Airbus Group NV (AIR) is studying an upgrade of its A330 wide-body jet with more efficient engines in a contest that may pit General Electric Co. (GE) against Rolls-Royce Group Plc, people familiar with the plan said.
The European planemaker aims to make a decision about a possible upgrade by the end of March, said the people, who asked not to be identified because the talks are private. The 20-year-old A330 competes with Boeing Co. (BA)’s 787 Dreamliner, which is powered by either GE or Rolls-Royce engines.
While the A330 is popular on intra-Asian and trans-Atlantic routes, the jet lacks the efficiencies of the Dreamliner that comes with a lighter body and new engines. Airbus turned the A320neo with new engines into the fastest-selling airliner in commercial history, underscoring customers’ need to cut fuel bills that can comprise 40 percent of operating expenses.
“Fuel, fuel and fuel: those are the three compelling reasons to re-engine,” said Richard Aboulafia, vice president of aviation advisory company Teal Group, in Fairfax, Virginia.
The Toulouse, France-based planemaker is evaluating “all sorts of projects to keep Airbus aircraft leaders in their respective markets,” Chief Operating Officer John Leahy said in a written request for comment. “Most are not approved either for technical reasons or because the business case doesn’t work,” he said, adding that no decision has been made.
The A330, which seats 250 to 300 passengers, comes with engines by GE, Rolls-Royce and United Technologies Corp. (UTX)’s Pratt & Whitney unit. Rolls-Royce has been the most widely used variant in recent years.
Leahy has touted the A330’s “unbeatable economics” as a much cheaper alternative to purchase than the Dreamliner for customers who don’t need the extra range. While both aircraft have a similar list price, Airbus is able to give steeper discounts as the plane’s development cost has been amortized.
Representatives at General Electric declined to comment, while Rolls-Royce said it cannot discuss details of conversations with airframe makers. Pratt is focused on its geared turbofan engine and “remains confident” of the model’s the benefits to wide-body jets, spokeswoman Sara Banda said.
Rolls, with close ties to Airbus as the sole engine provider on the A350, is a likely choice for the new A330 engines, while GE is more closely linked to Boeing, having secured exclusivity on the new 777X long-range jet, the people said.
Discussions between Airbus and engine makers for now focus on technical issues and fuel efficiency, and haven’t yet advanced to the business and investment case, the people said. The manufacturer hasn’t ruled out offering competing engines.
Fitting the A330 with new engines would cost about 1 billion euros ($1.37 billion), less than a 10th of the expense to develop a new jetliner such as the A350, scheduled to begin service later this year.
Management at Airbus Group has signaled that it’s focused more on improving existing programs rather than braving all-out new developments. Already, the A330 has seen multiple upgrades, including a variant with added range and a shorter-range model targeted at the Chinese market.
The A350 is set to be Airbus’s last aircraft designed from scratch for about a decade, before the company embarks on a successor to the A320, by far its most popular plane and the model that pulls in the bulk of earnings.
Airbus has bolstered the re-engining business case by delaying the introduction of the A350-800, the smallest version of the A350 that is meant to fill the A330 space. Airbus wants to build more A350-900s, the version now in flight trial, and the larger -1000, which commands a premium.
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