Exclusive: United Tech, Pentagon in $1 billion-plus deal for F-35 engines

Third Marine Aircraft Wing's first F-35B arrives on the Marine Corps Air Station Yuma flightline, in Yuma, Arizona, in this U.S. Marine Corps handout photo taken November 16, 2012.

Credit: Reuters/U.S. Marine Corps/DVIDS/Lance Cpl. William Waterstreet/Handout

By Andrea Shalal-Esa

WASHINGTON | Mon Aug 26, 2013 1:42pm EDT

WASHINGTON (Reuters) - Pratt & Whitney, a unit of United Technologies Corp, has reached an agreement in principle with the Pentagon on a contract to build 39 engines for a sixth batch of F-35 Joint Strike Fighters, three sources familiar with the deal said on Monday.

The agreement - which Pratt had expected to reach over a month ago - is valued at more than $1 billion, said the sources, who were not authorized to speak publicly.

The Pentagon agreed on the terms of a contract for the sixth and seventh orders of F-35s with Lockheed Martin Corp, which builds the jets, in late July. The government buys the engines separately from Pratt & Whitney, which is the sole producer of engines for the radar-evading warplane.

The negotiations between Pratt and the Pentagon's F-35 program office had focused only on engines for the sixth batch, with separate discussions planned for a seventh batch of F135 engines.

Pratt President Dave Hess had told Reuters in June that he expected to reach a deal with the Pentagon within 30 days on the next engine contract, reflecting a cost reduction of less than 10 percent.

No further details were immediately available about the new agreement in principle, which the sources said was reached by Pratt and government officials last week but which has yet to be announced.

Officials at Pratt and the Pentagon's F-35 program office had no immediate comment on the deal, whose terms will now be finalized in coming weeks and months.

Pratt has said the cost of the F135 engine it builds for the F-35 fighters is down about 40 percent from 2001, when the program began. The company finalized a $1 billion deal for a fifth batch of 35 engines with the Pentagon in May.

The sixth engine contract includes 39 engines - 36 for F-35 planes and three spares, according to Pratt & Whitney.

Hess told Reuters in June that F-35 engine sales would account for more than 50 percent of the company's military engine revenue in coming years, when production ramps up, reaching $2 billion by around 2018.

Hess said that last year, military engine revenue accounted for about $4 billion of Pratt's total revenue of $14 billion.

Shares of United Technologies were up 0.6 percent at $103.41 on Monday morning on the New York Stock Exchange.

(Editing by Gerald E. McCormick and Matthew Lewis)

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Swiss government ready to sign tax deal with United States

A Swiss flag is pictured next to the Jet d'Eau (water fountain), and the Lake Leman from the St-Pierre Cathedrale in Geneva June 5, 2012.

Credit: Reuters/Denis Balibouse

ZURICH | Wed Aug 28, 2013 11:29am EDT

ZURICH (Reuters) - Switzerland said it is ready to end a long-running dispute with U.S. prosecutors over Swiss banks that have sheltered tax evaders, without disclosing any terms of the deal.

The two governments have been at loggerheads over a tax evasion crackdown which has ensnared around a dozen Swiss banks, is threatening a raft of others, and earlier this year felled Wegelin, Switzerland's oldest bank, following an indictment.

The Swiss government said on Wednesday the signing of the joint statement with the U.S. should enable Swiss banks to resolve the dispute with the United States while complying with existing Swiss laws. It gave no further details, and the finance ministry was absent at a weekly government press conference.

A Swiss newspaper reported the host of banks not yet under formal investigation in the U.S. could face fines of as much as 50 percent of their American client assets. [ID:nL6N0GT0T3] Government spokesman Andre Simonazzi said the terms and conditions of the program would not be immediately released, but would be communicated "as soon as possible".

While Switzerland's banking lobby and a banking employees association welcomed the move, a spokeswoman for the U.S. justice department didn't immediately comment on the Swiss statement.

The agreement deals mainly with a settlement for the roughly 100 Swiss banks that had U.S. clients, but are not yet being investigated by U.S. justice authorities.

"The SBA welcomes the positive outcome of the Federal Council's decision, as this means that the final step towards a solution has been taken and the U.S. can now launch the program," the SBA said in a statement.

