Lufthansa, Airbus Said to Negotiate $2.5 Billion Order for Revamped A320s

Airbus SAS may win an order from Deutsche Lufthansa AG for about 30 of its new A320neo planes as the airline seeks greater fuel efficiency amid rising oil prices, three people with knowledge of the matter said.

Negotiations between the planemaker and Europe’s second- largest airline for an order valued at $2.5 billion at list prices will probably be completed within a month, said the people, who asked not to be identified because the talks are confidential. A Lufthansa contract for the airliner, a version of Airbus’s current A320 equipped with engines that use less fuel, would be the third commitment since the manufacturer began offering the model in December.

Lufthansa is rejuvenating its fleet as the Cologne, Germany-based carrier seeks to use less fuel and replace smaller regional planes with larger models. Airbus said that mounting new engines on its single-aisle aircraft would offer 15 percent more fuel efficiency, adding pressure on Boeing Co., whose 737 model competes with the A320.

“This is not only about saving cost but also about image,” said Jochen Rothenbacher, an analyst at Equinet AG in Frankfurt who recommends buying Lufthansa shares. “Lufthansa has always been emphasizing how they’re renewing their fleet for efficiency, and this will help them prove that point.”

Stefanie Stotz, a Lufthansa spokeswoman, said the carrier is constantly reviewing options for its fleet and declined to comment on whether the airline is talking with Airbus about the A320neo. Stefan Schaffrath, a spokesman for Toulouse, France- based Airbus, also declined to comment.

30-Month High

Oil surged in London to the highest in almost 30 months today as Libya’s violent popular uprising reduced supplies from Africa’s third-biggest producer. Brent oil for April settlement rose as much as $2.96, or 2.7 percent, to $114.21 a barrel on the London-based ICE Futures Europe exchange, the highest since Sept. 1, 2008.

A geared turbofan engine built by United Technologies Corp.’s Pratt & Whitney unit and the Leap-X from CFM International, the venture of General Electric Co. and Safran SA of France, are the choices for powering the A320neo.

India’s IndiGo pledged in January to buy 150 of the A3230neo. Billionaire Richard Branson’s Virgin America Inc. said that month that it would buy 30 of the revamped planes as well as 30 of the current model.

Lufthansa Fleet

Lufthansa’s main-brand airline had 228 narrow-body jets in its fleet as of Sept. 30, according to its quarterly report, including 117 from Airbus’s A320 series. The carrier’s narrow- body planes also include models by Bombardier Inc. and Embraer SA of Brazil.

Last September, Lufthansa’s supervisory board approved an order that included two Airbus A321s, 22 A319s and eight Embraer E-195 regional jets for delivery starting in 2012. The German carrier is also expecting delivery of 20 fifth-generation Boeing 747 widebodies, and will eventually have a total of 15 Airbus A380 superjumbos.

Lufthansa has said it’s planning to decide this year on orders for Boeing’s 787 Dreamliner or the A350 widebody made by its European competitor.

Another potential A320neo customer is AirAsia Bhd., Southeast Asia’s biggest discount carrier. AirAsia Chief Executive Officer Tony Fernandes said this month that the company is in talks to buy about 175 of the upgraded A320s.

Success in the single-aisle market is critical because Airbus and Chicago-based Boeing derive the bulk of their earnings from these aircraft. Airbus, the planemaking unit of European Aeronautic, Defence & Space Co., predicted in December that it could sell as many as 4,000 of the modified A320 aircraft over 15 years.

Boeing is still weighing its options and will probably make clear its strategy by summer, Randy Tinseth, director of marketing at the U.S. company’s commercial airplanes group, said yesterday at the ICBI aircraft finance conference in Geneva.

To contact the reporters on this story: Andrea Rothman in Paris at aerothman@bloomberg.net; Cornelius Rahn in Frankfurt at crahn2@bloomberg.net.

To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net; Kenneth Wong in Berlin at kwong11@bloomberg.net.

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