(Reuters) - Planemaker Boeing Co (BA.N) will partner with French aerospace firm Safran SA (SAF.PA) to make and service aircraft auxiliary power units as it uses some its profit from record jet sales to push into other lucrative aerospace segments.
Boeing and rival Airbus SE (AIR.PA) are branching into more profitable services, in a bid to emulate the wider margins of third party suppliers who traditionally control the market for repairs and services.
Safran already makes APUs, which are used to start aircraft engines and run other systems, and competes with Honeywell International Inc (HON.N) and United Technologies Corp (UTX.N) - the two leading manufacturers of such power units.
“This move will strengthen Boeing’s vertical capabilities as we continue to expand our services portfolio and make strategic investments that accelerate our growth plans,” Boeing Chief Financial Officer Greg Smith said.
The alliance with Safran comes about a month after the world’s biggest planemaker said it would buy aerospace parts company KLX Inc (KLXI.O) to expand its aircraft services business.
The partnership will not affect Safran and Boeing’s 2018 forecasts and plans to return cash to their shareholders.
Safran currently supplies a wide range of components to Boeing’s commercial and defense programs. It also has a partnership with General Electric Co (GE.N) to make LEAP-1B engines for Boeing’s 737 MAX.
Boeing has been riding on strong demand for commercial jets, selling a record number of jets in 2017. In April, the company raised its full-year earnings and cash flow forecasts.
Reporting by Arunima Banerjee in Bengaluru and Mike Stone in Washington; Editing by Saumyadeb Chakrabarty