A320 [AirlineEconomics]

w w w. a v i a t i o n n e w s - o n l i n e . c o m

2012

A320 GUIDE

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CONTENTS

2 The A320 Family:The factsAirline Economics has produced

this brief aircraft guide for the A320

as this aircraft type is likely, in the

near future, to begin to stem the tide

of rapidly-declining values.

20 The A320 NewEngine OptionAlan Pardoe, marketing

communications director at Airbus

spoke to Airline Economics about

why the A320neo is a good buy.

eo fuel burn savings rationactor

tandard profile and weightssus CFM56-5B

Thanks to Sharklets A320neo delive

EngineSFC -15.3 %

ReferenceA320 CFM

rns %

rovedore

~7%

% more area* ~7%

werplant integration ~1%Sharklets -2.4%

A320neo LEAP-1A versus A320 CFM56

1 Airline Economics: A320 Guide 2012 www.airlineeconomics.co

24 The next stepWhich engine should you choose

for your A320neo?

30 A question ofconfidenceDavid Cook pulled engines out of

fighter jets in his RAF days and sold

engines to airlines when he worked

for a major engine manufacturer.

Now as president of independent

ASM Consulting he offers his views

on the new engines being offered

for the A320neo.

36 A question ofcircumstanceThe 737max v the A320neo – the

definitive guide to both aircraft.

42 737-800 Vs A320-200For those shopping in the

160-aircraft, Airline Economics has

gathered the relevant information on

the main contenders.

56 Data

2012 ISSUE

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Philip [email protected]

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INTRODUCTION

Airline Economics hasproduced this brief aircraftguide for the A320 as thisaircraft type is likely, inthe near future, to begin to

stem the tide of rapidly-declining values.The majority of A320 Family members

are amongst the most liquid commercialjets in the current market. The A319, theA320 and the A321 are amongst the mostattractive aircraft types on the market.

After the launch of the Boeing 737NGsto match the Airbus A320 Family, the150 seat narrow body market enjoyed abalanced duopoly with neither of the twotypes able to claim a decisive technologicaladvantage over the other. For investorsand finance houses this was critical inthe success of the aircraft types as thisstable situation is as a strong stimulus for

The A320 Family: The facts

them to commit funds. This duopoly willnow continue with the A320Neo and the737Max with the margins between the twoaircraft remaining static for the most part.

The story so farFor the European Airbus consortium, theA320 was its first product in the short-to-medium haul single aisle jet market. WhileEurope had tried its hand in this marketbefore with products like the Mercure, theCaravelle, the Trident and the BAC 1-11,the US had been dominating the segmentwith the JT8D powered Douglas DC-9 andBoeing 727 and 737 families. In the early1980s McDonnell Douglas was the firstto adapt the DC-9 to the higher fuel costenvironment and the upcoming Stage IIInoise-regulations by stretching the DC-9and re-engining this “DC-9 Super 80”

(later renamed MD-80) with an improvedversion of the good old JT8D engine; theSeries -200. Boeing responded with astretched and modernized version of theold 737-200 , called the 737-300.

The 737-300 was the first of the 737generation now known as the “Classics”(-300, -400 and -500). One of the majorcontributing factors to the success of the737 Classic turned out to be its new, clean,quiet and fuel efficient GE/SNECMACFM56-3 engine. While the 737 Classicwas slowly gaining the upper-handover the MD-80, the Airbus planned anattack on the dominating position of theAmerican manufacturers in the single aislemarket. These plans eventually took theform of a truly high-tech aircraft, featuringamongst others the revolutionary fly-by-wire technology, side-stick controllers and

www.airlineeconomics.co Airline Economics: A320 Guide 2012 3

INTRODUCTION

containerized belly cargo space.Initially only powered by the -5A

derivative of the CFM56 engine, the firstAirbus narrow-body, designated A320, made its first flight in early 1987. Whilesome of the European flag carriers where“natural” launch customers for the A320,it took a bit more effort to find customersoutside of Europe and with the bankruptciesof early North American A320 customers(incl. Pan American and Braniff) a numberof early A320’s even ended up in theArizona desert. Eventually North Americaand the rest of the world warmed up to theA320 and Boeing was forced to modernizeits own offering in the narrow body marketto match the European newcomer.

Sticking to the familiar “737” designationand other typical Boeing narrow body characteristics, in 1997 the Boeing 737 NG

(Next Generation) was introduced, oncemore powered by a CFM56 derivative,this one designated the -7. Although bothmanufacturers had their victories in thebattle for market share, Airbus triumphedwith an order from JetBlue in 1999, whichopened up the low-cost carrier marketto the A320. Traditionally this lucrativemarket segment had been dominated byBoeing’s 737, largely based on the fact thatthe father of the low-cost model SouthwestAirlines was a dedicated 737 operator.

Today, A320 family aircraft can be foundon all continents flying for operators withall kinds of business models, from low-costairlines and leisure charter operators toscheduled network carriers. Just beforethe global financial crisis hit, Airbus wasstruggling to keep production rates up tocope with demand and opened up a new

final assembly facility for the A320 familyin Tianjin, China.

The basic 150-seater A320-100 made itsfirst flight in February 1987 but this versionwas quickly superseded by the more capablehigh MTOW -200 version. In 1993, a 185seat, 6.93 m. stretched version called theA321-100 made its first flight. In 1997, in itsturn, the-100was effectivelysupersededbythe more capable A321-200.

In June 1995 the A320 and A321 werejoined by the 124 seat A319-100 featuring ashorter fuselage (just under 4m) comparedto the A320. In 2002, the fourth familymember made its first flight, the 107 seatA318-100 at 2.4 m. shorter than the A319was verging on the regional jet market.The A318 was aimed at operators with arequirement for 100-seat aircraft but adesire to maintain fleet commonality but


INTRODUCTION

A320Neo Family aircraft are the betterasset in the long term. For now we have towait and see.

