Airbus Sales Chief John Leahy thinks that Airbus is deciding to upgrade its A320 narrow-body aircraft, their lead profit maker, with new engines and expects the Boeing will do the same.
But Airbus will not complete studies on the move before end of September as it juggles engineering resources. A new engine would offer airlines fuel savings of about 15 percent from 2015, pending more radical improvements in engine technology which Airbus does not expect for at least 15 years but which Boeing expects sooner.
A decision whether to put forward the engine upgrade soon, and risk decreasing of large backlogs of planes already sold with older engines, or wait for further technology developments and build a new plane and engine costing well over USD$10 billion bears on the shoulders of plane makers.
Leahy, Airbus’s top salesman, favors going for the interim step saying “We think that is way to go and that Boeing will be behind us before end of year,” about the “re-engining” project. “Let’s make sure we have engineering resources in place,” he said, adding that replacing the engines of the same plane with fuel-saving wingtip devices known as Sharklets would have strong demand. “We are running those tracklines through. By the end of September we will have whole thing put together… Assuming that it works I would like to think we would be out there in the fourth quarter,” he said, adding the proposals would have to be approved by the EADS board before Airbus could offer the plane.
“We had 131 firm orders at the end of June and I have a bet with Louis (Gallois) here that we will more than double that by the end of the air show,” he said, referring to the chief executive of Airbus parent EADS.
The timing is crucial for all companies involved as it would determine whether investments of several billion dollars in a re-engined Airbus A320 or Boeing 737 make financial sense.
“If the next generation is coming in 2019, then it would have a big impact on residual values, but if it is 2026-27, then it is a much longer run,” Leahy said.
“If we don’t re-engine, then Boeing probably won’t, and then there will be a niche for the C Series… but with re-engining there is no case for it,” Leahy said. He also expects “one or two” extra A380 orders this year after sale of thirty-two A380 aircraft to Emirates.
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