GE-AMR deal shows industrial-finance balance-exec

Thu Sep 17, 2009 8:44pm BST

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* Includes $1.6 bln sale-leaseback arrangement

* Largest GE aviation finance deal in about a decade-exec

* American to buy GE engines for up to 100 jets

BOSTON, Sept 17 (Reuters) - General Electric Co's (GE.N) deal to provide the parent of No. 2 U.S. carrier American Airlines with $1.88 billion of financing and also to sell engines for up to 100 new jets is its largest aviation finance deal in about a decade, a GE executive said on Thursday.

The pairing of the finance arrangement with AMR Corp AMR.N and separate engine deal illustrates the strength of GE's finance-industrial balance, said Norman Liu, chief executive of GE Capital Aviation Services.

"They basically approached us ... looking for a comprehensive solution and that's what we provided to them as a company," Liu said. "The deal size is a little bit bigger than normal, but it's basically a good aircraft investment. The 737-800s are as good as they come, planes that you can still move around even in a tough market like now."

GE and AMR reached a $1.6 billion sale-leaseback agreement on Boeing 737s previously ordered by the airline and a separate $281.5 million loan facility secured by other aircraft. The finance arrangement -- plus a separate $1 billion sale by AMR of frequent flyer miles to Citigroup Inc (C.N) -- helped to drive AMR shares up as much as 25 percent. [ID:N17185858]

American also said it had selected GE engines for its future 787 aircraft.

GE, the largest U.S. conglomerate, has long argued that its hefty finance arm -- which has businesses ranging from financing heavy equipment made by its industrial divisions, to lending money to mid-sized businesses -- played a complementary role to the company's big manufacturing arms. That assertion has come under fire over the past year as the global credit crunch has pounded down profits at GE Capital, contributing to a slump in GE shares.

While the financing and engine deals were complementary, GE standards required each to be profitable independently, Liu said.

"Each deal has got to stand by itself, we're separate business units," Liu said. "We view it as a good win for both of us."

GE shares were down 2 cents at $16.88 on the New York Stock Exchange, following three consecutive days of gains. Over the past month, the shares are up about 22 percent, sharply outpacing the 5 percent gain of the Dow Jones industrial average. (Reporting by Scott Malone; Editing by Steve Orlofsky)

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