Historically, it was the IAE V2500-A1powered A320 aircraft that were consideredto be inferior against all others. IAE wasquicktoimprovetheperformanceofthe-A1via the Phoenix kit. While IAE had its A1,CFMI had its Double Annular Combustor(designation: “/2P”) as its problem engine.The DAC was CFMI’s answer to the requestfrom some Northwestern and CentralEuropean carriers for an ultra-cleanengine to reduce environmental chargesimposed by the local governments. Whilethe DAC clearly met that requirement,it came at the expense of slightly higheroperational cost. Bankruptcies of theoriginal operators released a number ofDAC’s to the market and financiers wereconfronted with negative reactions frompotential new operators, either for realreasons or as leverage in the negotiations.

the International Aero Engines (P&W/RR/MTU/JAEC) V2500-A1/A5 series andthe CFMI CFM56-5A/5B series, both alsoat different thrust levels. From a financeperspective the 50/50 split of the A320 fleetin V2500 and CFM56 powered aircraft isa negative factor. Whereas the competitionbetween the two engine consortia mayresult in a little more initial discounting,for remarketing purposes, the A320 fleetis effectively split in two major segments.Fortunately both engines each enjoy a substantialmarket base,hencethenegativeimpact of the split is not major, but shouldthis not remain the case with the A320neofamily then Boeing with its single engineMax could find itself in a strong positionwhen considering remarketing. Thedifferences between the P&W and CFMengine offerings on the Neo aircraft are sohuge that there is bound to be a differencein performance and maintenance costs –this, not the airframe, will decide which

the economics did not stack-up, the aircraftwas too heavy to compete economicallywith larger turboprops and with 100 seatturboprops now coming to market thisaircraft seems to be more or less dead in thewater.

Effectively, neither Airbus nor Boeingcan claim complete superiority in thenarrow-body market. Most asset basedfinanciers are equally happy to finance theleading Boeing and Airbus aircraft, but theless suitable variants of both families arebecoming ever more difficult to finance.

The short range A320-100 is perhapsthe worst mistake to date for the A320Family. The aircraft featured a low MTOW,wing fuel tanks only and no wingtip fences.Only 21 A320-100s were built and all wereequipped with CFM56-5A1 engines and allended up with Air France which has beenphasing them out of its fleet ever since.

Airbus will state that the biggest pluspoint of an A320-200 is that it has an enginechoice, while Boeing argues the oppositestating that its 737 NGs sole engine choicemakes it easier to remarket. (An argumentthat has carried forward to today with thenew engine options – the Airbus A320neowith its dual engine choice and Boeing’ssingle-sourced 737Max).

While Boeing elected to offer onlyCFM56-7B engines (at different thrustlevels), Airbus offered a choice between

A320 FAMILY COMPETITION

100-120 seats A318-100 vs. B737-600, Embraer 190/195 and Bombardier C-Series

120-140 seats A319-100 vs. B737-700, C-Series, the Chinese C919 and the Russian MS21

140 -170 seats A320-200 vs. B737-800 and in the future potentially the C919 and Rus-sian MS21

170-200 seats A321-100/-200 vs. B737-900/-900ER, and in the future potentially the Chinese


INTRODUCTION

easyJet in the UK.Spirit is able to half the breakeven fare

per passenger from that of its competitorJetBlue and its cost per seat mile is betterthan any other airline in its class. Thereforeit is the case that the A320 and the A319,if configured correctly, can beat theeconomics of their Boeing rivals, and thatis before purchase price, pilot trainingand maintenance costs are taken intoconsideration.

Spirit Airlines is not alone in benefittingfrom this airline model. Easyjet is currentlylooking very strong indeed with its A320Family aircraft configured in such a waythat will allow it to go head to head withforemost competitor Ryanair and its fleetof 737-800s and come out on top.

EasyJet is the first of a new type ofairline – it is a low-cost model but does notact like one. It is moving away from thetraditional low-cost poor passenger serviceas it aims to provide the best of both worlds– a new airline model that targets businesstravellers, which allows passengers bookextra bags without fuss and choose theirseats at a small premium. All of this hasbeen made possible by the A320 familyaircraft it operates as the airline was able toreconfigure its Airbus aircraft so that it has,in effect, erased the seat cost advantage ofthe 737-800.

Easyjet is at the vanguard of A320 familyconfiguration at this time and when otherairlines are able to copy this configurationthey too will be in a position to trump theeconomics of the 737-800, after that it is aquestion of strong airline management anda robust business plan.

The A320 single-aisle jetliner family(composed of the A318, A319, A320 andA321 and neo derivatives) is the undisputedbest-selling aircraft product line of all time.It is used in a full range of services fromshort-haul airline routes to intercontinentalsegments, on operations from challengingcity central airports to high-altitudeairfields and even an Antarctic ice runway.The aircraft family really has seen and doneit all.

A320 FamilyTotal orders 8418Total deliveries 5125In operation 4979(as of May 2012)

number of significant fleet concentrations,both for the individual types as for thefamily as a whole and these, which includeIndia and central Europe may yet seeanother round of distressed pricing.

The A320 Family has a clear run withthe Neo variants through to 2035 at thetop of the market. After that who knows.For the A320 Family aircraft in the airtoday there is a range of things happening.From reconfiguration that makes the A320better per passenger mile than the 737-800 affecting current prices to conversion,there is much movement still to come.The latter, conversion is the next step. TheEADS EFW conversion program for A320passenger to freighter was halted due tolack of demand in 2010 but that was due tomarket conditions.

It is highly likely that this program willstart once again soon and head towardscertification. The availability of a cargoconversion project in a way can be seen asan insurance policy for any investor in earlyA320’s.

A320 operators todayAt this time, two of the best-performing,publicly-listed airlines are flying A320 Family fleets. Spirit Airlines in the US and

This experience created a bad name for theDAC which remains to this day. The DACengine can be converted to a Single AnnularCombustor by swapping the enginecore butthis is too costly to be seen as economical.

Historically, used A320 values havefluctuated slightly more compared to737NG values. While Airbus is accused ofa more aggressive pricing policy, allegedlyresulting in significant discounts, thismost likely is not the whole explanationfor the higher volatility. Because the A320was launched long before the 737NG, theA320 has lived through more downturns.In addition, as a coincidence, a number ofA320 operators defaulted during the post9/11 crisis, while practically all of the 737NGoperators survived. As a consequence, ahigher number of A320’s faced distressedmarket circumstances, compared to therival 737NG. There seem to be no specific“structural” reasons as to why the A320should be more vulnerable during adownturn, maybe apart from the size andcomposition of the operator base. Thequality and diversification of the operatorbase does play a role. As history has proven,a high fleet concentration with one or moreweaker airlines increases vulnerability ofthe type. Within the A320 Family, there is a

SPIRIT AIRLINES – THE BEST BREAKEVEN POINT IN THE MARKET

Spirit Airlines Southwest JetBlue

Breakeven fare per pax $62.96 $96.98 $133.00

Cost per seat mile (CASM) $9.73 $10.43 $12.13

Aircraft utilization 12.8 hrs/day 10.9 hrs/day 11.7 hrs/day

INHERENT COST ADVANTAGE IN EASYJET’S MODEL

Legacy A319 easyjet A319 easyjet A320

124 seats 156 seats 180 seats

70.1% load factor 87% load factor 87% load factor

84 passengers 136 passengers 156 passengers

Fewer passengers with higher costs

56% more passengers than Legacy A319

15% more passengers than easyjet A319

FLEET AS AT 1/1/2012

Owned Leased Total

A319 111 56 167

A320 29 6 35

Total Fleet 140 62 202

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INTRODUCTION

This represents an important percentageof the 8,400-plus firm orders booked for allA320 aircraft types.

