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May 20, 2024
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(image: FlightGlobal)

In a strange turn of events, it seems Airbus is backing away from or at least delaying its much awaited A320-family NEO.  There was an expectation that this week we would hear all about the new airplane update.

But news from this week’s ISTAT conference in Munich, provided information that is 180 degrees from what was anticipated.  In fact the news out this week leaves us a bit perplexed. Here’s why:

  1. Are there internal doubts about NEO?
  2. Is there a delayed decision?
  3. ALC’s Steven Udvar-Hazy opines
  4. Air France-KLM’s Pierre-Henri Gourgeon also opines
  5. Airbus’ Tom Enders opines

From reading the tea leaves it seems that within Airbus there is a split view.  Mr Leahy seems eager to proceed with the NEO.  But his bosses (Gallois & Enders) seem unconvinced.

It is easy to understand why M Gallois and Herr Enders are concerned – the A380, A350 and A400M taught hard and expensive lessons.  The concern over “limited engineering resources” is perfectly rational.  This concern is also apparent at Boeing.  So there are excellent reasons to be cautious.

Now let’s look at the other side.  Mr Leahy, as chief salesman, is close to customers. He hears customers’ needs and wants to fulfill them.  His primary concern is having a product in place now.  Why? Because Boeing apparently will not offer a 737 that will be as efficient as an NEO – providing Airbus with a window of opportunity.  Moreover, Mr Leahy is really keen on stymieing Bombardier’s CSeries – something he wants/needs to do quickly as possible.

Even as one is sympathetic to the constraints at Airbus, the truth is that the company is in a bind.  Squeezed between Boeing with two programs (737 & 777) selling well compared to one program (A320) at Airbus, the latter needs to protect its core cash earner. (The A330 is deeply discounted to fend off 787 sales)

But even as we believe the NEO is necessary (agreeing with Mr Leahy)  we also believe the focus on the A320 for NEO is not the best place to start.  The A320 sells well as is. But the gap that demands attention is around 200 seats – in the space occupied by the A321 and 757.   The 757 is aging and even with winglets is vulnerable.  We wrote about this when we proposed an A321GAirbus’ A321 would be a great place to start with an NEO.

If Airbus were to provide NEO versions of its A320 and A319 it knows that these airplanes will slow down progress of Bombardier’s CSeries.  That is an attractive option for Mr Leahy obviously.  But when the CSeries starts flying this advantage will decrease because the CSeries will eclipse NEO numbers.   Then Airbus and Boeing will almost certainly attack the CSeries using pricing power. An A321 NEO has no threat on the horizon.

So while Airbus debates the pros and cons of its NEO, the 200 seat market beckons.  And Mr Leahy is probably gnashing his teeth.

8 thoughts on “Nixing NEO?

  1. So in the authors words, the A320 is the only money making program at Airbus as the A330 is so discounted it hardly fetches anything? Yeah somehow I doubt that. Agendas are very blindening.

  2. The A330 deeply discounted?
    Let’s spend a few second looking at the current situation.

    If I am an airline with a need for additional mid sized twin lift before 2016 or even later I have two options:
    1.) Buying an A330 (delivery 2011 or 2012)
    2.) Trying to lease some inferior aircraft (e.g. 767) or wait many years…

    This really put Airbus into a situation where they have to heavily discount their A330, don’t you think so 🙂

  3. I suspect the bosses at EADS are loathe to move first, either with the NEO or a new model. With the C-Series claims still unproven, and Boeing all but declaring at re-engined model doesn’t cut it with customers, why go down the re-engining route? The risk is enormous. With the implications of the WTO rulings looming in the background, and the lessons learned from the A380 and A400, caution is definitely in order. Moving first doesn’t necessarily guarantee that one will be the last contender standing.

  4. I’m not an expert, but this doesn’t stop me challenging your implication that the 777 program is much now more profitable than the A330 one.

    In the same way as the A330 has to use price to compete against the 787 so does the 777, I suggest, against the A350.

    The 777 is not selling in great numbers right now. Boeing has sold 40 this year. Of these, 30 are destined to a single airline, Emirates, and as such are likely to be heavily discounted. Airbus have sold 56 A330’s in the same period to a broader range of airlines.

  5. The issue with the A320NEO going against the CSeries is more of an issue of what Airbus does with the A319 which is comparable to the CS300. The A320 is not currently at risk.

    Therefore, Airbus can decide to invest in the A320NEO as a way to improve the A319 to compete with the CSeries while at the same time enhancing the A320 and most importnatly the A321 or discount the A319 so much that it will be the same business benefit for operators.

    Personally, I believe that they will do the A320NEO because this will force Boeing’s hand in developing a new narrowbody that will only be available in 2017 with 2012 technology, which will give Airbus enough time to launch their more efficient narrowbody in 2020 with 2017 technology.

  6. I guess the biggest loser for “no NEO” decision is P&W. without Airbus a320 NEO, P&W will only have CSeries as customer until the “all new” narrowbodies from Airbus and Boeing arrive in 2020. And at that point IAE, CFM and probably even RR have GTF engines to offer.

    Instead of selling best engines with good profit on 2013-2020 on a popular narrowbody, P&W will have to compete with others to even get included in “new narrowbody” programmes.

  7. You can search far and wide via google.
    This is the only instance of any discounts
    of whatever weight in respect to to the A330

    Semi OT:
    With fleetbuzz-editorial down is this the end
    of heavy handed guidance metered out galore ;-?

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