Wednesday, September 29, 2010

A320 upgrade plan nears approval

Senior Airbus engineers are expected to meet on Thursday to finalize plans to upgrade the A320 aircraft series with new engines in a bid to sustain sales of the plane maker's best-selling jet family, industry sources said.

EADS subsidiary Airbus has been considering the "re-engining" project to make its short-haul and medium-haul planes up to 15 percent more fuel-efficient from 2015.

Barring surprises, it is now seen as virtually certain that Airbus will go ahead with the EUR€1 billion - EUR€2 billion project, but it has pledged only to do so if it can avoid using engineers needed to prevent further delays on other key projects.

A panel of engineers and advisers is expected to weigh the options on Thursday with the launch of the so-called Airbus A320 NEO -- for New Engine Option -- seen as the favored scenario.

Airbus declined to comment.

A green light from engineers on Thursday would still need to be approved by Airbus's executive committee led by chief executive Tom Enders and then by parent company EADS, with a formal launch seen likely in the middle of October.

The A320 series is a family of four aircraft which compete with Boeing's 737 Next Generation family for sales of single-aisle jets, the backbone of most airline fleets. The upgrade is expected to affect three of the four types.

Upgrading with new engines would help the large plane makers meet demands for more fuel savings and fend off growing competition from planes such as Bombardier's C-Series.

The new Airbus version would offer a choice of new engines from CFM International and Pratt & Whitney. They would be fitted as an option instead of current models from CFM and a consortium that includes Pratt & Whitney.

The Economist reported this week that the 150-seat A320 NEO would cost about USD$8 million more than the current model, equivalent to a price premium of about 10 percent.

Airbus hopes the upgrade will keep its product portfolio fresh until 2025. It doubts a big enough leap in technology will be ready before then to make it worth building a completely new plane.

Boeing has been looking at the same move but analysts say it is increasingly likely to pass on the engine upgrade in the hope that technology for a game-changing new plane will be ready earlier than Airbus believes -- possibly as early as 2020.

Single-aisle product strategy is key to revenues and profits at both plane makers. Airbus delivered single-aisle planes worth some USD$33 billion at today's list prices last year, though in practice planes are sold at a discount.

The Economist quoted Airbus sales chief John Leahy as saying he thought Airbus could sell another 4,000 A320-family jets, compared with 4,125 delivered up to the end of last year.


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