A318Total orders 81Total deliveries 77In operation 70(as of May 2012)

The A318 seats 107 passengers in atypical two-class cabin layout over a rangeof up to 3,250 nm/6,000 km, powered byCFM56-5 or PW6000 engines.

The A318 brings all the benefits ofAirbus commonality and comfort to the100-seat market segment but as a regionaljet the aircraft was found to be too heavyto be able to be competitive. In the endthis version of the A320 Family could not

A319 and A321; while Tianjin assemblesA319s and A320s.

Tianjin is Airbus’ first assembly facilitylocated outside of Europe, resulting froma joint venture involving Airbus with aChinese consortium comprising the TianjinFree Trade Zone (TJFTZ) and ChinaAviation Industry Corporation (AVIC).

To ensure the type keeps its competitiveedge, Airbus has continued to invest inimprovements across the product line, including the development of the A320 newengine option (A320neo) enhancements tothe aircraft’s aerodynamics, upgrades to bethe widest passenger cabin in its class, andextended service intervals for the airframe.

Since Airbus’ launch of the A320neoin December 2010, more than 1,320 firmorders have been logged from 24 customersas of June 6, 2012 – setting a sales recordof its own with bookings from airlines andleasing companies alike.

Since the A320 entered service in 1988,the various family types have transportedapproximately 90% of the world’spopulation in total numbers, carrying somesix billion passengers.

The A320 Family’s numbers speak forthemselves: An A320 takes off or landssomewhere in the world every 2.5 secondsof every day, more than 50 million operatingcycles logged since entry-in-service, and abest-in-its-class dispatch reliability of over99%. The A320 Family has won a majoritymarket share in segments that range frommainline network carriers and low-costairlines to charter operators and leasingcompanies.

Continued developmentTo regularly enhance the A320 Family’scapabilities and performance, Airbusinvests more than €100m annually inkeeping the aircraft competitive andefficient. Airbus has continuouslyimproved payload and range since theA320 Family’s service entry, while variousaerodynamic refinements have broughtadditional reductions in drag for better fuelefficiency and lower emissions.

Improvements in the two jet engine typescurrently available on the A320 Family– CFM International’s CFM56 and theInternational Aero Engines V2500 – haveresulted in fuel consumption reductions,lower emissions, longer on-wing lifetimesand more cost-efficient maintenance.

An enhanced cabin configurationdeveloped by Airbus for new productionaircraft – as well as for retrofit on existingaircraft – provides additional shoulder-level room for passengers, 10% greaterstowage volume for overhead baggage,and a modern ambience using LEDlighting, all while making best use of latesttechnologies, materials and design. As anadded bonus, the new cabin also brings areduction in weight.

Output increaseAirbus will increase its output rate to 42aircraft per month in the fourth quarter of2012.

The A320 Family is produced on twoAirbus assembly lines in Europe: Toulouse,France and Hamburg, Germany; whichhave been complemented by an additionalfacility in China. Toulouse is home to theinitial assembly line, building A320s;Hamburg has responsibility for the A318,

DIMENSIONS

Overall length 31.44 m

Cabin length 21.38 m

Fuselage width 3.95 m

Max cabin width 3.70 m

Wing span (geometric) 34.10 m

Height 12.51 m

Track 7.59 m

Wheelbase 10.25 m

CAPACITY

PAX Typical seating 107 (2-class) Max 132

Bulk hold volume 21.21 m³

PERFORMANCE

Range 5 950 km

Mmo M0.82

Max ramp weight 59.4 (68.4) tonnes

Max take-off weight 59.0 (68.0) tonnes

Max landing weight 56.0 (57.5) tonnes

Max zero fuel weight 53.0 (54.5) tonnes

Max fuel capacity up to 24 210 litres

ENGINES

PW6000A

CFM56-5B

Thrust range 96 to 106 kN

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INTRODUCTION

PW6000 delayed introduction of thatengine substantially and the CFM56became the preferred engine by far forthe A318. Currently, the PW6000 is onlyoperated by one airline, which makes thecombination rather unique but at the sametime unsuitable for asset-based financing.Market experience has proven that even arelatively young, CFM56 powered A318could not be sold for prices that exceed thebreak-up value of the aircraft, or rather thevalue of its engines. From that perspectivethe CFM powered planes at least haveanother edge over the PW6000 planes.The conclusion has to be that the A318 doesnot make a popular asset from a financier’spoint of view or indeed from an owner’s

The A318-100’s MTOW ranges from56.000 to 68.000 kg. While the enginespowering the larger members of thefamily obviously are too heavy for the littleA318, offering a more optimized enginetype would jeopardize the importantcommonality benefit, which is why Airbusdecided to offer both options. Airlines that already operated CFM-poweredaircraft and preferred the commonalityelement could select a CFM56-5B8/9powered A318, while airlines preferringan optimized power-plant could select theuniquely for the A318 developed Pratt &Whitney PW6000 engine.

With the A318 already a slow selleras such, development problems for the

compete effectively against the Embraerand Bombardier offerings.

Family RelationshipAs the smallest A320 Family member,

the A318’s fuselage is 2.39 metres shorterthan the A319. Take-off weight choicesof up to 66 metric tonnes provide airlineswith greater operating flexibility andhigher loads in operating the A318, with amaximum flight range of 2,800 km.

Designed to serve markets with frequentservices on low-density routes, the A318accommodates 107 passengers in a typicaltwo-class cabin configuration. Airlinesenjoy the benefits of Airbus technology,including one of the newest wing designsin its size category and the application ofadvanced materials in the airframe.

The main selling point of the A318 hasbecome its wide cabin, which ensures anedge with large overhead bins for carry-onluggage. The cabin cross-section also offersunrivalled cabin flexibility, ranging fromfour-abreast first class and five-abreastbusiness seating to comfortable five- andsix-abreast economy class arrangements.Unlike certain competitors, the A318 haslarge passenger and service doors at boththe front and rear of the aircraft, allowinggalley servicing and cabin cleaning to becarried out simultaneously. These largerdoors speed passenger flow as well as theservicing.

The cockpit is shared with all of the otherA320 Family aircraft. This enables A318pilots to fly any other A320 Family aircraftwith a single-type rating, allowing airlinesto schedule the aircraft best matched topassenger bookings on a per-flight basis.

