GE Engine Services said Tuesday that it's buying 95% of Varig's Galeao International Airport engine service facility in Rio de Janeiro for $180 million. Varig will retain five percent of the new joint venture company, GE Varig Engine Services.

GE Varig will maintain and overhaul CFM-562, CF6-50, CF5-80C2 engines for Varig and for third-party customers.

"The main reason for this was so we could specialize on our core business which is serving our passengers," said Varig president Fernando Pinto. "For engine care, we wanted a specialist, and who better than the manufacturer to do that?"

The deal will also "make it easier for us to do financial planning with power by the hour," Pinto said.

"This is an excellent center for us to serve South America," said GE Engine Services Bill Varechi. "We will be able to serve not only commercial but also military engines."

The engine facility in Rio de Janeiro could be expanded to handle up to 250 engines per year. Varechi said too that GE Engine Services was currently out of capacity and would move some work to the Rio facility immediately.

The GE purchase deal is expected to close at the end of September.

By John Wiley