Airbus nears deal on revamped A320s

Airbus is in final negotiations with suppliers about a reworked version of its bestselling A320 and is poised to unveil a more fuel-efficient version as early as next month, chief operating officer Fabrice Bregier says.

New engines on the A320 would cost €1 billion ($1.7 billion) to €1.5 billion, a fraction of the €$10 billion a new model could reach in development, Bregier said.

Airbus has forged preliminary agreements with two engine makers and is talking to suppliers of engine outer casings, landing gear, and other equipment that would need changing, he said.

"If we re-engine, we give the plane another 10 years to live," Bregier said in an interview in Toulouse, France, where Airbus is based. "We'd sell another 3000, 4000 more planes, so it's worthwhile for us to look seriously at how we can have equipment evolve or change."

Putting new engines on the A320-series planes would help Airbus satisfy airlines seeking greater fuel efficiency in the face of rising oil prices. The move would also put pressure on Boeing to reconsider its 737 model, after indicating it may skip a reworked version because it would not satisfy the efficiency gains that airlines demand.

The final decision to approve the business case for new engines has not been signed off on, and the company was still "talking in the conditional tense", he said. Bregier and other members of the executive committee gathered in China last week for their monthly strategy meeting. Airbus said in July that it would decide on the engine options this month.

The A320 family of aircraft offers the choice of two engines. One is built by CFM International, a joint venture between General Electric and Safran of France, and the other is manufactured by International Aero Engines, a group that includes Pratt & Whitney and Rolls-Royce Group.

New engines would involve a more fuel-efficient version of CFM's CFM56 model with a new hot section, or core, and a new engine from Pratt & Whitney, whose geared turbofan allows the outer fan to turn at different speeds, using less fuel. Airbus estimates the new engines would bring 15 per cent greater fuel efficiency than existing models.

While the A320 and the 737 aircraft are the smallest in the two manufacturers' range, the jets represent the cash cows for the aircraft makers because they are the most widely flown jets.

Boeing has sold 6510 of the 737, which was originally introduced in the 1960s, while Airbus has sold 4125 of the A320, which debuted in 1988 and helped the European company leapfrog Boeing in 2003.

Airbus sales chief John Leahy has said the company was unlikely to bring out an all-new plane before the middle of the next decade in order to reap the benefits of advanced materials and engines.

Boeing chief financial officer James Bell told investors last month that customers "haven't shown a real interest" in the re-engined aircraft.

Complicating matters for Boeing may be the fact that the wing on its 737 plane is closer to the ground than on the A320, potentially making new, heavier engines with bigger fans more technically challenging to attach and the revamp more costly.

For Airbus, one potential pitfall may be stretched engineering resources. The company is already coping with development of the A350 long-range plane, which will feature an unprecedented amount of composite materials for an Airbus jet, as well as its A400M military aircraft that is years behind schedule. Manufacturing the A380 superjumbo has also been slower than planned.

"The goal is to change as little as possible, but it's a possibility that we leave open to ourselves," Bregier said of a reworked A320.

- BLOOMBERG