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UPDATE 1-French group Safran maintains forecasts as quarterly sales fall 38%

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PARIS, April 30 (Reuters) - French aero engine and equipment maker Safran reported on Friday a 38% drop in first-quarter revenues but maintained full-year forecasts as airlines face a bumpy recovery from the coronavirus pandemic.

Chief Executive Olivier Andries said the downturn reflected continued uncertainty over the industry’s worst crisis but voiced optimism about a relatively quick pickup in demand for medium-haul models that support much of Safran’s business.

Safran co-produces engines for the Boeing 737 MAX family and competes with Pratt & Whitney on the Airbus A320neo in the busiest segment of the jetliner market through their CFM International venture.

Safran, which has warned of a delayed recovery to the market for engine services, said its widely watched civil aftermarket revenue fell 53.4% in dollar terms in the first quarter.

March airline traffic showed signs of improvement after stalling in January and February. It remains weak in Europe and Asia outside China, the company said.

Total revenues fell 37.9% to 3.342 billion euros ($4.1 billion) from 5.383 billion.

Safran’s seats business was “strongly impacted” by the COVID-19 pandemic that has sharply reduced long-haul air travel.

However, it won an order for business-class seats from a “major U.S. airline” for the upcoming Airbus A321XLR.

Industry sources have said Airbus is asking engine makers for more thrust as it fine-tunes the jet’s design.

Andries said CFM had provided an engine meeting Airbus requirements and that there was “nothing new” on the project.

He said Safran would closely watch its supply chain as planemakers plan sharp increases in output next year.

The update came as Safran, MTU Aero Engines of Germany and Spain’s ITP Aero announced an agreement to produce, develop and support an engine for a new European combat jet, the Future Combat Air System.

Andries said Safran would keep control of the design of the engine under the plan, which expands an earlier deal between Safran and MTU. A demonstrator will be powered by the existing Safran-designed M88 engine used on France’s Rafale fighter.

$1 = 0.8253 euros Reporting by Tim Hepher; Editing by Sudip Kar-Gupta and Edmund Blair

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