Comment: certain uncertainty

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Airbus thinks customers will rush to sign up for the 15% fuel burn reduction that its A320 NEO offers. But as Toulouse ratchets up its sales effort, opinion is split among airlines and financiers about the benefits that the re-engined family has to offer

The arrival of Airbus's A320 New Engine Option gives airlines a third way in the mainline single-aisle sector.

On paper, choosing the NEO should be a no-brainer. That's the view of Airbus's chief salesman John Leahy, who assures potential customers that the new CFM International and Pratt & Whitney advanced turbofans will deliver double-digit fuel savings.

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 About the arrival of the Airbus A320 NEO

And with the oil price already heading in the wrong direction, this assurance alone must be enough to convince some customers. British Airways chief Willie Walsh is one of several airline bosses who had been very positive in the build-up to the NEO launch about the prospects of an upgrade delivering significant reductions in fuel burn.

There may have been no orders announced at the launch, but Airbus sees a market for 4,000 NEOs through to 2025 and Leahy is confident that the promise of such big operating cost savings will quickly entice airlines and lessors to sign "a couple of hundred orders".

But the equation airlines must work out is not simply about fuel consumption benefits. Airbus has been clear in its message that this aircraft is an interim solution ahead of an all-new short-haul family emerging from Toulouse in about 15 years - or just a decade after NEO deliveries start.

And therein lies the rub. Some airlines - notably Ryanair - feel the NEO is a waste of development effort and would prefer the manufacturers to concentrate on marrying the new engine technology with significant airframe developments to deliver real game-changing performance gains.

But Leahy is convinced that all the technology to deliver the 30% improvements that an all-new aircraft would need to justify its huge development costs will not arrive before the middle of the next decade. "So if we can get roughly halfway there - 15% - re-engining with these new engines, it would be ridiculous for us not to offer that to the market," he says.

Another area of doubt around NEO is asset value - both its own and the effect it will have on the installed fleet of A320s and 737s. After years of stability in the single-aisle market, the industry is steering into almost uncharted territory. It is the first time in living memory that an airframer has launched a major development that is acknowledged from the start as being a stop-gap design.

VIDEO VIEW 

Ryanair deputy chief, Howard Millar, tells Airline Business in a VIDEO INTERVIEW why aircraft manufacturers' time and effort would be better spent developing all-new single-aisle aircraft rather than interim solutions

You have to go back to the dawn of the jet age half a century ago, when engine technology was changing so rapidly that no sooner had a new airliner entered service, than an updated version delivering significant improvements in noise and fuel burn was already in the advanced stages of development.

But Airbus could face the same predicament. The NEO's five-year development timetable is driven mainly by the availability of the engines from CFM and P&W. The changes to the NEO are being kept to a minimum to aid commonality with current A320s, so the airframe engineering required for the new engine installation should not, in itself, be a five-year exercise.

Airlines, of course, would love the 15% fuel savings now, but waiting five years could mean that, by then, something better - and more permanent - may be well on its way from Seattle.

This could have a serious impact on NEO residual values. But Toulouse is gambling that this uncertainty will not be enough to put off airlines wanting the guarantee of a significant reduction in their fuel bills within five years. And if Airbus or any leasing company, such as CFM affiliate GECAS, is prepared to absorb the financial risk, then NEO might just start a mini-revolution in the single-aisle sector.

One thing certain about NEO is that there is a divergence of opinion across the industry. The coming months will be intriguing as the Airbus sales effort moves into top gear.