The ripples from Airbus’ investor day still reverberate.  One item caught our eye and its about the engine selection.   For some time now there has been a drip-drip of information that indicates Rolls-Royce has the lead in the secret race to the A380neo.

Problem is, prior to Fabrice Bregier’s remarks the day after the Airbus event last week there was still nothing firm about an A380neo.  Airbus’ John Leahy has been wanting one for a while.  But such a decision is a very big risk – industrial and financial.  The VLA market is not (yet) as big as Airbus wants it to be.  Even with all the hubris in the world, the case for an A380neo is not straightforward. Traffic doubles every fifteen years – maybe it takes another ten to get to the critical mass where VLAs are in greater demand.

What really clouds the case for the current A380 is the 777-9.  Absent that aircraft, we would guess Airbus would not even talk about an A380neo before 2025.  But when the competition moves, which is the 777-9, then a reaction is required and decisions are accelerated.

As of this writing there is still nothing firm about an A380neo.  The concept is being spoken about more openly, but Airbus has not formally launched such a program.  Therefore the engine suppliers have not provided anything formal to Airbus.  If Rolls-Royce has been pushing behind the scenes, why would they be doing this?

In speaking with Engine Alliance, the other A380 engine maker, we got a standard response.

“The EA remains in discussion with Airbus on the A380 and its future. Airbus would need to decide the technical requirements at an aircraft level. If Airbus were to pursue one or more new or upgraded platforms, then at that point the EA would evaluate our technical portfolio and the associated business case(s).

We have designed a series performance improvement packages. Some improvements have been launched and some are nearing decision points as we speak with Airbus, airline customers and our member companies. 

The GP7200 is the quietest, most durable, most reliable and most fuel efficient engine for the A380. It also offers the best performance in hot and sandy environments. The EA remains committed to the success of the A380 and the success of our airline customers.”

Would Airbus ignore EA as it considers an A380neo? Of course not.  Moreover the main airline customer pushing for the A380neo is the largest EA customer.

Consider this chart.

2014-12-18_14-22-44Only four customers have their A380 orders completed.  There are 141 aircraft still to delivered with today’s orders.  Current A380 production is 30 per year, so there are nearly five years of production to go. Clearly Airbus wants, and needs,  more orders.

For Rolls-Royce this five year horizon means trouble.  They only have 30 outstanding aircraft to power.  EA has nearly four times the backlog, and that is without any new orders from Emirates.  Assuming the two customers with no engine selected go for Rolls-Royce this doubles their backlog, but that still leaves EA with nearly twice the backlog.  EA does not have a weak hand. Documents we have seen for proposed Amedeo aircraft showed them with EA engines – making the EA case stronger.

It is rational for Emirates and Airbus to make certain that both engine makers get a chance to offer something for the A380neo – when it is formally announced.  It seems hasty to think Rolls-Royce has the lead here. While the company is tight with Airbus, as tight as GE is with Boeing, it does not have a monopoly.

However, it seems perfectly plausible why Rolls-Royce would be frantic to be selected as sole source on an A380neo.

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