in the First Half of 2003 98th Fiscal Year - FIAT SpA

The difficulties encountered in the commercial aircraft engine
and commercial engine overhaul businesses continued in the
first half of 2003 owing to the enduring crisis among airlines,
which was aggravated by the drop in traffic in the Far East in
the wake of the SARS epidemic. The government market
offered attractive opportunities, while in the Space operations
the Ariane programs have slowed following the unsuccessful
flight in December 2002.
In the Commercial Aviation segment work continued on the
development and certification of new engines (in particular the
GE90, T700-T6E1 and Trent 900) in collaboration with General
Electric and Rolls Royce. Production of helicopter transmission
systems remained high, primarily due to strong demand for
T700 engines in association with recent military events.
Sales of aeroderivative turbines for electricity generation are
stagnant. One important event in this sector was the agreement
with GE and the subsequent start-up of a program for the
development of a 120 MW turbine (the LM7000).
In the first half of the year, work performed as part of
Government Programs saw the continuation of FiatAvio’s
involvement in the US Joint Strike Fighter program: following
the signing of two contracts with General Electric and
Rolls Royce Allison to build low-pressure turbines for the F136
engine for the new F-35 fighter (JSF), FiatAvio began
negotiating the detailed agreements for the project.
Plans to replace European air fleets were also launched, with
FiatAvio being selected to develop and manufacture the power
transmission gearbox for the TP400 engine that will power the
A400M military transporter.
Within the field of European military programs, production and
delivery of the EJ200 engine to the countries participating in
the Eurofighter-Typhoon project continued successfully, while
in the Advanced Trainers segment work continued on obtaining
certification of the F124 GA 200 engine that will power the
Aermacchi M346.
Negotiations with the Italian Air Force for overhaul services
under a power-by-the-hour program integrated with the In
Service Information System (ISIS) were extended to include
other power units (Spey, Pegasus etc).
Negotiations for automation systems for the Italian and French
Orizzonte-Class frigate program are at an advanced stage, while
the Sector is also bidding to supply propulsion and automation
systems for the new multimission FREMM frigates of the Italian
and French Navies.
Commercial Engine Overhaul operations received the first
engines from an Iranian airline and the Indonesian airline Lion
Air, with which negotiations are under way for an exclusive
long-term contract. Overhaul customers for the CFM56-3
engine included the Chinese airline Hainan Airlines, and in
April a five-year contract was signed with AirOne. Overhaul
services for the PW120 engine continued with a significant
number of long-standing customers, while new customers were
acquired from South America and Iran.
28
Aviation — FiatAvio
Space operations continued with the development of the new
MK2 liquid oxygen turbopump and the pump that will be used
in the new Ariane 5 third-stage engine (Vinci). In the second
quarter of 2003 Ariane 5 flights resumed with the baseline
version of the launcher, with two successful launches of
commercial satellites.
Detailed design work continued for the Zefiro 9 and Zefiro 23
solid-fuel boosters with the definition of the configuration of
the first prototypes, which will be built in the second half of
2003.
Operating performance
Revenues in the first half of 2003 totaled 625 million euros, a
decline of 20.6% from the 787 million euros posted in the fist
six months of the previous year. The fall was mainly attributable
to the contraction of activity in the commercial aviation segment
and the slowdown in Ariane flights.
Operating income came to 53 million euros in the period,
compared with 119 million euros in the year-earlier period.
The decline was due to adverse exchange rate trends and
a less favorable composition of sales.