The other selling point of the A318 isthe steep approach capability of the type.The A318 is the largest commercial aircraftcertified to land at steeper-than-usualgradients, making it ideal for operationsat such constrained locations as city centreairports – translating to significant cost andtime savings for business travellers.

Since 2009, British Airways has beenoperating A318s with “steep approach”capability from London City Airport (LCY)to New York’s JFK International Airport.These aircraft are equipped for premiumservice with seats that convert into full lie-flat beds, along with OnAir connectivityfor passengers and this has proved that theA318 can carve out a market segment if welltargeted.

DIMENSIONS






Height 11.76 m

Track 7.59 m

Wheelbase 11.04 m

CAPACITY


FREIGHT

LD3 capacity underfloor 5LD3-46W

Max pallet number underfloor 5


Total volume 17.0/24.2 m³ (LD3/LD3+bulk)

PERFORMANCE

Range 6 850 km with sharklets

Mmo M0.82



Max landing weight 61 (62.5) tonnes


Max fuel capacity up to 24 210 (30 190) litres

ENGINES

CFM56-5B

V2500-A5

Thrust range 98 (120) kN

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INTRODUCTION

Below the main deck, an unmatchedcargo capability results from the A320Family’s wider fuselage – enhanced by its containerised cargo loading systemthat is unique in its aircraft category andis compatible with the airline industry’sfreight system for widebody jetliners.

Advanced navigation technologydeveloped for the A320 Family is availableontheA319. TheuseofRNP-AR(RequiredNavigation Precision – AuthorisationRequired) procedures combined with RTA(Required Time of Arrival) operationseliminates the need for holds during aflight, and enables a continuous descentapproach. The net benefits are lower noiseand reduced fuel burn, as less engine thrust

and value projections are assumed. TheA319-100 is available with MTOW’sranging from 64.000 to 75.500 kg and upto two ACT’s are optional.

The A319 has the same optimised cabincross-section as the other A320 Familymembers – which is the widest single-aisle fuselage on the market and sets thestandards for passenger cabin adaptabilityin this segment. This allows for top-of-the-range comfort with generous seat width, oran extra-wide aisle for fast turnarounds. Anew cabin interior introduced by Airbusprovides a fresh new look, significantincrease in overhead stowage, a noticeablereduction in noise, and options forambience lighting – all with lower weight.

perspective.

“Steep approach” capabilityAirbus’ A318 is the largest commercial

aircraft certified to land at steeper thanusual gradients, with the potential totransform long-haul operations betweencity centres and reduce precious time andcosts for business travellers.

The A318 was approved for steepapproach landing capability by theEuropean Aviation Safety Agency (EASA)in 2007, with this modern jetliner certifiedfor a 5.5-degree approach slope. Thiscompares to a nominal 3-degree slope forstandard operations.

The A319 seats 124 passengers in atypical two-class cabin layout over a rangeof up to 3,700 nm/6,850 km, powered byV2500-A5 or CFM56-5B engines.

The second most popular member of thefamily is a simple shrink from the baselineA320. As a slightly smaller version ofAirbus’ A320, the A319 continues to proveits versatility – enabling carriers around theworld to benefit from the aircraft’s rangeoptions and seat layout flexibility.


In addition to the standard 124-seatconfiguration with a range of up to 3,740nautical miles, Airbus offers an option witha seating capacity of up to 156 passengers– a version that is being ordered by anincreasing number of low-cost airlines.

The operator base is split betweenCFM56 and V2500-A5 operators. Apartfrom some DAC powered planes, the A319has relatively few problem variants. Thetype is used by a wide range of operatorsranging from traditional network carriersto LCC’s and even corporate/private jetoperators. The A319 is suitable for assetbased transactions, albeit some of the older-5A powered aircraft may be popular withsome second or third-tier airlines as resultof current market prices. For transactionsinvolving well maintained, standard specA319’s there seem to be very few things thatcan go wrong from an asset based point ofview – that is, as long as realistic valuations

DIMENSIONS






Height 11 m

Track 7.59 m

Wheelbase 12.64 m

CAPACITY


FREIGHT

LD3 capacity underfloor 7 LD3-46W



Total volume 25.8/31.7 m³ (LD3 / LD3+ bulk)

PERFORMANCE


Mmo M0.82





Max fuel capacity up to 24 210 (30 190) litres

ENGINES

CFM56-5B

V2500-A5


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INTRODUCTION INTRODUCTION

enables choices of four-, five-, and six-abreast layouts with wider seats, along withopportunities for wider aisles and increasedoverhead storage bins. Rapid turnaroundtimes on the ground are further facilitatedby the A320’s bigger passenger and servicedoors.

Following the Boeing lead, Airbus hasdeveloped a new interior for the A320and its other family members that brings afresh new look to the cabin. Improvementsinclude a significant increase in overheadstowage, a noticeable reduction in noise,and new options for ambience lighting. Anadded advantage is this updated interior’slower weight.

Advanced navigation technology

rated pilot can transition to any otherAirbus aircraft with reduced training(known as Cross-crew Qualification), and isable to operate another Airbus aircraft typewhile still actively flying the A320 Family (acapability called Mixed Fleet Flying).

The A320 now also benefits fromblended winglets, or sharklets as Airbuscalls them. As with the A319 these areexpected to result in at least a 3.5% reducedfuel burn over longer sectors, correspondingto an annual reduction in CO2 emissions ofaround 700 tonnes per aircraft.

The A320’s fuselage is seven incheswider than its competitors, enhancingcomfort for passengers and increasingrevenue opportunities for airlines. It

is required.A significant enhancement in play at

this time is the introduction of “Sharklets”which are in effect blended winglets andwill act to provide a 3.5% saving in overallfuel consumption on long route sectors.


The A320 accommodates 150passengers in a typical two-class cabinlayout, and has a 3,300 nm/6,150 kmrange. It can be powered by CFM56-5 orIAE V2500-A5 engines.

Airbus launched its best-selling single-aisle product line with the A320. Typicallyseating 150 passengers in a two-class cabin– or up to 180 in a high-density layout forlow-cost and charter flights – the A320 isin widespread service around the globe onservices that vary from short commutersectors in Europe, Asia and elsewhere totrans-continental flights across the UnitedStates.

The A320’s includes the extensive useof weight-saving composites, an optimisedwing that is 20% is more efficient thanprevious designs, a centralised fault displayfor easier troubleshooting and lowermaintenance costs, along with Airbus’usual fly-by-wire flight controls.

The A320 pioneered fly-by-wirecontrols and the impact of the samecannot be overstated. They provide totalflight envelope and airframe structuralprotection for improved safety andreduced pilot workload, along improvedflight smoothness and stability, and fewermechanical parts.

