Airbus experts review A320, upgrade 80 pct likely

Thu Sep 30, 2010 6:27pm EDT

* Senior engineers review plans to upgrade best-selling jet

* 80/20 odds in favour of engine project go-ahead -sources

* Airbus management, EADS board must give green light

By Tim Hepher

PARIS, Sept 30 (Reuters) - Airbus engineers will report to the planemaker's top management next week on plans to upgrade its A320 jet family with new engines and the 1 billion-to-2 billion euro project ($1.36 billion-$2.73 billion) is 80 percent likely to go ahead, industry sources said.

A final decision will depend on approval by Airbus' executive committee and then on a further green light from the board of Franco-German-led parent company EADS EAD.PA.

A "wise men" group of current and former senior engineers met on Thursday to dissect proposals to modernise Airbus' best-selling model by taking advantage of new engines that offer airlines 15 percent fuel savings in the face of high oil prices.

No immediate decision was taken but the group will report its findings to senior Airbus management in Toulouse next week, a source familiar with the matter said.

The industry sources declined to be identified because the discussions are still confidential.

An Airbus spokesman said, "We do not comment on internal meetings."

Airbus Chief Executive Tom Enders has called for a review of engineering resources before deciding whether to back the proposal in order to prevent disruption of other key projects. But senior executives say the odds are "80/20" in its favour.

Airbus faces a number of delays on larger plane projects including the A380 superjumbo and A400M military transporter and is wrestling with a tight schedule for its next big plane, the 270-350-seat A350 wide-body jet due to be delivered in 2013.

Sales chief John Leahy believes upgrading the 150-seat A320, which along with related models generates most of Airbus's cash, is needed to fend off growing competition in the lower end of an airliner market dominated by Airbus and Boeing Co (BA.N).

Thursday's engineering summit came as rival Boeing announced a further delay to its 747-8 Freighter, a significantly reworked version of its legendary jumbo jet. Analysts said the delay might further erode the chances that Boeing would decide to put new engines on its 737 family, which competes with the A320. [ID:nN30156233]

The prospects of Boeing matching Airbus on "re-engining" had already been described as slim, at least in the short term.

Its 737 jetliner is lower to the ground than the A320 and would need costlier structural changes such as new or modified landing gear to accommodate larger engines under the wings.

Boeing executives have also expressed doubts over whether there is enough demand for re-powered single-aisle planes; the alternative is to wait a few more years until the whole plane can be redesigned with newer technology to leapfrog Airbus.

However, analysts say Boeing's stance will only be fully evaluated once Airbus announces its next strategic move.

Single-aisle product strategy is key to revenues and profits at both planemakers. Airbus delivered single-aisle planes worth some $33 billion at today's list prices last year, though in practice planes are sold at a discount. [ID:nLDE68S2FZ]

The new Airbus version would offer a choice of new engines from General Electric-Safran (GE.N) (SAF.PA) joint-venture CFM International and United Technologies (UTX.N) unit Pratt & Whitney. They would be fitted as an option instead of current models from CFM and a consortium that includes Pratt & Whitney.

$1 = 0.7337 euro (Reporting by Tim Hepher, editing by Matthew Lewis)