Airbus's launch of the re-engined Airbus A320 programme - the so-called New Engine Option, or NEO, offering a choice from 2016 of the in-development CFM Leap-X or Pratt & Whitney PW1100G powerplants - has animated the aviation finance community.

Flight International's sister finance publication Commercial Aviation Online spoke to lessors and bankers about the move. Here's what they had to say:


  • Lessor 1: "The risks of delivering NEO on time, on budget, with stated performance capabilities and with acceptably low operational disruption potential cannot be overstated and will be high on the agenda for customers. The economics of the aircraft itself still appear only marginal."

A320 NEO
 © Airbus
Just float it out there

  • Lessor 2: "I do not object [to the NEO] from a technological or business case point of view. I do object, though, to the way that Airbus has attacked its own investor base with the oversupply of the A320 family and its recent development. Each decision it takes is with a disregard to the residual value of the aircraft.

"Airbus really is like a supermarket or grocery store in that, once that product is off the shelf and out the door, you're on your own. The long-term ramifications to investors are a distant second to any short-term gain for Airbus."

  • Lessor 3: "The re-engined A320 will not deliver the savings of the [Bombardier] CSeries, as the latter is a wholly new design incorporating the latest technologies. The market still wants the 15% NEO fuel-burn saving proven contractually. At best, it provides a temporary solution for existing operators who take the difficult step of accepting a mixed-engine fleet.

"It is not good news for lessors with existing orders or large investments in the type unless they take the view that this will stave off an all-new design for another decade, but the issue with that argument is, what will Boeing do? Our guess is an all-new design some time sooner."

  • Lessor 4: "The incremental benefit as valued by airline customers will be limited and will be a strong function of the incremental price.

"So far this year, the market has responded to the buzz about A320 re-engining with a strong bias for the Boeing NG product, which has outsold the A320 family by a wide margin. Boeing did not have to resort to heavy discounting to achieve that."

  • Lessor 5: "I saw the [P&W] engine running over two years ago and was most impressed. We need something new. Pratt & Whitney has tremendous civil experience. Let's see some activity in the market."


  • Banker 1: "Airbus's sales forecast of 4,000 is not achievable without either significantly increasing the global fleet of aircraft or reducing the economic lives of existing young/medium-age aircraft. They are misleading investors about the economic lives of aircraft and/or distorting green credentials in order to launch a new product for which demand is more than likely to be artificially supported through the ECAs [Export Credit Agencies]."
  • Banker 2: "I don't approve of the move. Airbus cannot afford to develop a new aircraft, so this is a band-aid."
  • Banker 3: "I don't imagine there will be much of an option for buyers by 2016; new orders will be incentivised to equip from either of the two new engine variants. Residual values of the incumbent A320 family fleet will be impacted, but likely not before the end of the decade."
  • Banker 4: "All industries must continue innovating. The A320NEO appears to be headed in that direction."
  • Banker 5: "If I were an airline already owning A320s, I wouldn't be too happy to see a competing product that's going to impact the residual value of my existing fleet, for an interim solution.

"If I were an airline not yet owning A320s, I'd be delighted to see [Airbus chief salesman] John Leahy desperate to sell a new toy that no one has really asked for, and on the other side Boeing lowering the price tag of the 737-800 to 'cut the wings' off the NEO.

"If I were a lessor with A320s already on my books, I would ask Leahy to provide me with a new NEO order at the same price as the current A320s. I'd tell him he is hurting the value of my existing book - and possibly forcing me to change my depreciation policy - with a product I never asked for.

"I wonder if there is any winner in this story."

Source: Flight International