June 26, 2014 / 7:11 PM / in 3 years

EXCLUSIVE-UPDATE 1-Airbus poised to revamp A330 with Rolls-Royce

(Adds details, quotes, background)

By Tim Hepher

PARIS, June 26 (Reuters) - Airbus is very close to a decision to upgrade its A330 with engines provided by Rolls-Royce, setting the stage for a bitter new phase in the battle for wide-body jet orders with Boeing’s 787 Dreamliner, people familiar with the matter said.

The move will strengthen a growing strategic pairing between the European companies, with General Electric - the main alternative engine supplier on the existing version of the jet - no longer seen as a contender to take part in the $2 billion project, provisionally dubbed “A330neo”, they said.

The people, asking not to be named, said the go-ahead with Rolls-Royce as sole supplier for a new version of the A330, offering up to 14-15 percent in fuel savings with the help of new wingtips, remains subject to Airbus Group board approval.

Board members at the Franco-German group are expected to meet well before the July 14-20 Farnborough Airshow, usually the occasion for splashy aircraft launch announcements.

However, it remains unclear whether Airbus will officially unveil the new project at the world’s premier aviation event, since it usually waits to have orders in the bag first.

Purchasing decisions are expected later this year from some potential key launch customers such as Delta Air Lines, which is currently replacing Boeing 767 and 747 jets.

Airbus, which has promised investors a decision this year on whether to revamp the 253-295 seat A330 passenger jet, said none had been taken so far.

“We will have a comment when we have a decision. There is no decision yet,” a spokesman said.

Rolls-Royce said it was “not aware” of a final A330 decision having been reached, and any announcement would come from Airbus. GE reiterated it had offered its GEnX engine for the jet but declined to comment on the commercial talks.

The A330 first entered service 20 years ago and had been expected to be overtaken by a new generation of carbon-composite jets like the 787 Dreamliner, and soon the Airbus A350.

Following a three-year delay to the 787’s arrival, sales of the A330 held up better than expected.

But the backlog of undelivered aircraft has been dwindling as the 787 recovers momentum, and Airbus is keen to inject new life into its most profitable wide-body jet.

PRICE, AVAILABILITY

The move raises the prospect of a potentially bruising transatlantic battle for sales at the lower end of the market for wide-body jets, ranging from the 230-250 seat A330-200 and 787-8 to the 525-seat A380 superjumbo.

Airbus has said it will offer the refreshed A330 at significantly lower prices than the 787 and match the newer plane’s performance per seat on most key routes.

Boeing denies this but is preparing to put up a fight, with its sales chief telling Reuters this month that it would “react” to the relaunch of the A330.

Industry experts have speculated that Boeing could respond by changing its one-size-fits-all 787 pricing strategy by offering different prices for different levels of performance - a move which can serve as a form of discounting.

But the U.S. planemaker is also expected to look just as hard at ways of increasing availability of the 787, which is mostly sold out until around the end of the decade.

Both planemakers will be under pressure from investors to prevent the contest developing into a price war that might destabilize wider pricing and undermine profitability goals.

The A330neo is expected to be launched in two versions, updating the A330-200 and A330-300.

One casualty will be the smallest member of the Airbus A350 family, the slow-selling 270-seat A350-800.

The re-engined A330 is accordingly expected to be marketed as the entry point for Airbus’s wide-body portfolio, already nicknamed by some in the industry as an A350-200/300. (Additional erporting by Alwyn Scott, James Regan; Editing by Laurence Frost)

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