Honeywell Lands $23 Billion Embraer Engine Deal

Diversified U.S. manufacturer Honeywell International said on Tuesday it won a $23 billion contract to supply engines for Brazilian aircraft maker Embraer's midsized business jets.

It will be the first time Honeywell is selling engines to Embraer, which competes against Textron's Cessna unit and General Dynamics' Gulfstream in the fast-growing business jet market.

Honeywell , which is also the world's largest maker of cockpit electronics, expects to begin producing and shipping the engines in 2011, with the new Embraer aircraft going into service in 2012, said Rob Wilson, president of business and general aviation at Honeywell.

He estimated that Embraer would sell about 1,200 of the twin-engine MSJ/MLJ aircraft, which will carry six to eight people and have a range of around 3,000 nautical miles (5,556 km) over the 20-to-25-year life of the program.

The $23 billion estimated value of the contract includes maintenance, parts and spare engines as well as original engines, over the projected life of the aircraft, he said.

Market Leveling Off

After several years of robust growth, Wilson said Morris Township, New Jersey-based Honeywell expects demand for business jets to level off over the next few years.

However, he said increased demand from emerging markets, particularly in Asia, would help to offset any slowdown in the U.S. economy.

"If you look back over history the business aviation marketplace was dominated by North America so it was cyclical based on the economy in North America," Wilson said.

"In the last few years we've really seen demand explode outside the U.S," he added. "We see strong demand growth in the euro region we see very very strong demand growth in Asia and India and so that tends to soften any fluctuation we see due to the U.S. economy."

Honeywell competes with the Pratt & Whitney unit of U.S. conglomerate United Technologies and Britain's Rolls-Royce in making engines for business jets.

Last year Honeywell Aerospace was the conglomerate's most profitable unit, recording $2.2 billion in segment profit and accounting for 35 percent of the company's $34.59 billion in revenue.