Airbus expects strong lessor demand for A320neo

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Airbus is confident that its new A320neo family will prove popular with leasing companies, despite the lukewarm reception that the re-engining plans received from some of the players in the build-up to launch.

The upgraded family - powered by advanced turbofans from CFM International and Pratt & Whitney - was launched at the beginning of December without the traditional fanfare of customer commitments.

But Airbus chief operating officer customers John Leahy is confident that, while nothing is likely to be on the books by year-end, sales will quickly rack up in 2011. "We are talking to quite a few airlines and leasing companies right now," he says. "I'm sure we'll have very quickly a couple of hundred orders."

His inclusion of leasing companies is significant, given that some had expressed doubts over Airbus's Neo plans due to concerns that the re-engined variant could unsettle used values of the current A320 models. However, GE Commercial Aviation Services (GECAS), which is a leasing affiliate of CFM through GE, is seen as a likely early client for the CFM-powered version of the Neo.

The current A320 family - like the modern-variant Boeing 737 - has proved extremely popular with lessors and Airbus executive vice-president and head of strategy and future programmes Christian Scherer sees no reason for the Neo to be different.

"We see a lot of demand from leasing companies," he says.

Acknowledging that "dissident voices" among lessors are concerned about the effect on residual values, Scherer adds: "I would say to the sceptics: imagine the impact on the residual value of an A320 if we came out with a brand-new airplane. We're not. We're coming out with an option on a proven, existing A320. It's going to increase the A320 programme value and not decrease it."

Airbus must also convince sceptics among the finance community about the benefits of the A320neo. DVB Bank's managing director for aviation research, Bert van Leeuwen, warns that the uncertainty that Neo brings to the market threatens an end to "the golden age of aircraft leasing" as it may unsettle the equilibrium that has allowed investors to put billions into purchases of Airbus and Boeing narrowbodies with confidence in their future values.

"I would call the opportunity for airlines to cut their fuel bill by 15% 'progress', or 'value', but I wouldn't call it uncertainty," says Scherer, and sees no reason why it could destroy the financial institutions' business model: "Their customers are the airlines, and they will buy the Neo because it will burn 15% less fuel," he says.