world’s largest maker of cockpit displays, beat Rolls-Royce Group Plc and United Technologies Corp.’s Pratt & Whitney for the engine contract.

“This is a very high-volume airplane and engine,” Rob Wilson, president of the business and general aviation unit, said in an interview. “We see this as one of the best selling airplanes in the next decade.”

Embraer said March 28 that it will spend $750 million to develop the two business jets. The MSJ and MSL models will seat seven to 12 people and are target to begin flying in the second half of 2012. Embraer also said last night in Washington that Rockwell Collins Inc. will supply the avionics for the two jets. Rockwell didn’t disclose a value for its work.

Honeywell, which has won aircraft-control contracts with Embraer in the past, rose to $58.10 at 7:42 p.m. yesterday from its closing price of $57.19 in New York Stock Exchange composite trading. The stock has gained 21 percent in the past 12 months.

Fuel-Efficient Engines

Sao Jose dos Campos-based Embraer is the second business jet maker to use Honeywell’s engine; about 360 of the turbofan engines are in service in Bombardier Inc.’s Challenger 300. The engine features “best-in-class” fuel efficiency and a near perfect mechanical reliability rating, Wilson said.

“A 99.95 percent reliability is very, very aggressive,” Wilson said. “It’s becoming more and more important in this size class” as the planes are being flown 1,000 hours a year, up from 400 hours, the historical average.

Honeywell plans to produce about 40 of the engines in 2011 to meet Embraer’s goal of putting the planes in service a year later. The company expects to build “hundreds of engines a year” in the next decade, Wilson said.

Honeywell posted sales of $34.6 billion last year, with the aerospace division accounting for $12.2 billion. In addition to cockpit displays and engines, the unit makes navigation, communication and weather systems, landing gear and auxiliary power units.

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