Kingfisher Seeks Damages from IAE

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Beleaguered Indian airline company Kingfisher Airlines Ltd. recently disclosed that it has filed a lawsuit against engine-maker International Aero Engines (IAE) to seek financial compensation worth $236 million as damages for allegedly supplying defective engines.

IAE is a consortium of specialized global engine-makers including Pratt & Whitney, an operating unit of diversified business conglomerate United Technologies Corp. (UTX), the Japanese Aero Engine Corporation (:JAEC), and the German MTU Aero Engines GmbH. It manufactures the V2500 engines that are used in the A320 aircraft. IAE’s aftermarket business includes various engine overhaul centers with over $1.5 billion in sales.

The lawsuit alleged that engines supplied to Kingfisher by IAE were defective in design and manufacturing and was one of the primary reasons for grounding 14 Airbus A320 family aircraft, which ultimately led to high operating loss for the grounded airline company.

Although IAE spokesperson did not comment on this issue, the litigation could impair the brand image of the company. The damage-control exercise is likely to dent a hole in the credibility of the assembly-line manufacturing units and United Technologies would certainly want to avoid any such instances in future.

Based in Hartford, Conn., United Technologies provides high-end technology products and services to the building systems and aerospace industries worldwide. The company serves various end markets such as aerospace, defense and commercial construction. The business diversification allows the company to remain profitable amid tough economic times.

United Technologies’ operations are primarily classified into two principal businesses: commercial and aerospace. Under its commercial business, the company has Otis and the UTC Climate Controls & Security division, which combined the former Carrier and UTC Fire & Security divisions. The aerospace business of the company consists of Sikorsky aircraft and the UTC Propulsion & Aerospace Systems, which include UTC Aerospace Systems and Pratt & Whitney divisions. Concurrently, United Technologies presently has five principal business segments: Otis; UTC Climate, Controls & Security; Pratt & Whitney; UTC Aerospace Systems; and Sikorsky.

United Technologies currently has a Zacks Rank #3 (Hold). Other companies in the industry that are worth mentioning include Federal Signal Corp. (FSS) and ITT Corporation (ITT), both having a Zacks Rank #2 (Buy), while Hutchison Whampoa Ltd (HUWHY) holds a Zacks Rank #1 (Strong Buy).

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