It is September and the final countdown has begun toward the Airbus decision whether to offer a re-engine the A320 family with Pratt & Whitney P1000G Geared Turbo Fan and the CFM International Leap-X.
On the assumption that Airbus won't delay the decision-studies were promised to be completed by the end of this month-what are the benefits, the risks and the challenges?
The benefits have been well-publicized by Airbus. Coupled with sharklets, which will be available beginning in 2012 on new-production aircraft, Airbus' John Leahy, COO-Customers, says the A320 family will have a 15% lower fuel burn than today's A320s. But Airbus is going to turn right around and take away half this benefit by charging one-half the net present value of the savings, or an additional $7-$8 million, before discounts.
The added weight in landing fees, the second engine type in a shop (or third, in the case of a US Airways which already has the V2500 and CFM56 as a result of the merger between America West Airlines and US Airways, which had the two engine types in their respective A320 fleets); and added training and maintenance costs all combine to have a net benefit to the airlines in the single-digits.
Single-digit benefit is not what customers want, according to Boeing, which cites this as the principal reason for leaning toward rolling the dice and going for a new, replacement airplane with an entry-into-service by 2019-2020.
Which brings up the risk factor for Airbus, and for Boeing.
Airbus says Boeing will be "silly" to launch a brand-new aircraft by 2019 if Airbus is going to come out with a brand new aircraft around 2027, when officials believe fuselage, engine and air traffic management technology will be ready to provide the 30-40% gains airlines want.
Accordingly, an interim solution like the A320 New Engine Option (NEO) makes sense and Boeing is taking a huge risk, Airbus officials say. And they may well be right-if they are correct about when technology converges. But what if the Airbus officials are wrong? Then it will be they who will be "silly" to go with a NEO in 2016 if Boeing comes out with a new aircraft in 2019, says Jim Albaugh, CEO of Boeing Commercial Airplanes. He believes there is a path to get to 20% fuel efficiency gains by 2020 on airframe and engine technology alone. He's circumspect about the airframe technology, though some believe composites will advance enough to allow at least some "down-scale" by then. As for the engines, CFM has already indicated the second generation Leap-X will be ready for engine certification about 2018, with aircraft certification the following year. Allowing for some slippage that seems inevitable these days on new aircraft programmes and it is 2020.
The multi-billion dollar risks for Airbus and Boeing are huge, and it comes down to who will be right about the paths being considered: Airbus, with the philosophy that the technologies won't converge until 2027 or later, making an interim aircraft sensible? Or Boeing, which believes 20% advances in fuel burn can be made by 2019 with incremental advances thereafter?
The challenges are equally as daunting, if quite different.
Airlines, lessors and financiers worry that the residual values (RV) of the current A320 fleet will take a premature plunge with the announcement, and Entry-Into-Service (EIS), of the A320 NEO-and that the RVs of the A320 NEO itself will take a hit when the A320 replacement aircraft comes. Airbus argues there is little to worry about until the installed base of the A320 NEO passes the 50% point of the incumbent fleet-but few are buying it. Appraisers, who have a long history of a testy relationship with Airbus, are particularly skeptical.
Will a re-engine programme make sense for Airbus? History is mixed. There have been several successful RE programmes: The Allison and Rolls-Royce jet-props on the Convair 340/440/240 series; the CFM56 on the DC-8-60 Series; and, modestly, the Roll Tay on the UPS fleet of Boeing 727-100s. But these were all on out-of-production aircraft and there were also unsuccessful ones. The Napier turboprop on the CV-340/440 (actually an in-production aircraft at the time); and the Valsan 727, which replaced the outboard 727-200A engines with the engines from the MD-80 series but left the center engine alone come to mind.
McDonnell Douglas was successful in the re-designed and larger MD-80, with new engines, over the ageing DC-9 Series, but the MD-80 was essentially new aircraft. The MD-90 and MD-95 were warmed-over re-engine products that did not sell well.
Airbus plans to retain 95% commonality with the current fleet, which is both an attribute and potentially a negative. Airbus' Leahy points out that the Boeing 737NG is 80% different than the 737 Classic (Leahy says 90% but 80% is the widely accepted number) and by retaining 95% commonality, A320 operators don't have to stock more parts. But it also reinforces the fact that the A320 is an ageing aircraft, a design dating to the 1980s. By 2016, the supposed EIS of the A320 NEO, the A320 design will be 30 years old, an age where technology begins to overtake. For all the valid criticism that the 737 fuselage dates to the 1950's 707 heritage, the 737NG isn't the same aircraft, as Leahy himself acknowledges, and it entered service 10 years after the A320, in January 1998-almost 30 years to the day from EIS of the 737-100.