Around a dozen banks are under U.S. investigation, including Credit Suisse (CSGN.VX), Julius Baer (BAER.VX), the Swiss arm of Britain's HSBC (HSBA.L), privately held Pictet and state-backed regional banks Zuercher Kantonalbank and Basler Kantonalbank (BSKP.S).

Several of those banks have said they are preparing information of client withdrawals demanded by U.S. investigators, after the Swiss government said it would allow them to circumvent secrecy and privacy laws to do so.

Last week, a Swiss government source told Reuters the U.S. government had ratcheted up the pressure on Switzerland to strike a deal after the Swiss parliament rejected an accord in June, tightening its negotiating terms after the rebuff.

(Reporting by Martin de Sa'Pinto; Editing by Katharina Bart and Mark Potter and Louise Heavens)

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Exclusive: United Tech, Pentagon in $1 billion-plus deal for F-35 engines

Third Marine Aircraft Wing's first F-35B arrives on the Marine Corps Air Station Yuma flightline, in Yuma, Arizona, in this U.S. Marine Corps handout photo taken November 16, 2012.

Credit: Reuters/U.S. Marine Corps/DVIDS/Lance Cpl. William Waterstreet/Handout

By Andrea Shalal-Esa

WASHINGTON | Mon Aug 26, 2013 1:42pm EDT

WASHINGTON (Reuters) - Pratt & Whitney, a unit of United Technologies Corp, has reached an agreement in principle with the Pentagon on a contract to build 39 engines for a sixth batch of F-35 Joint Strike Fighters, three sources familiar with the deal said on Monday.

The agreement - which Pratt had expected to reach over a month ago - is valued at more than $1 billion, said the sources, who were not authorized to speak publicly.

The Pentagon agreed on the terms of a contract for the sixth and seventh orders of F-35s with Lockheed Martin Corp, which builds the jets, in late July. The government buys the engines separately from Pratt & Whitney, which is the sole producer of engines for the radar-evading warplane.

The negotiations between Pratt and the Pentagon's F-35 program office had focused only on engines for the sixth batch, with separate discussions planned for a seventh batch of F135 engines.

Pratt President Dave Hess had told Reuters in June that he expected to reach a deal with the Pentagon within 30 days on the next engine contract, reflecting a cost reduction of less than 10 percent.

No further details were immediately available about the new agreement in principle, which the sources said was reached by Pratt and government officials last week but which has yet to be announced.

Officials at Pratt and the Pentagon's F-35 program office had no immediate comment on the deal, whose terms will now be finalized in coming weeks and months.

Pratt has said the cost of the F135 engine it builds for the F-35 fighters is down about 40 percent from 2001, when the program began. The company finalized a $1 billion deal for a fifth batch of 35 engines with the Pentagon in May.

The sixth engine contract includes 39 engines - 36 for F-35 planes and three spares, according to Pratt & Whitney.

Hess told Reuters in June that F-35 engine sales would account for more than 50 percent of the company's military engine revenue in coming years, when production ramps up, reaching $2 billion by around 2018.

Hess said that last year, military engine revenue accounted for about $4 billion of Pratt's total revenue of $14 billion.

Shares of United Technologies were up 0.6 percent at $103.41 on Monday morning on the New York Stock Exchange.

(Editing by Gerald E. McCormick and Matthew Lewis)

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United Continental boosts 2Q earnings 38 pct.

Higher fares and a lower fuel bill led to a 38 percent profit jump for the parent of United Airlines in the second quarter.

Fewer passengers flew on United from April to June, but those who did paid slightly more. Not just for plane tickets, either. United boosted revenue from add-on charges such as baggage fees and seats with more legroom.

Last spring, United was struggling to merge some of its large computer systems with Continental, resulting in snafus that frustrated passengers and hurt fares.

In the most recent quarter, a key measure of per-seat passenger revenue rose 1 percent as United recovered. The airline projected that per-seat revenue would rise as much as 5 percent in the third quarter.

"We have clearly turned the corner post-merger, and I am confident that we are on a path toward becoming the world's leading airline," said Jeff Smisek, the airline's chairman, president, and CEO, on a conference call.

United sees one path to greater profitability in collecting more money for add-ons. Revenue for its extra-legroom Economy Plus seats jumped 37 percent in the most recent quarter. United hopes to sell more of those seats through the Sabre ticket distribution system next year. Sabre processes sales to large corporate travel clients and online booking sites such as Travelocity, which Sabre owns.

