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Is the Airbus A330neo the Most Popular Plane on the Drawing Board?

Engineering a new type of aircraft is a major undertaking for any company, but to fight for market share, airplane manufacturers Boeing  (NYSE: BA  )  and Airbus Group  (NASDAQOTH: EADSY  )  must remain at the forefront of technology.

With Boeing rolling out the 787 Dreamliner, Airbus is looking for wide-body successes for itself. With current company estimates about the viability of a new wide-body and encouraging comments from potential customers, Airbus is seriously considering creating an Airbus A330neo.

Reduce costs
The success of the Boeing 787 has largely been credited to efficiency improvements stemming from features such as fuel-saving engines and a more aerodynamic composite body. But developing a new plane takes more time and more money -- both things highly valued in the manufacturing industry -- than reworking an existing design.

Airbus has an existing aircraft, the A330, that some investors and industry analysts believe would see increased sales if the company incorporated some of the modern technologies going into its other neo models.

Building an A330neo would give Airbus a quicker route to production and lower development costs than creating a new aircraft from scratch. Aviation Week estimates the development time at two to three years, which would make the aircraft a viable option for airlines looking to modernize their fleets toward the end of this decade.

Like Boeing with its Next Generation and MAX versions of existing models, Airbus has been developing updated models of its product line. In the narrow-body category, where it competes with aircraft such as the Boeing 737, Airbus is updating the A320 family with new versions of the A319, A320, and A321.

An A330neo would likely be developed along the same lines as the A320 modernization. Besides saving Airbus money and time on development expenses, the A330neo would probably have a fleet management advantage. Airbus notes that the A320neo family has an over 95% airframe commonality with the regular A320 family, making maintenance of a fleet encompassing both aircraft easier to manage. By building off the A330 airframe, an A330neo would offer similar advantages for airlines with existing A330 aircraft in their fleet.

Potential buyers
While there is no way to know yet how the new aircraft would be received, there are already a few potential buyers waiting in the wings. Delta Air Lines  (NYSE: DAL  )  CEO Richard Anderson told Aviation Week that "I hope they (Airbus) do offer an A330NEO." Delta is looking for new wide-body aircraft to replace aging Boeing 747 aircraft; Anderson's comment suggests that if Airbus were to build the A330neo, Delta could be an interested customer.

The A330neo may also find a home with budget airline AirAsia, an Airbus operator with expansion ambitions in the Asia. Growing airlines need more aircraft, and continuing to supply AirAsia's fleet would make for a good long-term relationship between the airline and Airbus.

The aircraft could also find buyers in aircraft leasing companies. The Wall Street Journal noted comments from Steven Udvar-Hazy, chairman and CEO of the aircraft leasing giant Air Lease  (NYSE: AL  ) , discussing Airbus' total sales potential and his preference for it to offer a choice of engines. Air Lease President and COO John Plueger acknowledged a possible interest in an A330neo, and said: "We're not shy about saying we're taking a serious look at that airplane," but echoed Udvar-Hazy in the company's preference for multiple engine options.

Will Airbus build it?
Despite these comments from Delta and Air Lease, Airbus is still on the fence about building an A330neo. Even though it would be cheaper than developing an all-new model, one analyst from a major bank estimates that the process would still cost about $2.7 billion.

Airbus' commercial aircraft arm believes that the company could sell over 1,000 A330neo units if the plane receives the green light. Udvar-Hazy has projected sales of up to 1,200 aircraft.

At this point, Airbus is doing its due diligence before deciding whether to undertake a major overhaul of a jetliner two decades old. With speculation building and input from potential customers being made available, Airbus will likely decide in the near future whether to go forward with the A330neo. In the meantime, the airline industry is going on a shopping spree, so Airbus and Boeing will have to find one way or another to grab valuable market share.

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Read/Post Comments (5) | Recommend This Article (1)

Comments from our Foolish Readers

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  • Report this Comment On June 04, 2014, at 9:54 AM, A310 wrote:

    Yes, it is.

