Christchurch City Council has agreed to lend up to US$17 million (NZ$20.7m) to aircraft engine servicing company Christchurch Engine Centre, to allow the company to expand its jet servicing facilities.

But the potential expansion plan comes at the same time as CEC is considering cutting jobs, according to a union.

CEC is a joint venture between Government-controlled Air New Zealand and the United States-based aircraft engine producer Pratt & Whitney.

The city council's investment arm, Christchurch City Holdings Ltd, has put funding into the venture over time with the view of fostering employment and economic development in Christchurch.

CCHL issued its annual report this week detailing the latest US$17m agreed loan, which comes after the council sold out of its stake in a jet engine test cell.

In the early 2000s, CEC's V2500 engine testing cell was backed by a $20m investment by the Christchurch City Council, and $4m from Christchurch International Airport. Some of the money was later being paid back under a lease and repayment.

CCHL chief executive Bob Lineham said that after talks in the past year or so, the city had in July sold its remaining stake to CEC for an undisclosed sum and agreed to loan the engine centre US$17m for expansion.

The loan replaced the council's combined equity/debt investment in the jet engine facility, known as JEFL that was originally a subsidiary of Vbase.

"They [Pratt & Whitney/Air New Zealand] were doing a whole financial restructuring of their operation, so it suited them to have this asset as part of the total complex."

Lineham said he understood future investment in the CEC would relate to the V2500 engine testing, while the company was winding back investment in servicing some of the older engine types including the JT8D engine.

"They do have plans for expanding this [V2500] particular side of their business . . . that side of it is doing quite well as I understand it."

Engineering Printing and Manufacturing Union spokesman Ged O'Connell said the CEC might be focusing on one area of engine testing in an economic downturn.

Earlier this month the EPMU said the CEC was getting out of one of its engine lines because it had become obsolete. A restructuring plan could mean up to 40 people being laid off, a union spokesman said.

- © Fairfax NZ News