Pratt upbeat on overall economy, business prospects

By Andrea Shalal-Esa

FARNBOROUGH, England (BestGrowthStock) – Pratt & Whitney, the engine-making unit of United Technologies Corp (UTX.N: ), said it anticipated good prospects in all business sectors against the backdrop of a global aerospace market recovery.

“All the indicators continue to be positive,” Pratt & Whitney President Dave Hess said, citing growth in cargo and air traffic, expected profits in the airline industry and low fuel prices all pointing in the right direction for a recovery.

At the same time, Pratt & Whitney was fairly well insulated from mounting pressure on European and U.S. defense budgets, given that its biggest programs were continuing, Hess told Reuters in an interview before the Farnborough Airshow.

He said Pratt remained on track with cost-cutting plans for the F135 engine, one of two engines designed to power the Lockheed Martin Corp (LMT.N: ) F-35 Joint Strike Fighter.

He said he remained hopeful that Defense Secretary Robert Gates and the Obama administration would prevail with their plans to end work on the second F-35 engine, which is built by General Electric (GE.N: ) and Britain’s Rolls Royce (RR.L: ).

“There is so much budget pressure right now … we just don’t have the luxury of spending another $3 billion” on the GE-Rolls engine, Hess said.

Lawmakers have repeatedly continued funding the alternate engine program, but the Obama administration was threatening to veto defense spending bills if they include the program.

Supporters of the second engine argue that the investment in the second engine will be offset by lower prices achieved through competition in the longer run.

Hess said continued support for the second engine was “absurd,” given the good performance of the Pratt engine and the fact that most other warplanes only had one engine maker.

“I’m hopeful that the merits of the argument will prevail over lobbying,” he said.

COMMERCIAL OPPORTUNITIES

Hess said Pratt was in a very competitive position to provide a new geared turbofan engine to Airbus, a unit of Europe’s EADS (EAD.PA: ), if the company decided to upgrade its narrow-body aircraft with new engines.

Airbus said it was leaning toward a decision to upgrade with new engines and expected Boeing Co (BA.N: ) to follow suit, but the European planemaker said it would not make a final decision until the end of September.

Hess said Pratt was “pretty close to converging on an agreement with Airbus” on its engine offering.

Hess said he also saw good opportunities internationally, given Pratt’s role in providing engines for the Lockheed F-16 fighter and Boeing’s F-15 warplanes, both of which are being heavily marketed in overseas fighter competitions.

Pratt also powers Boeing’s C-17 cargo plane, which is forecasting 30 international sales over the next five years. “We’ll see those programs continue to chug along,” he said.

Pratt’s Canada unit was also working hard to increase the company’s share of the engines for large business jets from around 12 percent currently, Hess said.

The company already leads the market in powering small and medium-sized business jets, but Hess said he saw a promising opportunity to muscle in on the large business jet market with a new engine that had been in testing since last December.

The company has also developed and flight tested an engine for a new scramjet that could achieve speed of nearly Mach 5, while Pratt’s rocket maker, Rocketdyne, was also continuing work on heavy lift rocket motors, he added.

“In every one of the segments, there’s stuff going on that could lead to a much strong performance,” he said.

(Reporting by Andrea Shalal-Esa; Editing by Maureen Bavdek)

Pratt upbeat on overall economy, business prospects