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Airbus ends speculation and goes ahead with an A330neo, with "14% per seat" fuel savings

Airbus has announced that following a decision by the Airbus Group board, it has launched the A330neo, claiming it will deliver a fuel consumption reduction of "14% per seat".

The decision ends more than 12 months of will they-won’t they speculation about the future of its widebody aircraft programme.

Airbus president and CEO Fabrice Brégier stated the A330neo is the “logical evolution” of the A330 family, providing an “optimal solution” for customers “looking to minimise their fuel and operating costs while offering best-in-class comfort to their passengers.”

The aircraft will encompass a two-variant family: the A330-800neo and A330-900neo

Rolls-Royce has been selected as the sole engine provider and will supply its "latest generation" Rolls-Royce Trent 7000 engines. According to Rolls-Royce, the engine will deliver a 10% improvement on fuel consumption, featuring twice the bypass ratio and half the perceived noise.

The new engine design draws upon existing architectures and expertise, combining Rolls-Royce’s experience from the Trent 700 for the A330-200/3000 with the architecture from the Trent 1000-TEN – developed for the 787 – and new technology from the Trent XWB. The first engine test run for the Trent 7000 is planned for 2015 with certification expected in 2017.

Airbus projects the new engines, in combination with aerodynamic improvements, will see the A330neo reduce fuel consumption by 14% per seat. In addition to the fuel savings, the aircraft will offer a range increase of up to 400 nm.

Aerodynamic enhancements for the aircraft will include A350 XWB "inspired winglets", an increased wingspan and new engine pylons to improve aerodynamics. The A330neo also will incorporate the "latest generation cockpit systems", while retaining operational commonality with other Airbus types.

Airbus will also optimise the cabin to offer up to 10 additional seats, in the company’s standard 18-inch width. The cabin systems will be updated to allow the introduction of new passenger service features including 4th generation in-flight entertainment systems, mood lighting and full in flight connectivity.

Development costs for the A330neo were not revealed. However, Airbus announced the development costs will be incurred from 2015 to 2017, with an impact of around -70 basis points on Airbus Group’s 2015 return on sales target. Airbus Group CEO Tom Enders stressed that the company has “a very good business case and the A330neo, once in service, will continue to significantly contribute to our group’s earnings”, stated Fabrice Brégier, Airbus president and CEO. “We see strong market potential for the A330neo, and like its market-leading smaller sister, the A320neo, we are confident this new aircraft will be a success in the medium-haul segment."

Initial deliveries are projected to commence in 4Q2017. No launch customer has been announced.

A330neo launch settles speculation, confirms low-risk approach from major manufacturers

The launch of the A330neo had been widely expected from Airbus, although it was unclear whether a decision would be made in time for the Farnborough Air Show. Airbus had been under pressure from a number of customers, including AirAsia X and Air Lease Corp, to develop the aircraft.

Airbus had initially been conservative about the business case for the A330neo, projecting a market for several hundred aircraft, but its tune has changed in recent months. Airbus chief operating officer customers John Leahy has suggested the aircraft could attract around 1000 orders and maintain the life of the A330 out to 2030. Mr Brégier has suggested the market for the A330neo could be up to 900 aircraft. In Jun-2013, Air Lease Corp chairman and chief executive officer suggested the A330neo could generate 1100 to 1200 orders.

Total programme orders for the existing A330 aircraft sit at 1342. Airbus has a backlog of 243 A330 orders, enough for around 30 months production at current rates.

Airbus had booked only 29 net orders for the A330 this year. Its existing sales campaigns and improvement efforts, centred on a high-capacity lighter weight ‘Regional’ variant and a longer range high take off weight version, were not delivering. Airbus has long held that it wants to keep the A330 in production beyond 2020, but A330 production slots are open in 2016 and beyond.

With A330neo the EIS projected at 4Q2017, Airbus will need to log around 100 to 150 more A330ceo orders to bridge the gap with A330neo production.

Airbus will want to see at least 500-600 new orders for the A330neo, keeping it in production beyond 2022-2023 and spreading the development cost across a suitable number of aircraft.

The manufacturer has not announced a price for the A330, but given the price disparity between the A330 and the Boeing 787 – the only competing product – Airbus will want to ensure price point competitiveness. Airbus is confident that the A330neo will be able to compete with the economics of the 787.

There is a potential impact on the A350-800

The launch of the A330neo may mean the end for the A350-800, the smallest version of the A350 family, and an admission that Airbus couldn’t cover the twin-engine widebody market with just a single type. There are only five customers left for the A350-800 - Aeroflot, Asiana Airlines, Hawaiian Airlines, Yemenia and AWAS – with just 34 orders between them.

Airbus has been pressing customers to upgrade to the larger A350-900. Hawaiian Airlines and Aeroflot have both confirmed they would consider the A330neo in place of the A350-800. The result is that the manufacturer may abandon production of the smaller variant altogether, a move reminiscent of Boeing’s decision to abandon the 787-3, the smallest planned version of the 787 Dreamliner.

In launching the A330neo, Airbus has continued the recent trend of aircraft makers choosing the low-risk option of reworking their existing designs instead of pioneering development of all-new aircraft. It also caters to the demands of airlines, who "want them now!", rather than waiting several years for a totally new type to arrive.

The A320neo, Boeing 737 MAX and 777X and Embraer E-Jets E2, all improved derivatives of existing airframes, have already proven tremendously popular, combining better economics with proven technologies and reduced development timescales.

With the experience of long delays to the Airbus A380, A350 XWB, Boeing 787 and Bombardier’s CSeries, customers and aircraft makers alike are proving risk-averse, prioritising smaller improvements available sooner, rather than pressing ahead with high-risk and high cost new airframes, with potentially years of delays.

Airbus is banking that this trend will continue to generate sales from airline customers, dealing with high fuel costs that have fundamentally changed the operating environment for aviation.

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