  • Report this Comment On June 04, 2014, at 11:47 AM, Tyeward wrote:

    An A330 NEO will not be a new redrawn aircraft. It will be just a touch up and a revamp of what already is. Airbus will need to do something to combat the 787 in all of it´s planned variants. The A-350 will cover the 777 battle, however they need something against the 787. The A330 is ideal for the moment. The A330 is a 20 year old concept however it´s still a sound viable aircraft. You can expand on it to make it a better more competitive aircraft. I am team Boeing, however before people get it in their heads that this would be seen a cheating a bit, I would remind people that this is what Boeing did with the 747-8. They just took the 747 and revamped it here and there and expanded on it with new tech. So there will be no crying foul here without the pot calling the kettle black. I am rather interested in how this pans out. It´s a good aircraft, and I would like to see how they improve upon it.

  • Report this Comment On June 05, 2014, at 2:40 PM, aktundra wrote:

    Airbus has little to loose with a A330NEO, the market is there, demand from many more than just two or three carriers and a clear need for an update to a still very brisk selling model. Airbus, unlike Boeing with the 748 fiasco is positioned with the A330 in a segment of the market that is currently building and selling planes like hotcakes. I thinnk the A330 NEO would less compete with the 787 than it would continue to garner sales to existing A330 customers who have already bought over 1,088 of them. With technological leaps in the commercial airplane industry now mostly limited to increased efficiency and lower weight, the need for all new designs is largely outweighed by the imrovements that can be made to existing models by incorporating new engines, new wing and expanded use of composites. While the 787 is more efficient than other aircraft in its segment, that has come at a great price with years of delays, the debacle of the fleet being grounded, the ongoing operational problems and now new battery concerns. A revamped A330 (and 777) build on proven reliable airframes, add the newest technology and by doing this can almost, if not totally eclipse the improvements made with a clean sheet design. At this point in time, the 787 and A350, while not exactly matching performance and capacity across their ranges, come pretty close and a 777MAX and A330Neo would likely not canabalize sales from the newer models although one can argue that by the time the 777MAX (or whatever they call it) takes to the skies it will be ahead of the 787 in technology by about 15 years. It looks like there will be plenty of choices in the medium-long haul widebody market for the next 20 years and with the 737MAX and A320Neo family coming into service in a couple years the lower end is also covered, I think they next clean sheet design we see will be a medium sized , medium range narrowbody from...probably Boeing. Airbus has a major opportunity to take a fantastic plane and make it better, I think the writing is on the wall with this one. If the 777 MAX can sell 500 copies, so can an A330NEO.

  • Report this Comment On June 06, 2014, at 3:41 PM, ZizewitzMB wrote:

    Sometimes I wonder if the great analysts are blinded by the knowledge.

    Who has tried an upgrade to compete wit a sub-model of a start of the art aircraft???

    Even if it is obvious thatan upgrade cost less than a radically new model, its characteristics will be better as the existing aircraft, but worse than the of the new one.

    So, Boeing is developing the B737Max upgrade, too compete with upgraded A320neo (Airbus does symmetrically). This make sense

    Boeing developed the B747-8 upgrade, to compete favorable with the obsolete A380 and

    to substitute retired B747-400,, as well to address the cargo market with its sister B747-8F

    This didn't work well, at well for now, because

    - Generally, there is not enough market for such 4 Engine superjumbos

    - The B747-400 retrement has really still not kicked in, but eventually will work. At least it was not an absurd enterprise!

    - But which would be the market of the A330NEO?

    a) The only exiting market is the one covered by the B787-8, a radically new aircraft, with obviously much better characteristics

    b) The only reasonthat the existing A330 has sold until now is because there are nt enough B787 available in time. Boeing will see that this will not happen in 3 years (the tracking record of Airbus developing the A350, the catastrophically wrong market-wise A340, the billions coasting A400 and the mishaps with the A380 lets thing it will be not only 3 years)

    c) The fact that the A350 was directed only for larger aircraft and no variant with the B787-8 Size is a further example of miss-planning,

  • Report this Comment On June 10, 2014, at 2:52 AM, RIATdog wrote:

    "Even if it is obvious thatan upgrade cost less than a radically new model, its characteristics will be better as the existing aircraft, but worse than the of the new one."

    So why is Boeing putting a warmed-over 777 up against the A350?

    Airlines and lessors are begging Airbus to do the A330neo. Airbus will launch it at Farnborough in July and it will be a big seller. I can't see 1,200 like SUH, but I can see at least 700 sales. For around €1bn - a licence to print money!

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Alexander MacLennan

Alexander MacLennan is a Fool contributor covering Industrials, Airlines, and Financial companies. He is always ready for a good growth or turnaround story and tries to find them before the market does.

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