Ryanair signs major parts deal with engine maker CFM

By Tim Hepher and Gianluca Lo Nostro

PARIS, Feb 10 (Reuters) - European budget giant Ryanair RYA.I and jet engine maker CFM International unveiled a deal on Tuesday to support the Irish carrier's plans to open two engine maintenance shops with a flow of spare parts, securing scarce supplies for the next 15 years.

The plants will probably be based in continental Europe and the first will open as early as 2028, using Ryanair's financial strength to purchase parts early at a time of industry-wide shortages, Ryanair CEO Michael O'Leary told a news conference.

Sporting a French rugby shirt days after Les Bleus thrashed Ireland at the Stade de France, Ireland's best-known business leader joked about high engine prices, saying he had suffered a comparable defeat in talks with CFM's French co-owner Safran.

"Beware the French bearing gifts; this is going to cost me," O'Leary said as he signed the parts deal at the headquarters of Safran, which jointly makes engines for Boeing BA.N 737 and some Airbus AIR.PA jets with GE Aerospace GE.N through CFM.

Under the provisional agreement, Ryanair will buy all its engine parts directly from CFM and take over maintenance when the new shops are up and running.

The companies said that over the 15-year term, Ryanair would commit to parts worth more than $1 billion a year.

COST ADVANTAGE

O'Leary, who went to one of Ireland's top rugby schools, is a fan of Munster Rugby and in a job ad for a financial assistant last year said rival Leinster supporters need not apply.

But his surprise appearance in the French national jersey drew attention to the increased bargaining power of firms like Safran, one of the world's largest aerospace contractors.

He declined however to back strong criticism of the engine industry by the head of the International Air Transport Association, fellow Irishman Willie Walsh, saying the trade group's airline members were themselves prone to raising prices.

Olivier Andries, CEO of Safran, which also makes such aircraft parts as brakes and landing gear, said engine makers needed to harvest a return on upfront investments over many years.

Ryanair has said that by setting up its own engine shops and aggressively buying spare engines and parts at a time of manufacturing bottlenecks, it can widen its cost advantage over competitors wholly reliant on expensive third-party supplies.

For CFM, the parts deal eases demands on the capacity of its own repair network and those of independent maintenance firms.