Sept. 18 (Bloomberg) -- Airbus SAS, the planemaker that said yesterday its next single-aisle model likely won’t come for another 15 years, risks an open flank to rivals from Canada and Asia that seek a slice of the industry’s most lucrative segment.

A successor to the Airbus A320 series will enter service about 2024, Chief Operating Officer John Leahy said in an interview yesterday. A year ago, Leahy had slated the next narrow-body model for about 2018. Boeing Co. will likely need until 2020 for a replacement for the 737, according to Tom Cogan, Boeing’s director of airplane product development.

Delays to Airbus’s A380 superjumbo and Boeing’s 787 Dreamliner have distracted the two largest planemakers and drained resources. That’s helping companies from China, Canada, Japan and Brazil attack the duopoly that Boeing and Airbus have held for decades in the segment that accounts for about 60 percent of the total market.

“They’re late doing these programs because they ran out of resources -- money and people -- because they screwed up their major programs,” said Nick Cunningham, an aerospace analyst at Evolution Securities in London. “That’s left the door open for new contestants to come into the bottom end of the narrow-body market.”

Industry Workhorse

Single-aisle jets, with about 100 to 200 seats, have been the industry’s workhorses for decades. Boeing and Airbus combined have delivered more than 9,000 narrow-body planes since the first Boeing 737 hit the market in 1967, with some 4,500 orders still pending.

Developing a successor would cost about $10 billion, money that both Boeing and Airbus say they will only spend if technological breakthroughs are guaranteed on the new models.

Airbus, based in Toulouse, France, won’t proceed unless it can offer 30 percent better operating costs through new engine technologies, aircraft design and materials, Leahy said yesterday. He said airframe and engine makers need more time to develop planes that provide a major efficiency leap from current models.

An all-new single-aisle jet depends on available technology, Boeing’s Cogan said in a Sept. 16 interview.

“We’re constantly pushing for state of the art in aerodynamics, engine technologies, materials and systems” before offering a new plane, he said.

New Engines Needed

Both Boeing and Airbus are pointing to engine makers, saying they need to provide the next generation of turbines rather than upgrades of existing models to create an incentive for a new single-aisle model.

General Electric Co., the world’s largest jet-engine maker, is developing two new power plants. One, slated for 2016, would use a new hot section to reduce fuel consumption, and the other, which wouldn’t be ready until at least 2020, would make a bigger efficiency leap with counter-rotating blades outside the casing. Rolls-Royce Group Plc, the No. 2 maker, is working on three new offerings in similar timeframes.

“The world won’t want to wait until 2020 for the next improvement in commercial aviation, particularly on the narrow- body,” Jeanne Rosario, vice president for engineering at GE Aviation, said during a Sept. 17 presentation to analysts.

Work on new designs “needed to begin yesterday,” Southwest Airlines Co. Chairman and Chief Executive Officer Gary Kelly said today. His Dallas-based carrier operates the largest fleet of 737s, with 544 planes.

Applying Pressure

Deutsche Lufthansa AG’s fleet manager, Nico Buchholz, said he’s “very happy” with his March order for as many as 30 Bombardier Inc. CSeries jets that seat up to 130 passengers for its Swiss International unit.

Any next-generation Boeing or Airbus narrow-body aircraft that the German carrier, Europe’s second-largest, orders would need to bring at least 20 percent efficiency gain, Buchholz said. International Lease Finance Corp. is also considering the CSeries, the first time in the 36-year history of the world’s biggest leasing company that it’s looked beyond Boeing and Airbus.

AMR Corp.’s American Airlines, the world’s second-largest carrier, is “applying whatever pressure we can for them to develop more efficient aircraft as soon as possible,” said spokesman Tim Wagner.

Air France-KLM Group had been pushing for a new single- aisle model by 2012 and might order 150 planes if its requirements were met for a 25 percent fuel-burn improvement, its single-aisle fleet director, Henri Hurlin, told Air Transport Intelligence magazine this month.

Closing In

Rivals are closer to bringing a new model to the market. Bombardier’s CSeries plane is scheduled to enter service in 2013. The jet promises 15 percent lower operating costs, partly from new engines by United Technologies Corp.’s Pratt & Whitney. Its geared-fan technology uses a fan that spins independently of the main turbine, cutting fuel and maintenance costs.

Brazil’s Empresa Brasileira de Aeronautica SA, or Embraer, has already extended its line of successful regional jets to offer a model that seats as many as 114 passengers.

In Asia, China’s government-controlled Commercial Aircraft Corp., or Comac, is marketing the 168-seater C919, slated to enter service in 2016. Comac says the jet will use as much as 15 percent less fuel than 737s and A320s. Japan’s Mitsubishi Heavy Industries Ltd. said last week that its MRJ jet, originally set to offer up to 90 seats, may be stretched to as many as 100 when it enters service in 2014.

GE and Rolls-Royce have said they could provide engines for an interim solution to Boeing and Airbus. The two airplane makers haven’t ruled out upgrading existing models with new engines for the time being.

Pratt & Whitney Engine

“Right now, we’re executing on the CSeries and MRJs,” said Todd Kallman, who runs Pratt & Whitney’s commercial-engine business. “If someone wants to re-engine an existing platform, we believe our engine can provide substantial benefit in fuel burn, noise and emissions.”

Southwest’s Kelly said today, in a speech at the Austin Economic Club in Texas, that incremental improvements won’t be enough and that “radical” new aircraft and engine designs are necessary. He said he’s not expecting a major breakthrough anytime soon.

Airbus and Boeing say their dominance in the single-aisle market won’t be easy to crack. Leahy said Comac, Bombardier and Embraer will need “many years” to show their reliability. Chicago-based Boeing has 2,100 of the $69 million 737 planes on order following technological upgrades in the mid-1990s.

Richard Aboulafia, vice president at Fairfax, Virginia- based consulting company Teal Group Corp., said the final arbiter will be operating expenses. Fuel is the main cost for airlines and contributed to a $16.8 billion industry loss last year, according to the International Air Transport Association.

“It’s fun to think about scenarios,” Aboulafia said. “With $147 fuel prices, it’s not 2024, it’s 2015” for Airbus and Boeing to introduce a new model. “And if it’s $50 a barrel forever, then frankly, it’s the 12th of Never.”

To contact the reporters responsible for this story: Andrea Rothman in Toulouse, France at aerothman@bloomberg.net; Susanna Ray in Seattle at sray7@bloomberg.net.

Last Updated: September 18, 2009 15:08 EDT