CFM International and International Aero Engines (IAE) are battling to win an engine competition at Malaysian low-fare carrier AirAsia, which is close to finalising a deal with Airbus for up to 80 A320-family narrowbodies.

 Industry sources say an engine competition has been on for weeks and a selection is expected soon between the CFM56 and IAE's rival V2500 turbofan. The engine manufacturers and other industrysuppliers have been bidding to supply the Airbus aircraft, say the sources, despite denials from the airline that an airframe selection has been made.

AirAsia, the most successful low-fare carrier in Asia, has for months been assessing A320-family aircraft against the Boeing 737 - the latter powered exclusively by CFM56s. Airbus proposed 160-seat A319s and 180-seat A320s in the competition, while Boeing offered the 149-seat 737-700, a higher-capacity 737-700 dubbed an "ES" variant that would seat 157 passengers and the 189-seat 737-800.

The deal for 40 orders and 40 options was seen as a "critical" win by Boeing, as the airline has more than 20 148-seat 737-300s in service and Airbus has won every low-cost airline competition in Asia over the past year. Although the airline has said repeatedly that it has yet to make an aircraft selection, numerous industry sources confirm that Airbus has been informally told it has won and Boeing informed it has lost.

It has said negotiations are at an advanced stage and agreement may be reached as early as December.

While AirAsia has not formally signed any binding Airbus agreement and Boeing could come up with an improved offer before the airline's board gives formal backing for an A320-family deal, the sources say this is unlikely. AirAsia's board is expected to meet this week to give the airline authority to negotiate a final agreement with Airbus. Deliveries are expected to start around January 2006 and take place at a rate of around one aircraft a month.

Source: Flight International