UPDATE 2-Airbus will not rush A330 move, stresses profitability

Thu Jun 12, 2014 9:11pm EDT

(Adds quotes, background)

By Tim Hepher and Cyril Altmeyer

TOULOUSE, June 13 (Reuters) - Airbus mapped out a potential revamp of its A330 jet, but vowed not to let the estimated $2 billion investment divert it from improving profits at Europe's largest aerospace group.

Fabrice Bregier, chief executive of the flagship planemaking unit of Airbus Group, said the company would decide whether or not to launch a re-engined version of its most profitable wide-body jet before the end of the year.

"We are studying it. We have many customers telling us 'this aircraft is excellent, please try to also reduce the fuel burn with new engines'," Bregier told reporters.

"So we are looking at that, we are not rushing. We will take the decision this year. It's not limited to putting new engines on; it's more complicated than that."

Airbus faces a drop in orders for the 20-year-old A330 from 2016 as attention switches to the newer Boeing 787, but appears progressively more confident about being able to preserve its wide-body 'cash cow' with improvements in fuel efficiency.

The move depends on a jigsaw of decisions including the outcome of talks with engine manufacturers General Electric and Rolls-Royce and a debate about whether the market is big enough to support more than one choice of engine.

It must also weigh the fuel savings provided by newer - but larger - engines against their increased weight and drag.

Airbus says it can compete with the newer plane because of factors such as cheaper maintenance and a lower price for the A330 and has clashed with Boeing over which plane is lighter.

It said strong sales had surprised even its own experts.

"The 787 promised the world an awful lot but in spite of all the promises it made, airlines have found that the A330 still has a lot to deliver," said Executive Vice President Kiran Rao.

Boeing has dismissed the A330 revamp as a distraction from the 787's innovations but has pledged to "react" in a sign that it may be tempted to shift its pricing strategy.

NEXT DECADE

Airbus insisted it was looking at more than a brief stopgap.

"I wouldn't be interested in doing a short term programme for only 4-5 years; it has got to be an aircraft that would be powerful enough in the market place until the end of the next decade," said Executive Vice President Programmes Tom Williams.

The A330 review comes as Airbus looks beyond the entry into service of its brand-new A350, which it expects in December as scheduled, to the production ramp-up needed to reach a longer-term target of making the jet profitable by 2019.

Such plans, calling for a rapid increase in output, have little margin for error and can quickly drive up costs.

Bregier, who has made avoiding the delays and cost overruns that beset the rival Boeing 787 Dreamliner his chief priority, said the A350 would prove itself financially and downplayed the impact of a major order cancellation this week.

"At the end of the day, we are looking at profitability," Bregier said.

"We believe that at the end of the decade we will have not only the A320, the A330, but also the A350 very profitable. On the A380 our goal is to break even. If we have that, the financial challenges that you know for Airbus will be met."

Some analysts have expressed concerns over the strategy for the aircraft after Emirates cancelled 70 airplanes.

Rating agency Moody's said the cancellation was "credit negative" for Airbus Group and "credit positive" for Boeing.

Bregier meanwhile held out the prospect that Airbus would continue to increase production of smaller narrowbody A320-family jets if the market called for it.

Airbus and Boeing are producing narrowbody jets at record rates and have suggested they could go higher from around 2018.

"There is no industrial limit. Conversely, I don't want to build extra capacity and not be able to make the best use of my cash," Bregier said during an annual media seminar.

Airbus said it had found signs of fatigue on fewer than 10 percent of doors inspected on the A380 after a number of reports of noise, but that there was no immediate safety issue.

On Jan 4, a Singapore Airlines A380 carrying 494 people made an emergency landing in Baku, Azerbaijan, after problems with the door seal led to oxygen masks being deployed. (Editing by Geert de Clercq)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.