Godfather wrong on A320, Airbus sales chief says

By Tim Hepher

PARIS (BestGrowthStock) – Airbus (EAD.PA: ) sales chief John Leahy defended a decision to upgrade its best-selling jetliner and said his most influential critic, a leasing magnate dubbed the godfather of aviation, had got it wrong.

Leahy, seen as the prime mover behind the planemaker’s decision to invest in an upgraded version of the A320 family to fend off new competitors, said he was talking to several airlines and could sell a “couple of hundred” within a year.

The U.S.-born salesman, who made his mark in 1986 by beating Boeing (BA.N: ) to a 100-jet order by Northwest Airlines for the world’s first fly-by-wire airliner, is gambling on re-inventing the A320 with new engines to extend its life into next decade.

He has won an internal campaign to modify the plane to lock in fuel savings, rather than wait for technology improvements to enable a radically new plane in perhaps 10 years’ time, and argues Boeing will follow suit with its comparable 737 model.

Leahy had faced internal foot-dragging on resources and some outside doubters, including his friend and long-time customer Steven Udvar-Hazy, who invented the aircraft leasing industry.

Udvar-Hazy, nicknamed the godfather of aviation for his deep pockets and ability to tell Airbus and Boeing how to design their planes, has criticized the “A320neo,” saying the extra aircraft ownership cost would outweigh lower fuel spending.

“I hate to say it, but occasionally the godfather of the industry gets it wrong,” Leahy said in an interview.

Udvar-Hazy founded and until recently ran International Lease Finance Corp (AIG.N: ), owner of one of the biggest fleets.

Udvar-Hazy staged a comeback with new jet orders in July. The two men wisecrack comfortably together in public, but are known as tough negotiators and have not always seen eye to eye.

The 150-seat A320 and the Boeing 737 face competition from Canada’s Bombardier (BBDb.TO: ) as well from China and Russia.

Leahy said the option to buy existing planes with better engines, providing 15 percent fuel savings, would extend the life of the 150-seat A320 until the second half of next decade.

BALANCING ACT

He said the A320neo would not be a new airliner, something that would not only need new certification but would render existing aircraft obsolete and devalue a backlog of 2,200 jets.

Walking a tightrope between selling new product and propping up interest in older models, the industry’s most high-profile salesman appeared less ebullient than usual in making forecasts.

“I would say over the next year or so we will sell a couple of hundred of these,” Leahy told Reuters. “Remember 2016/17 is still a long way out, which is one reason why we are not anxious to rush in and get significant orders for the aircraft.”

Leahy said Airbus was in talks to potential buyers including AirAsia (AIRA.KL: ), Qatar Airways, Indian carrier IndiGo and leasing companies including ILFC and a finance arm of GE (GE.N: ).

He rejected fears from lessors and bankers that the new plane option would drive down resale values of older models.

“I think that there will be no impact on residual value and an argument can be made that it enhances it because it increases the life of the A320 family by maybe eight to 10 years.

Leahy said the A320 carrying newer engines would cost around $6 million more than the existing model, which has a list price of $81.4 million, but would pay for itself in efficiency.

The extra price includes some $1 million for engine makers, but this is not finalized, he said. The plane will come with a choice of engines offered by GE/Safran (GE.N: )(SAF.PA: ) venture CFM or United Technologies unit Pratt & Whitney (UTX.N: ).

Hazy and Leahy previously disagreed over the design of the larger A350. Facing calls from key buyer Emirates for further design changes to one type of A350, Leahy said he would study them but remained quick on the draw for potential business.

“We are always willing to listen and talk to important customers but if you want to buy an A350 this afternoon, I have got a spec and we can wrap up the contract in time for dinner.”

(Editing by David Holmes)

Godfather wrong on A320, Airbus sales chief says