Bloomberg: DVB Bank May Shun `Bizarre' Airbus A320 NEO

[David Knudsen]

Source

DVB May Shun `Bizarre' Airbus A320 NEO as Newer Planes to Hit Resale Value
By Chan Sue Ling - Jan 19, 2011 7:52 PM GMT+1000

DVB Bank SE, the German lender planning to make $2.3 billion of aircraft loans this year, may shun Airbus SAS’s re-engined A320 because of concerns about resale values.

The value of A320 NEOs may drop “significantly” once next-generation single-aisle aircraft begin entering the market, which could happen within a decade, Bertrand Grabowski, the board member responsible for aviation at the Frankfurt-based bank, said today in an interview in Singapore.

“Why do you propose to the market an aircraft which is going to be an interim arrangement?” Grabowski said. “That’s bizarre.”

More than half of the $65 billion of aircraft deliveries made last year were funded by commercial loans or capital markets, Grabowski said, which makes support from lenders important for new planes. Airbus has developed the A320 NEO, or new engine option, to extend the life of its bestselling model while it works on a successor.

“Banks or leasing companies are going to be exposed,” said Andrew Miller, chief executive officer of Sydney-based CAPA Consulting, which advises airlines and industry investors. “When a new model is announced, the depreciation of the existing model grows.”

Individual lessors and banks also have more clout since the global financial crisis, which forced a number of players out of the market, he said.

A320 NEO Orders

Airbus this week announced an order for 30 A320 NEOs from Virgin America. The Toulouse, France-based planemaker has also agreed a preliminary deal to supply 150 NEOs to New Delhi-based IndiGo. Customers will have a choice of new engines from United Technologies Corp.’s Pratt & Whitney and CFM International Inc., a venture between General Electric Co. and Safran SA.

“The A320 NEO will strengthen even further the market- leading position of the A320 family as a sound long-term investment both for airlines and the financing community,” said Sean Lee, an Airbus spokesman. “This is already being borne out by the overwhelmingly positive reaction from the market.”

Boeing Co. has had a difficult time making a “compelling business case” for fitting its 737 with new engines, Jim Albaugh, president of its commercial airplane operations, said this month. The Chicago-based company has said it will decide by midyear between offering new powerplants or waiting to develop a replacement aircraft.

Airbus, the world’s biggest commercial airplane maker, plans to begin deliveries of the A320 NEO in early 2016 and it last month predicted market potential of as many as 4,000 aircraft over 15 years. A successor to the A320 won’t come before the middle of next decade because materials won’t be advanced enough before then to justify the development expense, the company has said.

A320 Values

The A320 NEO will also likely depress the value of existing A320s already owned by lessors and airlines, said Shukor Yusof, Standard & Poor’s Singapore-based editorial director. Financing deals for single-aisle planes typically run as long as 12 years, he said.

“I’m not surprised by bankers’ apprehension about the A320 NEO,” he said. “The impact will probably be felt most in the late second half of this decade.”

Airbus and Boeing have both struggled to focus on new single-aisle models as they wrestle with the development of larger planes. Boeing yesterday announced a seventh delay for its new 787 Dreamliner, while Airbus’s A380s also ran behind schedule.

Success in the single-aisle market determines the pecking order in the industry because both Airbus and Boeing derive the bulk of their earnings and orders from these aircraft. The twin- engine 737 and A320s both seat about 125 to 185 people. List prices range from about $65 million to almost $100 million, depending on the version.

[Laurent Sanhard]

From the Financial times 17.1.11

Airbus edges ahead of Boeing in ordersBy Pilita Clark in Toulouse

Published: January 17 2011 15:40 | Last updated: January 17 2011 15:40


Sir Richard Branson bites an apple reading ‘Airbus 10.000’ after he announced that Virgin America will buy 60 Airbus aircraft

Airbus claimed victory over its older US rival Boeing on Monday in the battle to supply airlines with passenger jets after revealing a fresh order from Virgin America, the low-cost US airline founded by Sir Richard Branson.