In addition, fly-by-wire and cockpit standardization across the A320 Familyare at the heart of Airbus’ commonality,which allows a pilot qualified on oneFamily member to fly them all, using thesame type rating. Over 80% of operatorswith 10 or more A320 Family jetliners intheir fleets fly more than one model of theAirbus single-aisle product line – enablingthem to benefit fully from the commonalityconcept through more effective schedulingof aircraft and crews. Taking the Airbuscommonality one step further, an A320-

DIMENSIONS






Height 11.76 m

Track 7.59 m

Wheelbase 16.91 m

CAPACITY


FREIGHT

LD3 capacity underfloor 10 LD3-46W



Total volume 36.8 / 42.7 m³ (LD3 / LD3+bulk)

PERFORMANCE


Mmo M0.82





Max fuel capacity 24 050 (30 030) litres

ENGINES

CFM56-5B

V2500-A5



INTRODUCTION

it is clear that aircraft and engines or indeedaircraft with engines that can be considered“niche” are to be avoided. He worst case ofthis to date for the A320 family aircraftis with a fleet of A320s in India which,to lower the runway loads, are equippedwith four-wheeled main landing gears, asopposed to the standard two-wheel maingear bogies. These aircraft are more or lessonly fit for parting out outside of India.


The A321 accommodates 185 passengersin a two-class configuration over a range ofup to 3,200nm/5,950km, and up to 220passengers in a high-density configuration.It can be powered by CFM56-5 or IAEV2500-A5 engines.

The A321 is the A320 Family’s largesttype. This aircraft has a stretched fuselagewith an overall length of 44.51 metres,along with an extended operating range ofup to 3,000 nautical miles while carryinga maximum passenger payload. The A321typically accommodates 185 passengers ina two-class configuration (16 in first classand 169 in economy) or in a high-densityseating layout can go up to 220 passengers.

(“/3”) upgrade which includes changesin the high-pressure (HP) compressor,combustor, HP turbine and low-pressure(LP) turbine nozzle. Together these havebeen designed to increase time on wing,improve fuel burn, give the engine moremargin over CAEP 6 emissions levelsand improve durability. New Tech-Insertcomponents can be installed at engineoverhaul except for the combustor. Techinsertion has now become the productionstandard. The CFM-56-5B../P is availableat various thrust settings, ranging from 21.6Klb (“B8”) to 33 Klb (“B3”), all essentiallybeing the same engine. A “bump” versionfor “hot and high” airports is available also.

In response, IAE introduced an engineupgrade for their V2500-A5, calledSelectOne. The upgrade includes highand low-pressure turbine improvements,an upgraded compressor, a new variablestator vane system and new engine controlsoftware. IAE claims up to 1% lower fuelburn and 20% longer time on wing fromthe upgrade. The A5 is available at variousthrust settings as well, ranging from the 22.0Klb V2522-A5 to the 33 Klb. V2533-A5. Abump version for “hot and high” airports isoffered on specific V2500 versions.

On the main financiers prefer aircraftwith higher thrust engines as this helpswith remarketing by widening the poolof potential customers and avoids theadditional cost of a thrust upgrade, whichis not cheap. So for financing and investing

contributes to the A320’s operationalflexibility. This includes the RequiredNavigation Performance (RNP) capability,which reduces approach distances forlanding while reducing fuel consumptionand CO2 emissions; and the GlobalPosition (GPS) landing system, allowinginstrument-type approaches where groundstations are not available.

Also offered are the Microwave LandingSystem (MLS) for increased approachcapability in low visibility conditions; andthe Future Air Navigation System (FANS)for optimised flight path and reducedaircraft spacing.

AstheA320-200’sfirstflightisnowovertwenty years ago, it is obvious that enginetechnology has evolved in the meantime.While there is a clear difference betweenthe 737 Classic and the 737 NG, there is nosuch sharp distinction between early andlate A320’s. One differentiator that is usedby financiers is to call CFM56-5A poweredaircraft “A320 Classics”, contrasting themfrom the more modern -5B poweredaircraft. A trend can be detected thatincreasingly discriminates the older -5Apowered aircraft as becoming less desirablefor financing.

Both CFMI and IAE continue toimprove their products. The first generationCFM56-5A was succeeded by the -5B andlater the -5B was improved with a new 3DAero package (designation “/P”). In mid-2007, CFMI introduced a “Tech Insert”


INTRODUCTION

payload, up to 500 nautical miles of morerange, lower operating costs, along withreductions in engine noise and emissions.A320neo’s fuel savings translate into some3,600 tonnes less CO2 per aircraft per year.Additionally, the A320neo will provide adouble-digit reduction in NOx emissionsand reduced engine noise.

The new A320 versions will have over95% airframe commonality with theexisting models, enabling it to fit seamlesslyinto existing A320 Family fleets – a keyfactor for Airbus customers and operators.

In the first year after its launch inDecember 2010, some 1,420 orders andcommitments had been booked for theA320Neo, making it the fastest-sellingcommercial aircraft ever.

The importance of SharkletsThe Airbus Sharklets featured on the

A320neo also will be available for A320Family jetliners beginning in late 2012.These devices cut down on aerodynamicdrag by helping reduce the spiral-shapedvortices that are formed at the wingtips ofaircraft during flight.

The Sharklets should bring more than3.5% savings in overall fuel consumptionon long route sectors to A320 aircraft, whilealso improving take-off performance andincreasing payload by 500 kg. – allowingfor additional range or more passengers tobe carried.

These devices also should allow for lessthrust to be used during take-off whenrunway performance is not limiting,thereby decreasing airport noise. Inaddition to their environmental benefits,the Sharklets’ aerodynamic improvementsprovide multiple advantages for operators– including increased range and payload,better take-off performance and rate-of-climb, higher optimum altitude, reducedengine maintenance costs and higherresidual aircraft value.

Airbus rolled out its A320 developmentaircraft equipped with Sharklets inNovember 2011, for a flight test campaign tovalidate the benefits offered by the devices,which was joined in April 2012 by the firstnew-build A320 with Sharklets. With thepopularity of its Sharklets, Airbus also ispursuing a large winglet retrofit optionfor the in-service fleet of A320 Familyjetliners, which will further enhance thefuel efficiency and residual value of theseaircraft operated around the world.

base and from that point of view can stillclaim superiority over its far more recentopponent, the Boeing 737-900/900ER.The A321-200 is available with MTOW’sranging from 78.000 to 93.500 kg., withthe basic MTOW 78.000 kg. Up to twoACT’s are optional. There is also a smallnumber of DAC-powered A321’s.

