Thai Airways Swaps Rolls-Royce For General Electric In Billion-Dollar Order For New Fleet

Thai Airways International Pcl TAWNF has decided to switch from Rolls-Royce Holdings Plc RYCEY to General Electric Co. GE for its next-generation widebody engines, dealing a blow to the UK company’s efforts to enhance profitability.

What Happened: The Bangkok-based airline announced an order for 45 Boeing Co. aircraft equipped with engines manufactured by GE, Bloomberg reported on Wednesday. The order also includes an unspecified number of options. This decision comes after Rolls-Royce faced public criticism from Thai Airways’ CEO over pricing concessions in November.

Rolls-Royce has been striving to improve profitability under CEO Tufan Erginbilgic, leading to a tougher stance with customers on new deals. This approach has led to some friction, and the Thai order marks the first public loss for Rolls-Royce due to this strategy.

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The new aircraft, which will be added to Thai Airways’ fleet between 2027 and 2033, will not affect the airline’s ongoing repayment plans under its debt rehabilitation process.

Why It Matters: This move is a significant setback for Rolls-Royce, which is facing challenges in boosting profitability. The company’s approach to renegotiating existing contracts and taking a tougher line with customers on new deals has been met with resistance, as seen in the case of Thai Airways.

For GE, this deal with Thai Airways comes at a crucial time, with the company’s GE Aerospace and GE Vernova Spin-Off nearing. The company’s fourth-quarter fiscal 2023 revenues of $19.4 billion, an increase of 15% year-over-year, and adjusted revenue of $18.5 billion (+13% Y/Y organically), had sparked concerns.

On the other hand, Boeing has received a much-needed boost with this order from Thai Airways.

In December, Boeing was reported to be on the verge of securing an exclusive widebody jet deal with Thai Airways, with an announcement expected within weeks.

This development is being seen as a significant win for Boeing, especially in the wake of the intense scrutiny it faced over its manufacturing controls following an accident on an Alaska Airlines flight.

Boeing has been facing a series of setbacks, including newly discovered quality defects in its 737 MAX airplanes, which could potentially lead to delivery delays. These challenges have raised concerns about Boeing’s production targets and AI integration, making each new deal and order all the more crucial for the company’s recovery.

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Image: Shutterstock/ Pawarin Prapukdee