United also sells "subscriptions" for a $500 fee that entitles a passenger to Economy Plus for a year. And it's rolling out satellite-based Internet connections that it will sell to passengers. Revenue from add-ons like that rose by 13 percent to more than $20 per passenger in the second quarter, United said.

"We believe there is considerable room for us to grow in this high-margin space," said Chief Revenue Officer Jim Compton.

The airline is also aiming to bring so-called "revenue management" to more of those fees. Airlines have long sold tickets for different prices depending on how much demand there is for the flight and how far in advance the customer is booking. Now it's doing the same thing with those Economy Plus seats.

The next step will be to make different offers to different customers, Compton said. United deals with 140 million passengers per year, "not all of whom want or value the same thing from us, and not all of whom in return create the same value for the company," Compton said. He said United will beat its earlier goal of raising revenue from add-ons by 9 percent.

United Continental Holdings Inc. earned $469 million, or $1.21 per share, for the quarter. It would have earned $1.35 per share if not for special items. That's a penny better than expected by analysts surveyed by FactSet. A year ago it earned $339 million, or 89 cents per share.

Revenue rose almost 1 percent to $10 billion, about what analysts had expected.

United cut flying by 2 percent compared to a year earlier. Its fuel bill dropped 10 percent on a combination of the reduced flying and an 8 percent drop in the per-gallon price of fuel.

Lower fuel bills helped all of the big airlines in the most recent quarter. But oil prices have risen in recent weeks, likely dampening the relief for airlines.

Shares of Chicago-based United Continental fell 67 cents, or 1.9 percent, to $34.30.

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United, ANA find wire problems on 787 transmitters

Two airlines disclosed issues with the wiring on their Boeing 787's emergency transmitters, the same part of the plane that is getting close scrutiny after a parked jet burned earlier this month.

United Airlines said Friday that it found a pinched wire during an inspection of one of its six 787s. Earlier, Japan's All Nippon Airways found damage to wiring on two Boeing 787 locater beacons. It flies 20 of the jets.

The inspections were mandated by the Federal Aviation Administration for U.S. airlines after the tail of an Ethiopian Airlines 787 caught fire while parked at London's Heathrow airport earlier this month. U.K. investigators said the only thing in the tail section with enough power to fuel a fire like that was the emergency transmitter. That's a metal-cased, battery-operated radio the size of a loaf of bread that activates in a crash to help rescuers find a plane.

The FAA said last week it would require U.S. airlines to look for "proper wire routing and any signs of wire damage or pinching," and to check the transmitter's battery compartment for signs of heating or moisture. It issued a formal order on Thursday. The European Aviatoin Safety Agency issued its own order on Friday.

A wire could short-circuit if it's pinched by metal and the metal cuts through the wire's insulation, exposing the part that carries electricity.

United Continental Holdings Inc. spokesman Christen David said the transmitter with the pinched wire was removed and sent to its maker, Honeywell International Inc. Inspections were carried out without any impact on United's flight schedule, she said. That transmitter was replaced, and United has working transmitters on all of its 787s, she said.

Spokesmen for Honeywell International Inc. and Boeing Co. both declined to comment, citing the ongoing investigation.

So far, the FAA and European orders have only covered 787s. That's Boeing's newest plane, and only 68 have been delivered so far. But those particular transmitters are used on far more planes — U.K. investigators said they've been installed on some 6,000 aircraft.

The fire at Heathrow happened just when Boeing was hoping to get the 787 out of the news. In January, smoldering lithium-ion batteries on two 787s prompted authorities to ground the plane for almost four months, forcing Boeing to redesign the batteries and their chargers.

The grounding was costly for the eight airlines that flew the 787 at the time. Polish officials have said that LOT Polish Airlines — which is struggling and trying to reorganize its finances — lost some $30 million from canceled flights alone.

On Wednesday, Boeing CEO Jim McNerney acknowledged that the grounding created "some instances where we had obligations to customers, and those have all been satisfied." A moment later he added, "We think they are all behind us now."

LOT disagreed on Friday. In a statement, it said its demands "have not been compensated in any form" by Boeing. A Boeing spokesman did not have an immediate response to LOT's assertion.

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Associated Press Writer Monika Scislowska in Warsaw contributed to this report.

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