A320neoTotal orders 1320

The A320neo was initially poorlyreceived by aircraft lessors, but with fuelprices dangerously high in the late 2000sairlines wanted a stopgap aircraft, whichresulted in the A320neo family. TheA320neo is in effect an upgraded aircraftthat will have a market-leading life of around 15 years. It is very important tonote that the manufacturers and airlinesare fully aware that by the mid-2030sthere is likely to be new game changingaircraft brought to market with technologyhitherto only seen in the realms of sciencefiction. So given this fact, there seemed tobe little gain in developing a whole newaircraft that will not see service until 2020at the earliest that would come with a veryhigh price tag to cover R&D expenditure bythe manufacturer only for it to be obsoletewithin 15 years, the economics just didn’tstack-up. So it was that Airbus first spottedthe way that the market was moving andit took the brave and correct decision tolaunch an upgraded aircraft and not an all-new aircraft.

Boeing was somewhat backed intoa corner by the launch of the A320neoand its ensuring success, which forcedits competitor to introduce the 737Max.So it is that the A320Neo has defined thenarrowbody aircraft market over the past12 months and it will continue to do so wellinto the next decade and beyond.

The A320neo provides the minimumchange with maximum benefit for thebest-selling A319, A320 and A321 throughthe availability of two new jet enginechoices – CFM International’s LEAP andthe PW1100G PurePower from Pratt &Whitney – along with the use of Airbus’large Sharklets.

Improvements with the A320neoinclude a 15% reduction in fuelconsumption, two tonnes of additional

The twin-engine A321 can be poweredby either of two engine options: the CFMInternational CFM56 or InternationalAero Engines’ V2500. This will be changedfrom 2015 as deliveries of the A321neobegin with engine options coming fromthe impressive P&W PW1100G Purepowerand CFM Leap X. The new engines, alongwith weight savings and Sharklet wingtips should, Airbus hopes, give a 15% fuelsaving while increasing the range up to 500nautical miles/900 km or 2 tonnes of extrapayload.

The A321, as with the other A320Family members,benefitsfromoperationalcommonality with other Airbus aircraft,which provides carriers with tremendousflexibility in matching aircraft to specificroute requirements. All A320 Familyaircraft share a single-type rating – allowingpilots to fly any member of the Family afterattending only one training course andenabling the same team of mechanics tomaintain an aircraft.

The A321 has proved itself to havefirst class operational flexibility - with theoption to provide wider seats and enhancedcomfort; a markedly wider aisle for fasterboarding and easier cabin movement; andeven a hybrid layout.

The A320 Family’s wide fuselage alsooffers unmatched cargo capability foroperators. Its four members are the onlysingle-aisle aircraft offering containerisedcargo, with the A321 capable of carryingup to 10 standard LD3-46W containers inthe lower deck holds – enabling interliningwithout special ground handlingequipment. A distinct advantage in thecoming years as cargo conversion becomesa more popular option post remarketingand/or end of lease.

Like the A320, asset based financiersprefer the more range capable A321-200 over the -100, of which only 81 wereproduced. The -200 features structuralreinforcements, a higher weight scheduleand provisions for additional centre tanks.While initially there was a structuraldifference between the -100 and the -200,it is clear that as of msn633, all -100’sare effectively low MTOW -200’s and a(“paper”) upgrade to -200 levels is possible.The original -100’s lacked the range for UScoast-to-coast operations. While the A321-100hasallcharacteristicsofanicheaircraft,the -200 – although not as re-marketableas the A320-200 – enjoys a sizeable market

Insight

KPMG has unrivalled experienceand the largest team of aviationexperts equipped to handleany transaction.

© 2012 KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.The KPMG name, logo and “cutting through complexity” are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

For more information on how we can help, contact:

Tom WoodsTax PartnerT: +353 1 410 2589E: [email protected]

Michael DaughtonAdvisory PartnerT: +353 1 410 2965E: [email protected]

Killian CrokeAudit PartnerT: +353 1 410 2446E: [email protected]

kpmg.ie/aviation


A320NEO

In an industry survey of over ten thousand executives we asked a number of questions regarding the A320neo, the votes were qualified so that only those from investors, appraisers, banks, airlines, lessors and maintenance firms remained. Here are the results:

-

-

-

-

-

-

-

Yes: 43%

No: 43%

Undecided: 14%

Do you think the economics ofthe A320 NEO justifies the higherprice tag?

Do you think Airbus was right in itsdecision to launch the A320 NEO?

Yes: 56%

No: 36%

Undecided: 8%

The Airline EconomicsA320neo Survey

Yes: 12%

No: 10%

Undecided: 78%

If you have A320 aircraft on orderthat have not yet been delivered, will you be switching to the NEO?

A SELECTION OF COMMENTS FROM THE SURVEY

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It’s about the exper�seof an integrated stafflistening to yourunique business plan and goals…

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Talk to us. Talk to AWAS.Ascending.www.awas. com


AIRBUS INTERVIEW

desire for more fuel efficiency andlower emissions. Both of the twoengine options for the aircraft – theCFM International LEAP X engineand Pratt & Whitney’s PurePowerPW1100G engine – in addition to theSharklet wing tip devices, contributeto the 15% fuel burn reduction as wellas a double-digit reduction in NOxemissions, reduced engine noise, loweroperating costs and up to 500 nauticalmiles more range or two metric tonnes

TThe launch of theA320neo has to beconsidered a highlightof the a highlight ofthe past few years forAirbus. for Airbus.

After months of speculation theaircraft manufacturer finally took thedecision to re-engine its narrowbodyworkhorse.

Launched in late 2010, the A320neowas a direct response to the airlines’

The A320 NewEngine OptionAlan Pardoe, marketing communicationsdirector at Airbus spoke to Airline Economicsabout why the A320neo is a good bet.


AIRBUS INTERVIEW

two brand new engines with a 15%improvement in fuel burn that seriouslygets everyone’s attention,” he says. “Asfuel costs continue to go up, it is a verystraight-forward decision to take tore-engine an existing aircraft.”

There have been some doubtsover whether Airbus and the enginemanufacturers will be able to deliveron the promised 15% increase in fuelburn efficiency for the A320neo-familyaircraft. Taking into account the

more payload, according to the Airbusliterature.

In response to some of the moreharsh criticism that the manufacturercouldn’t afford the R&D spend todevelop an all-new A320 replacement,Pardoe says that the re-engine routemakes the most economic sense forairlines.

