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Turkish Airlines could switch Boeing 737 orders to Airbus if talks about engines fail, says chair

Ahmet Bolat, Turkish Airlines' chairperson, said that the airline could change its order of Boeing 737 MAX planes to Airbus if negotiations with engine supplier CFM do not progress. The sudden warning came after Turkish Airlines announced a tentative agreement with Boeing to purchase 150 MAX aircraft, which coincided with the meeting between Turkish President Tayyip Erdoan and his U.S. counterpart Donald Trump on September 25, subject to an engine deal.

CFM International is a joint venture between GE Aerospace, Safran and CFM International. It is the exclusive engine supplier of the Boeing 737 MAX. Pratt & Whitney, RTX's unit, competes for Airbus A320neo airline contracts.

Costs - DISAGREEANCE

Bolat said in Stockholm, late Wednesday night: "If CFM can come up with reasonable economic terms, we will sign with Boeing." Bolat said that negotiations had progressed, but there were still disagreements over costs.

If CFM persists in its position, we will switch to Airbus. Bolat stated that he had two options when it comes to Airbus' two engine suppliers.

CFM, which is the largest engine manufacturer in the world by number of engines sold, stated: "As an issue of policy, CFM doesn't disclose the details of contract negotiations with our clients."

Boeing declined to make a comment. The deal, which is being closely watched, is part of an ambitious fleet replacement program and expansion that will see around 800 Airbus aircraft in service by 2033. This follows Turkish Airlines' (THY) order for more than 200 Airbus airplanes in 2023.

Sources in the industry said that they expected the deal with CFM to be completed, given recent attention from politicians on the Airbus order and the limited supply of the competing jets.

Shared Risks

The industry has been impacted by a series of engine shortages, maintenance delays and rising prices for engine parts. THY is one of the airlines that has expressed frustration with this disruption. It faces delays related to Pratt & Whitney engine on its Airbus fleet. Engine makers claim they should be compensated for taking on such huge financial risks.

Industry sources claim that the core of the dispute over THY is who should take the biggest risk in terms of long-term repair costs. Jet engines are usually sold at a profit, but the manufacturers make money by servicing them over a 20-year period.

Instead of charging for repairs on an as-needed basis, they will often make long-term agreements priced per flight hour. This is riskier because of the increased wear and tear that modern engines experience. Sources claim that THY is waiting for a deal of this kind.

CFM appears to have been less inclined to offer such deals over the past few years. They prefer to delegate more work to independent stores. Two industry sources say that CFM has recently shown more flexibility in hourly deals, but at a higher price.

CFM officials said recently that the company had not stopped offering hourly contracts for long periods of time and its strategy to shift more work outsourced had not changed.

Open to placing orders on delayed Boeing 777X

Bolat, in a positive development for Boeing, said that THY, despite reports of recent delays, was still considering Boeing's troubled 777X Mini-Jumbo and closely monitoring its progress.

The twin-engined world's biggest jetliner, which was originally scheduled to be completed in 2027 is now projected to arrive seven years later.

Bolat stated that THY was in regular contact, including discussing the 777X. He also said THY was assessing the best routes for the aircraft.

Bolat added that THY would not rush to buy the 777X. (Reporting from Marie Mannes in Stockholm and Tim Hepher, with additional reporting by Joanna Plucinska and Ceyda Kaglayan, Editing by Adam Jourdan; Emelia Sithole Matarise, Rod Nickel).

(source: Reuters)