Alcoa to Produce Jet Engine Parts in Indiana

Zacks Equity Research
May 30, 2014

Aluminum giant Alcoa Inc. (AA) announced that it  has broken ground on its new $100 million aerospace expansion in La Porte, IN, where it will produce nickel-based superalloy jet engine parts for large commercial aircraft, including narrow- and wide-body and military airplanes.

The plant’s construction is expected to complete by the end of 2015. The plant will provide highly engineered parts that are required to build some of the best selling engines and at high volumes to its customers. The facility will utilize the latest technologies in order to meet particular product specifications.

The 32,000 square feet plant will increase Alcoa’s capacity to supply engines for narrow-body aircraft. It will also enable Alcoa to produce parts about 60% larger than components it already produces, thus expanding its market presence to wide-body airplanes.

The Indiana Economic Development Corporation has offered Alcoa up to $4 million in conditional tax credits, based on the company’s job creation plans. Further, the city of La Porte has approved tax incentives of $7.1 million over a 10-year period. This is the second major aerospace investment by Alcoa in Indiana in two years. The first one being Alcoa’s plans of constructing a $90 million greenfield state-of-the-art aluminum lithium facility at its Lafayette operations, as announced in 2012.

Alcoa is witnessing healthy airline fundamentals. The company, on Apr 8, increased its global aerospace growth expectations for 2014 to 8%-9% from 7%-8% factoring in strong demand for both large commercial aircraft and regional jets and sustained growth in the business jet market.

Alcoa, a prominent player in the mining industry along with Aluminum Corporation of China Ltd. (ACH), Atlatsa Resources Corp. (ATL) and BHP Billiton Ltd. (BHP), is a world leader in production and management of primary aluminum, fabricated aluminum, and alumina. The company currently holds a Zacks Rank #3 (Hold).

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