“When we see a brand new enginethat presents a 15% improved fuelburn we take notice but when we get

increased weight of both new enginesand the airframe, the efficiency ofthe new Sharklet wing tips, some


AIRBUS INTERVIEW

companies as the benchmark or bellweather of the aviation industry. “Wealways look to the lessors to get the sealof approval for an aircraft program,” hesays. “The 100 aircraft order for A320and A320neo from ILFC was a strongseal of approval. Lessors don’t buyaircraft if they have doubts.” However,he is keen to stress that “the A380 isprobably too big for most lessors tohandle”.

Airbus is not fazed by the newcompetition entering the narrowbodymarket from Bombardier’s CSeriesor the new offering from Chinesemanufacturer COMAC’s C919.

“We all serve the same marketplaceand have the same broad understandingof the market needs,” says Pardoe, “itis just our interpretation that differs.Clearly Bombardier has decided thatthe market needs more 110-130 seataircraft. But our research has shownthat although airlines want morefuel efficient aircraft, they also wantlarger aircraft and more widespreadaircraft family types. The A320 sitsnicely in that space. The sales figuresfor the CSeries speak for themselves.They have sold less than 100 aircraft,while Neo sales and commitments areheading for 500.”

He adds: “Meanwhile, the COMACC919 aircraft is a little further outand could become a competitor.That aircraft is arguably the bestthat Chinese manufacturers havelaunched. We innovate all of the time.We spend $100 million each year onregular R&D for the A320, not including

Pardoe says, “It doesn’t make economicsense to develop an all-new aircraftevery ten years because fuel pricesincrease – that has to be temperedagainst the cost of development.”

The A320neo progam has cost justover $1 billion but we expect to sellthousands of Neos. An all new aircraftlaunch would have cost ten times thatamount – it would be a brave board thatapproved that decision.”

In the meantime, for Airbus thelaunch of the A320neo has not affectedorders of the standard A320-typeaircraft that, like Boeing’s 737NG,remains sold out for the next five years.“The challenge we have is clearingthe backlog of well over 2,000 existingorders for the A320,” says Pardoe. “Atcurrent production rates, that takes usup to 2015-16 when the Neo becomes

available. The challenge for us is tofind production slots for new airlineorders of the A320 as airlines will notwant to miss out on five years of profitswaiting for a new aircraft to arrive.They would rather opt for the standardtype to get flying more quickly. In short,we continue to see strong sales of bothaircraft types.”

Pardoe regards aircraft leasing

estimates have suggested the amountsaved will be much lower, in singledigits. However Pardoe confidentlystates that the 15% stated reductionin fuel burn is a net benefit of all thosefactors. “The improved fuel burn of thenew engines before they are installedon the airplane is higher than 15%.The Sharklets on the aircraft alongwith the new engines on the wing, lessthe incremental weight of the heavierengines give a 15% net benefit in termsof fuel burn.”

There have been some doubtsover whether Airbus and the enginemanufacturers will be able to deliveron the promised 15% increase in fuelburn efficiency for the A320neo-familyaircraft. Taking into account theincreased weight of both new enginesand the airframe, the efficiency of thenew Sharklet wing tips, some estimateshave suggested the amount savedwill be much lower, in single digits.However Pardoe confidently statesthat the 15% stated reduction in fuelburn is a net benefit of all those factors.“The 15% fuel improvement is 15% netbenefit of engines on the airframe,” hesays. “The improved fuel burn of thenew engines before they are installedon the airplane is higher than 15%.The Sharklets on the aircraft alongwith the new engines on the wing, lessthe incremental weight of the heavierengines give a 15% net benefit in termsof fuel burn.”

As fuel prices continue to riseand airlines struggle to operate inchallenging economic conditions, thedecision to launch a re-engined versionof the A320 was an easy one for Airbus.

ORDER HISTORY

1971 First order (6 A300)

1989 1,000th aircraft sold










Orders by region

Leasing: 24%

Middle East: 7%

North America: 14%

Rest of World: 15%

Asia-Pacific: 25%

Europe: 15%


AIRBUS INTERVIEW

modest but growing demand for theA330-200F.”

The A330 production rate is alsobeing increased from eight aircraft permonth to nine and to 10 by 2013.

For the immediate future, Airbusis intending to deliver on its promiseswith the A350 XWB and continue towin orders for the A320neo, A330 and

the Neo program. We are confident inour ability to innovate enough to stayahead of our competitors.”

The latest innovation has been theA350 XWB project to compete withBoeing’s 787 Dreamliner. Pardoe isconfident the first deliveries will bemade in 2013. “The A350 XWB programis only a few months adrift of where wesaid it would be four or five years ago,”he says. “Some industry observersseem to want it to be late but we areon target to make the final assembly ofthe first aircraft at the end of 2011 andthe first flight next year for deliveriesto begin in the second quarter of 2013.”

In the interim between makingheadlines with the Neo and itssuperjumbos, Airbus’ workhorse theA330 family has been quietly satisfyingcustomers across the world, butspecifically in Asia.

“Korean Airlines has placed a firmorder for five more A330-200s,” saysPardoe. “The airline, like many others,took a number of the aircraft typeyears before and was very happy withits performance and so came back formore. Cathay Pacific has ordered 15more A330-300s because it works sowell for them. It does an honest job andcontinues to hold favour with manyairlines and we don’t expect that tochange any time soon. There is also

AIRBUS 2010 HIGHLIGHTS

Airbus key facts

Headquarters: Toulouse, France

Shareholder: 100% EADS company

Employees: 52,500 around the world

Subsidiaries: United States, China, Japan and Middle East

Spare parts centres: Hamburg, Frankfurt, Washington, Beijing and Singapore

Training centres: Toulouse, Miami, Hamburg and Beijing

Field service offices: More than 150 around the world

Supplier network: Some 1,800 suppliers in 30 countries

Industrial sites: 15 sites in France, Germany, Spain and the UK

Final Assembly Lines: Toulouse, Hamburg and Tianjin

Engineering Centers: 11 throughout Europe, US, China, India and Russia

2010 Financial results

Revenue: €29.9 billion (+7% compared to 2009)

R&D self financed: €2.3 billion (7.7% of revenue)

Capitalised R&D: €31 million in FY 2010 and €15 million in FY 2009

EBIT: €305 million (Pre-goodwill impairment and exceptionals)

the A380 as the industry continues togrow strongly and robustly. Pardoe isreluctant to look much further into thefuture but is adamant on one thing inparticular: “In my view, there will be noreturn to supersonic travel for anybodyunless somebody develops a miracleengine and there is no evidence that isabout to happen.”


