10-24-13 3:50 AM EDT | Email Article

By David Pearson


PARIS--Harnessing the remaining space operations of Italian aerospace company Avio Spazio with those of Safran SA (SAF.FR) would make great industrial sense at a time when Europe is preparing to start building the successor to the Ariane 5 satellite launch vehicle, Safran Chief Executive Jean-Paul Herteman said Thursday.

The French company Safran has made a non-binding bid for Avio Spazio, which specializes in solid rocket fuels. Mr. Herteman pointed out during a conference call that the two companies are the European specialists in solid rocket fuel technology and would benefit from Europe's new satellite launcher program.

Safran's Herakles solid-rocket propulsion division has been working with Avio for more than 20 years on Europe's Ariane rocket series, and the propulsion system of the next-generation Ariane 6 will rely more on solid fuel than its predecessor. Safran and Avio have a joint venture company called Europropulsion that provides the solid-fuel strap-on boosters for the current Ariane 5 heavy-lift rocket.

EADS Astrium, the space division of the European Aeronautic Defence & Space Co. (EAD.FR), is reported to have also made a bid for Avio's space business. Astrium is the program leader for the Ariane launchers.

At the end of last year, U.S. conglomerate General Electric Co. beat Safran to the post with an accepted offer to buy Avio's aeronautics division for 3.3 billion euros ($4.37 billion) from private-equity firm Cinven and Italian defense and engineering conglomerate Finmeccanica SpA (FNC.MI). These operations provide components for GE Aviation and other aero-engine companies. The purchase price represented 8.5 times Avio's 2012 earnings before interest, taxes, depreciation and amortization.

Cinven owns 81% of Avio, while state-controlled Finmeccanica owns 15%.

Safran's core jet engine activity is benefiting from the ramp-up in production of commercial aircraft by manufacturers including Airbus and Boeing. Safran's joint-venture CFM International with General Electric delivered 1,145 CFM56 engines in the first nine months of this year, a rise of 8% compared with the same period of 2012.

Safran expects to deliver 1,450 of the engines through December, and deputy Chief Executive Officer for Operations Marc Ventre told journalists during the call that the pace of CFM56 deliveries will continue to rise next year to meet demand from the airframe builders and could reach 1,500 in 2014.

Safran's engine production is at an all-time high, and Mr. Ventre acknowledged that there have been some strains in the company's supply chain. But he said no deliveries have been held up because of that up to now.


Write to David Pearson at david.pearson@wsj.com


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October 24, 2013 03:50 ET (07:50 GMT)

Copyright (c) 2013 Dow Jones & Company, Inc.
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