Air­bus to plan A320 en­gine op­tions as ri­vals crowd mar­ket

The Pak Banker - - Company& -

PARIS: Air­bus SAS said it plans to of­fer its A320 se­ries of air­craft with an op­tion of more fuel-ef­fi­cient en­gines to help de­fend its stake of the sin­gle-aisle jet mar­ket.

The com­pany will start de­liv­er­ing the new ver­sions start­ing in early 2016 and pre­dicted a mar­ket po­ten­tial of as many as 4,000 air­craft over 15 years, the Toulouse, France-based man­u­fac­turer said in a state­ment to­day. Air­lines can choose two new en­gine op­tions on the jets, dubbed A320 NEO, or opt for the ex­ist­ing power plants, ac­cord­ing to the re­lease.

Air­bus is seek­ing to ex­tend the life of the top-sell­ing A320, which en­tered ser­vice in 1988, be­fore work be­gins on a new sin­gle-aisle jet that prob­a­bly wouldn't be ready be­fore the mid-2020s. Boe­ing Co. is con­sid­er­ing an up­grade of its 737, and plane­mak­ers from Canada and China also are en­ter­ing the mar­ket. Air­bus stud­ied the up­grade for more than a year, as it weighed the risk of de­ploy­ing en­gi­neers needed on other air­craft.

"Find­ing the nec­es­sary re­sources for the A320 NEO wasn't ex­actly a walk in the park," Air­bus Chief Ex­ec­u­tive Of­fi­cer Tom En­ders said in the state­ment. "We are con­fi­dent that the A320 NEO will be a great suc­cess across all mar­kets and with all types of op­er­a­tors, of­fer­ing them max­i­mum ben­e­fit with min­i­mum change."

Air­lines can or­der A320s and vari­ants ei­ther with the new power plants, pick­ing be­tween Pratt & Whit­ney or the CFM In­ter­na­tional joint ven­ture by Gen­eral Elec­tric Co. and Safran SA, or stick with ex­ist­ing en­gines that have pow­ered the A320 since its cre­ation. Vari­ants of the plane in­clude the larger A321, seat­ing 180, and the smaller A319 for 124 pas­sen­gers.

"It's a smart move, it's what air­lines seem to want," said Richard Aboulafia, vice pres­i­dent of the Teal Group, a Fair­fax, Vir­ginia-based con­sul­tant. "With­out this, they'd find them­selves the high­est-cost player on the mar­ket."

In study­ing the mer­its of the A320 NEO, Air­bus, the plane­mak­ing unit of Euro­pean Aero­nau­tic, De­fence and Space Co., had to con­sider the risk of com­mit­ting ad­di­tional en­gi­neers who may be needed to fin­ish de­vel­op­ing the wide-body A350 model due to en­ter ser­vice by the end of 2013.

Air­bus is also still ramp­ing up pro­duc­tion of its A380 su­per­jumbo air­craft.

Qatar Air­ways Ltd., al­ready a ma­jor Air­bus cus­tomer, backs the plan and and will likely be among the first buy­ers, CEO Ak­bar Al-Baker said in an in­ter­view last week. Air­lines in­clud­ing Ryanair Hold­ings Plc and South­west Air­lines Inc., who are Boe­ing cus­tomers, have also de­manded new en­gines.

Both the A320 and 737 are twin-en­gine mod­els that seat about 125 to 185 peo­ple. List prices for each plane range from about $65 mil­lion to $95 mil­lion, depend­ing on the ver­sion.

Air­bus to date has won 6,745 or­ders for A320 se­ries jets and de­liv­ered 4,453. When the com­pany in­tro­duced the A320 in the 1980s, the jet in­cluded nov­el­ties such as fly-by-wire elec­tronic han­dling, help­ing Air­bus leapfrog Boe­ing in de­liv­er­ies in 2003. US Air­ways Cap­tain Ch­es­ley B. "Sully" Sul­len­berger III flew an A320 in his "mir­a­cle" Hud­son River land­ing last year.

Air­craft leas­ing com­pa­nies have met the pro­posal for new en­gines with dif­fer­ent views. Steven Ud­var-Hazy, chief ex­ec­u­tive of Air Lease Corp., said in Oc­to­ber that the A320 NEO would of­fer only a "a very slim mar­gin" for clients. In­ter­na­tional Lease Fi­nance Corp. Chief Ex­ec­u­tive Henri Cour­pron said to­day that he backs the pro­posal.

"I think it's dif­fi­cult not to em­brace progress and technology," Coupron said, adding that re­ject­ing the A320 NEO rep­re­sented "a short term view in a very long-term busi­ness."

The A320 NEO's in­creased fuel ef­fi­ciency of as much as 15 per­cent will re­duce car­bon emis­sions, with the po­ten­tial to cut 3,600 tons of CO2 sav­ings an­nu­ally per air­craft, Air­bus said.

The new en­gine op­tion in­cor­po­rates large wing-tip de­vices that help save fuel and in­crease range, dubbed "sharklets" by Air­bus. Mod­i­fy­ing the se­ries will cost as much as $1.5 bil­lion, a frac­tion of the $10 bil­lion an all-new air­craft devel­op­ment pro­gram can cost, Air­bus has said.

"We are pleased to see Air­bus of­fer new en­gines with lower fuel con­sump­tion, bet­ter eco-ef­fi­ciency and dras­ti­cally re­duced noise emis­sion for the A320 fam­ily," Nico Buchholz, di­rec­tor of Lufthansa's fleet op­er­a­tions, said in a state­ment to­day. "If in­deed the prod­uct of­fer­ing is 15 per­cent more fuel ef­fi­cient air­craft, then Boe­ing has to re­spond," he said.

Boe­ing con­tin­ues to make im­prove­ments to its 737 and re­mains open to what the next ap­proach will be, Jim Proulx, a spokesman, said yes­ter­day in an in­ter­view.

"We have the op­tion of of­fer­ing a new en­gine for the 737," he said. "Cus­tomer feed­back to date has been mixed, and on bal­ance, has been against a new en­gine but it's still a con­sid­er­a­tion and it's a tech­ni­cally vi­able op­tion. We are con­tin­u­ing to eval­u­ate the po­ten­tial of a new air­plane." -Bloomberg

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