San Francisco-based Virgin America said it would buy 30 Airbus A320 NEO planes, a revamped version of the manufacturer’s best-selling A320 narrow-body aircraft.

The airline will also buy 30 existing model A320s in a deal worth around $5bn at advertised prices, although in reality airlines frequently negotiate much lower prices.

Virgin America became the second airline in less than a week to order a batch of the aircraft, which together with Boeing’s similarly-sized 737 make up 44 per cent of commercial planes in service.

The flurry of last-minute deals saw Airbus notch up 574 net orders in 2010, Airbus revealed on Monday, compared with Boeing’s 530.

EDITOR’S CHOICE
Airbus seals $15.6bn India deal for 180 aircraft - Jan-11.CIT back on ‘offensive’ with Boeing orders - Jan-04.EADS is suffering turbulence at the top - Jan-13.EasyJet orders 15 new Airbus aircraft - Jan-04..Airbus also beat Boeing’s delivery numbers, handing over a record 510 jets last year against the 462 delivered by the US manufacturer.

Net orders, or booked sales minus cancellations, are an indicator of potential performance and the two manufacturers, who together dominate the global market for large passenger jets, watch each other’s order and delivery numbers closely.

Airbus has outpaced Boeing every year since 2003 in terms of the number of passenger jets delivered but its record on orders has been more uneven.

The move comes six days after the Indian budget airline, Indigo, said it would buy 150 of the A320 NEO jets as part of a $15.6bn deal. The new aircraft, which Airbus plans to fly from 2016, which will have new generation engines the group says will make them up to 15 per cent more fuel efficient than existing models.

Sir Richard, who was in Toulouse for a ceremonial signing for the jets, said: “Our business can no longer ignore climate change and advances like the NEO are not only good for the climate and bottom line but ultimately they are good for the health of our industry”.

David Cush, Virgin America chief executive, said the greater range on the new aircraft would allow Virgin, which now has 34 Airbus jets in its fleet, to fly from the west coast to Hawaii for the first time.

The two A320 NEO deals bolster Airbus’s arguments that it made the right decision late last year to re-engine its A320s. The Toulouse-based manufacturer and Boeing had both spent months trying to decide whether to replace the engines on their biggest-selling planes, or spend more money developing an entirely new aircraft.

Both face mounting pressure from ambitious aircraft manufacturers in Canada, China and Russia who plan to bring rival single-aisle jets to market as early as 2013.

Boeing still has not said what it will do, but has been outwardly dismissive of Airbus’s NEO, saying it will be expensive and complex.

While Virgin America and Indigo’s orders are a welcome sign of the airline industry’s recovery and a boost for Airbus, both were already customers of the European manufacturer.

Analysts will be much more impressed if Airbus can use its new jets to win market share from airlines that have traditionally been Boeing customers.

The first big test could come in the US, where Delta Air Lines has just revealed it may order 100 to 200 narrow-body jets to replace aircraft in a fleet that includes some of the oldest jets in the American industry.

Delta traditionally bought Boeing jets but inherited Airbus aircraft when it merged with Northwest Airlines in 2008.

“Airbus has a big opportunity coming up with the NEO,” said aerospace analyst Richard Aboulafia of the US consultancy, Teal Group.

“Indigo isn’t a market share shift; they’re an Airbus carrier. The real test is when you use a new product to go after the other guy’s market share and Delta is the golden opportunity for that.”
.Copyright The Financial Times

[Russell D]

The move comes six days after the Indian budget airline, Indigo, said it would buy 150 of the A320 NEO jets as part of a $15.6bn deal.

150 A320s!!! How on earth is Indigo ever going to find enough suitably qualified pilots to fly them?

Indigo, like most other LCC and new start-up venture airlines in India are struggling at the moment to find enough suitably qualified captains and F/Os to crew their growing fleets. It's gotten to the stage where direct entry F/Os for some of the airlines are entering the left hand seat with barely 500hrs total flying time, and in some cases, F/Os are then getting promoted to captain just a year and a bit from joining up as a F/O.

But still, 150 A320s...wow, Airbus must have struck the jackpot.