By Tim Hepher and Sarah Young
(Reuters) - Rolls-Royce (OTC:RYCEY) said on Thursday it had extended an exclusive deal to provide engines for the Airbus A350-900 to 2030, cementing its alliance with the European plane maker and deferring a potential challenge from rival General Electric (NYSE:GE).
Rolls already had a formal exclusive agreement to provide Trent XWB-family engines on the larger A350-1000 wide-body jet, and held what industry sources have described as "de facto" exclusivity on the stronger-selling A350-900 until 2025.
Thursday's deal - disclosed as Rolls plunged to a record 4 billion pound ($5.6 billion) 2020 loss - throws backing to the troubled engine maker and counters speculation that GE could enter the programme any time soon.
"We're already exclusive on the A350-1000, and extending our position on the -900 variant, that accounts for the bulk of the A350 fleet, out to 2030 is in line with the development timeline for our next generation UltraFan engine programme," Rolls-Royce Chief Executive Warren East told reporters.
The decision effectively postpones any re-engining of the A350 to next decade while giving Rolls more clarity as it tackles the costly UltraFan development, industry sources said.
It follows reports before the coronavirus crisis that Airbus was considering upgrading its long-range A350 with new engines, opening competition between Rolls and GE as it sought to reduce exposure to financial difficulties at Rolls.
Such a shake-up would redraw alliances in the aircraft industry but risked becoming tangled in conflicting engine deals, since the A350 addresses different parts of the jet market.
Airbus had no immediate comment on engine decisions.
The A350-1000 competes with the exclusively GE-powered Boeing (NYSE:BA) 777 family in the market for twinjet mini-jumbos carrying about 350 people. It faces future competition from the delayed 400-seat Boeing 777X, also powered by GE.
The A350-900 competes with some 777s but mainly with the smaller 787 Dreamliner, which offers both Rolls and GE engines.
Analysts say arranging for GE to power the A350-1000 could run into hurdles because of the U.S. engine maker's exclusive relationship with Boeing on the competing 777.
Rolls in turn is seen as reluctant to develop a future replacement engine for the A350-1000 without also having unambiguous ownership of the busier A350-900 market.
With a slump in demand for wide-body jets pushing out a decision on any new investments, and GE unlikely to join the A350 programme any time soon, industry sources said Thursday's announcement lifted uncertainty over engine decisions for now.
Any doubts over future supplier deals can have an impact on the resale value of airplanes which drive new sales.