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Mon, Feb 16, 2004

The Other Shoe Drops! Honda and GE Team Up

Form Strategic Alliance in the Business Jet Engine Market

We've been hearing some rumors for a while now... which turned out to be true. Honda Motor Co., Ltd. and General Electric Co. (GE) have announced the formation of a strategic alliance to produce a new jet engine for light business jets. The basic agreement was signed Sunday (2/15) at Honda Motor headquarters in Tokyo, Japan, by Takeo Fukui, President and CEO of Honda Motor, and David Calhoun, President and CEO of GE Transportation, a business unit of GE. GE is headquartered in Fairfield, Connecticut, USA.

The agreement establishes the framework under which Honda and GE will further develop and certify Honda's new HF118 turbofan jet engine. Honda launched its jet engine and aircraft project in 1986, and has been developing the lightweight HF118 engine, in the 1,000- to 3,500-pound thrust class, since 1999.

The HF118 has run more than 1,400 hours, including ground tests and more than 200 hours in flight tests on an existing test aircraft. In addition, two HF118 engines have powered Honda's new experimental compact business jet, the HondaJet, in flight tests that began in December 2003.

The Honda/GE basic agreement includes: joint certification of the HF118, joint marketing activities under both companies' joint brand with airframe manufacturers, and continued discussions on the business structure under which the two companies will mass produce the engine. Honda and GE have been in discussions for more than a year, and expect to sign a formal definitive agreement later this year.

"We have great respect for the technology, design and performance built into Honda's HF118 engine," said GE's Calhoun. "There are tremendous benefits to Honda and GE entering the business jet engine market together. Honda is the world's leading producer of engines for motorcycles, automobiles, and power products with superb technology. We are delighted to form a strategic alliance."

"This is a great step forward for Honda to enter the aviation business, which has been a dream of the company since its creation," said Honda's Fukui. "We aim to commercialize our compact jet engine business by merging mutual strengths: Honda's HF118 turbofan engine technology, and GE's technology, sales, and support through a spirit of equal partnership. We are confident in forming an alliance with GE, which is the leading manufacturer in the jet engine industry."

Honda and GE note that the emergence of smaller, relatively inexpensive business jets, which seat from four to eight passengers, create the potential for considerable engine sales for future business and personal travel. Honda and GE envision an annual market in the future for approximately 200 or more of these business jets. Small business jet applications include owner operators and fractional owners, as well as potential "air taxi" operations. The "air taxi" business involves micro-jets flying passengers on short hops, using the vast number of small airports not serviced by major airliners.

Jet engine technology is also driving market change. In the 1990s, GE took its jet engine designs for large airliners to regional jet passenger aircraft, an arena previously dominated by propeller-driven and turboprop aircraft. Now, Honda and GE plan to bring their expertise to a new generation of smaller, lightweight, low-cost, and highly efficient turbofan jet engines with low operating costs.

FMI: http://world.honda.com, www.ge.com, www.geae.com

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