Airbus Takes On Boeing Dreamliner by Refreshing 20-Year-Old A330

Jul 14, 2014 11:02 am ET

(See SHOW for more on the Farnborough air show.)

July 14 (Bloomberg) -- Airbus Group NV is upgrading the 20- year-old A330 jet with new engines to confront the wide-body challenge from Boeing Co.’s newer 787 Dreamliner.

The move became official at the Farnborough Airshow today, capping months of speculation about when and whether Airbus would offer the so-called A330neo. Airbus will drop the smallest of the three versions of its more-modern A350, a variant that hasn’t sold well.

A retooled A330 boasting greater fuel economy opens a new front in the jockeying between Airbus and Boeing in the long- haul segment dominated by the U.S. planemaker. Efficiency has been a central sales point for the carbon-fiber 787, and Chicago-based Boeing dismissed Airbus’s decision to refresh an older aircraft and scale back a new jet family.

“Their A350 strategy has failed -- they’re really down to one successful model,” Boeing Marketing Vice President Randy Tinseth told reporters at the Farnborough expo near London. “If they didn’t make this choice, they’d be headed for a 30 to 35 percent share in the 200- to 400-seat market.”

Customer feedback about the A350-800 spurred Airbus’s decision to abandon the plane, said Fabrice Bregier, who leads the airliner unit at the Toulouse, France-based company. Stopping work on that jet will let Airbus focus on the more successful and larger -900 model and respond to some airlines’ concerns for fixes to the biggest version, the -1000.

“We listen to the market,” Bregier said.

Air Lease

Airbus’s decision to build the A330neo was followed by an agreement to sell 25 of planes to Steven Udvar-Hazy’s Air Lease Corp., part of a rush of purchases disclosed on the opening day the aviation industry’s biggest annual forum. Counting an order for Airbus A321s, Air Lease committed to $14.1 billion of planes from the European manufacturer.

AerCap Holdings NV agreed to acquire 50 A320neo jets valued at about $6 billion, and Boeing won orders valued at more than $2 billion from lessor Avolon Holdings Ltd. and $3.1 billion from the U.K.’s closely held Monarch Airlines Ltd. Buyers typically get discounts from catalog prices.

Airbus’s 742 orders for the A350 family trail the 1,031 for Boeing’s Dreamliner, based on tallies on the planemaker’s website. While the Dreamliner’s 2011 debut ran more than three years late, the A350 isn’t entering service until this year. With the A330neo, Airbus will have fewer technological challenges -- and costs -- than with the carbon-fiber A350.

‘Much Lower’

“Our understanding from customer discussions is that this airplane needs to be in service before 2018, which this timeline achieves,” said Douglas S. Harned, an analyst at Sanford C. Bernstein & Co. “As with the A320neo, Airbus’s development commitment will be much lower than an all new airplane.”

Airbus said the A330 upgrade should reduce fuel consumption by 14 percent and offer a range increase of as much as 400 nautical miles (740 kilometers). Rolls-Royce Holdings Plc will supply the engines.

The price point for the A330neo -- the larger of two versions will list for $275 million -- makes it a compelling alternative, Air Lease’s Hazy said. Boeing’s mid-sized 787-9 retails for $249.5 million and seats about 280 people. The current A330-300 seats about 300.

The A330 and Dreamliner are the smaller offerings among the two planemakers’ wide-body lineups. Airbus’s A350-1000 is the company’s biggest twin-engine plane, while Boeing’s 777 is even larger -- and will grow again when the stretched 777X version debuts in 2020. Atop the size heap are Boeing’s 747-8 jumbo and Airbus’s A380 double-decker superjumbo.

Airbus has been pondering the future of the A330, which sits between the A320 single-aisle family and the new A350, following an order surge for the re-engined version of the A320. The twin-aisle A330 has been a popular alternative to the 787 after the Dreamliner was plagued by delays on service entry.

“The A330 is a very important margin contributor for our group,” Airbus Chief Executive Officer Tom Enders said in a statement. “It is also one of the most reliable and efficient commercial aircraft ever. Customers love it.”

--With assistance from Kari Lundgren in London.