AIRSHOW-UPDATE 1-Airbus engine study in Sept -exec

* Re-engining makes sense, subject to resources -Airbus
exec

* Sales chief sees no short-term impact on resale values

* Airbus exec says upgrade could hurt Bombardier C Series
(Adds quotes, background, CFM comments)

By Tim Hepher and Matthias Blamont

FARNBOROUGH, England, July 18 (BestGrowthStock) – Airbus (EAD.PA: )
is leaning towards a decision to upgrade its narrow-body
aircraft, its main source of revenue, with new engines and
expects Boeing (BA.N: ) will follow suit, according to sales
chief John Leahy.

But the world’s largest planemaker will not complete
studies on the move — seen as one of the most significant
decisions that both Airbus and rival Boeing (BA.N: ) face in
coming years — before end-September as it juggles engineering
resources.

A new engine would offer airlines fuel savings of about 15
percent from 2015, pending more radical improvements in engine
technology which Airbus does not expect for at least 15 years
but which Boeing appears to believe could come sooner.

Planemakers must decide whether to offer the engine upgrade
soon, and risk undermining large backlogs of planes already
sold with older engines, or wait for a further leap in
technology and build an all-new plane and engine costing well
over $10 billion.

Airbus’s top salesman favours going for the interim step.

“We think that is way to go and that Boeing will be behind
us before end of year,” Leahy said of the “re-engining”
project.

“Let’s make sure we have engineering resources in place,”
he said, adding that the same plane with new engines and
fuel-saving wingtip devices known as Sharklets would meet
strong demand.

“We are running those tracklines through. By the end of
September we will have whole thing put together … Assuming
that it works I would like to think we would be out there in
the fourth quarter,” he said, adding the proposals would have
to be approved by the EADS board before Airbus could offer the
plane.

He was speaking at a briefing before the Farnborough
Airshow where he expects further evidence of a rebound in jet
orders.

“We had 131 firm orders at the end of June and I have a bet
with Louis (Gallois) here that we will more than double that by
the end of the air show,” he said, referring to the chief
executive of Airbus parent EADS, sitting at the same briefing.

Airbus and Boeing between them have more than 4,000 A320
single-aisle short- and medium-haul planes on their backlog.

Aircraft engine makers CFM International, co-owned by
General Electric (GE.N: ) and France’s Safran (SAF.PA: ), and Pratt
& Whitney, owned by United Technologies (UTX.N: ), have each
brought out designs to burn 15 percent less fuel by mid-decade.

A step up to 25 percent in fuel efficiencies demanded by
some airlines would need a new generation of engines, possibly
using open rotors rather than fans housed in metal casing,
which most industry analysts say will not be ready before next
decade.

10 YEARS

The timing is crucial for all companies involved as it
would determine whether investments of several billion dollars
in a re-engined Airbus A320 or Boeing 737 make financial sense.

Executives at CFM said on Saturday that they would need a
production run of at least 10 years on their proposed new
Leap-X engine in order to make their latest project profitable.

Leahy in turn said resale values of existing aircraft could
be hit if the upgrade and completely new design were too close.

“If the next generation is coming in 2019 then it would
have a big impact on residual values, but if it is 2026-27,
then it is a much longer run.”

Residual values are important for leasing companies which
have considerable sway over the commercial jet market.

Airbus plans to offer the interim new engine as an option.

The European planemaker oversaw the creation of a
consortium called International Aero Engines as one of the
alternative power sources for its now well-established A320
family.

IAE contains Pratt & Whitney, whose partners have not said
whether they will join it in offering its Geared Turbo Fan
engine from within the consortium as Airbus wants.

IAE member Rolls-Royce (RR.L: ) is a leader in open-rotor
engines which could power the next generation after that.

Leahy said re-engining by the big planemakers would damage
the 110-130 seat Bombardier (BBDb.TO: ) C Series, a recent
entrant to the market which boasts better fuel consumption and
aims to encroach on the size range dominated by Airbus and
Boeing.

“If we don’t re-engine, then Boeing probably won’t, and
then there will be a niche for the C Series … but with
re-engining there is no case for it,” Leahy said.

Leahy also said he expected “one or two” extra A380 orders
this year after Airbus sold 32 to Emirates airline last month.

(Editing by Jeremy Laurence)

AIRSHOW-UPDATE 1-Airbus engine study in Sept -exec