A320NEO

CFM International haslaunched into service thisyear the CFM56-7BE “Evo-lution”, which will givecarriers around a 1% slightly

better fuel burn. When this is added tothe aerodynamic improvements on the737NGs the manufacturers reckon the air-craft will use 2% less fuel. However, whenthe A320neo comes into service analystshave calculated that the 737-800 will beat a 3%-4% DOC disadvantage. The gap,says Boeing will need to come from furtherengine improvements. The CFM Leap Xengine was launched to be used on Comac’sC919 aircraft and now for the A320neo.The engine maker assures operators thatthe maintenance costs will be the same forthe Leap X as for the CFM56.

Pratt & Whitney’s PW1000G has been earmarked for use on four aircraft: theMitsubishi MRJ, the Bomardier CSeries, the Irkut MS-21 and now the A320neo.Although Boeing has stated it is a fan ofthe engine, it is restricted by its exclusiv-ity contract with CFM for any re-engined 737 aircraft type. However an all-new air-craft would not be similarly restricted andso could in theory carry the P&W offering.

But which engine should A320neocustomers opt for? CFM has a long his-tory and loyal customer base and itsreliability means low maintenance costs.

As a geared engine, the long-termmaintenance costs and reliability of the PW1000G over the Leap X are being ques-tioned by many despite P&W’s claims itwill lower maintenance costs by 20%.

CFM was probably ahead in theorder stakes as the safer engine choicebefore ILFC opted for the Pratt & Whit-ney PW1100G for “at least” 60 of its100-strong order for the neo type aircraft.However, because most of the market theA320neo is aimed at includes airlines thatalready operate CFM56 engines and havemaintenance contracts in place for thesame, which will be favourably extendedfor Leap X customers, CFM should not beunduly worried that ILFC has opted forP&W.” AirAsia is expected to lean towardsCFM, if it opts for the P&W engine thatwill be a real eye opener. P&W is offeringa totally new engine; it cannot offer manyassurances until testing has been com-pleted and the engine is in service.

GTF technology is looking like the bet-ter option, and an option that CFM could

have gone for. Instead, CFM choose to useexisting technology to create a derivative engine that is in essence a scaled downversion of the GEnX, which is alreadyin flight test operations on the wing ofthe 787 and 747-8. Airline Economicsbelieves this could be a mistake.

The argument thus far has come downto reliability. CFM has successfully put thisfactor into the spotlight, but if P&W cananswer the reliability question(s) posed, itcould have the edge on its competitor.

For many, the PW1000G engine rangehas the edge in both performance and inforecast maintenance costs. Some thirdparty maintenance providers, off the recordat least, are absolute in their support for theengine range and say it is the option thatairlines and lessors should move forwardwith. Other analysts have suggested thatsome lessors that buy the A320neo couldhedge their bets with the Leap X and halfwith the PW1000G range. ILFC still has40 aircraft without an engine choice at thetime Airline Economics went to press sothis could prove to be correct.

The PW1000G range put simplyis not an updated engine; it is a newdesign for a new era. This should show

The next stepAfter the aircraft order comes the engine order: So which engine should you buy? ThePW1000G Vs CFMi Leap X


A320NEO

through in the long term and lead toimproved residual values for A320neoowners that choose the PW1000G overthe CFM Leap X. Many have arguedthat reliability is the key driver thatshould lead people to opt for the CFMengine, however the results from thePW1000G testing program so far confirmthat this engine type is far better than any-one could have hoped and thus to questionreliability at this point is unwarranted.

The PW1000G range is also avail-able for so many new next-generationaircraft that the type will have criticalmass within many fleets of the future,especially within North America,before 2025. This makes the PW1000Ga real winner for Pratt & Whitney butmoreover it will mean that airlinesacross the globe will have options forimproved synergies across a range of air-craft from different manufacturers. CFMcan lay claim to having the synergy advan-tage at the moment, which is a valid point.But with the A320neo being viewed as astopgap aircraft with a shortened lifespan,is it also true that the CFM Leap X enginehas a shortened life too, or is this engine atemplateforotherfutureaircraftofferings?

CFM confirms the Leap X was a commit-ted program when it was selected for theComac C919, which has an anticipatedmarket in excess of 2,000 airplanes. Beingselected for the A320neo has solidifiedtheir business case for the engine. WhetherBoeing decides to re-engine the 737 orlaunch a new replacement airplane, the Leap X will be the engine CFM offers. TheLeap X engine incorporates cutting-edgetechnology that is laying the foundationfor the next 30 years, and the Leap X corecould potentially be used in an open rotorengine in the 2030 timeframe but withthe EU this month telling governmentsthat they may fine airlines that flout noiserestrictions the going for open rotor designdoes not look smooth.

To date, Pratt & Whitney holds firmcommitments to supply GTF engines for 60of ILFC’s A320neo order, and also for the

Bombardier CSeries (24,000 lb. thrust),Mitsubishi MRJ (17,000 lb. thrust) andRussian MC-21 (30,000 lb. thrust). BothBoeing and Airbus engineers have beenimpressed by the test results thus far.

P&W expect a 16% fuel burn advan-tage for the 30,000-lb.-thrust engine onthe A320neo after including effects ofdrag and weight caused by the larger fan. Noise is expected to be 20 dB better than Stage 4, mainly due to the fan blade tipsremaining subsonic in a geared engine.

Long term, P&W believes that it canreduce fuel burn by 25% by introducingnew materials, going to higher tempera-tures and taking the gear ratio above4:1. Given these statements it is clearthat P&W has a long-term vision for theengine. Maybe CFM would have beenbetter off bringing a completely newengine to market? Airbus ensured thatthe PW1000G was on the A320neo as ahedge against the Bombardier CSeries,although the Aircraft Economics’ teamcannot help but feel upset for all thoseairlines and lessors out there with A320s being delivered that are now worth thatlittle less but Airbus was right in its think-ing that something had to be done now.


A320NEO

In an industry survey of over ten thousandexecutives Airline Economics asked a num-ber of questions regarding the engine choicesfor the A320neo.

The votes were qualified so that only inves-tors, appraisers, banks, airlines, lessors andmaintenance firms remained.

Everyone who voted left a comment. It is veryinteresting to note that all comments for votescoming in support of CFM were backward look-ing, while all votes for Pratt & Whitney wereforward looking.

The majority of MRO firms supported the CFM Leap X, with many stating that the CFM engine iseasier to work on and the company has a bettertrack record and better after sales support. How-ever many also said that CFM should develop a new engine and not rehash an existing model.

Many comments in Pratt & Whitney’s favourstated that the GTF is a far better option andtesting has shown this to be the case. On thedown side however, many people, even thosewho voted for the PW1000G as their preferredengine choice, who stated that the manu-facturer has a poor track record of bringingnew engines to market and the variablesfor the GTF technology are off putting, espe-cially reliability.

Demographic vote split by company type in final vote

Airline Lessor Appraiser MRO Financial

100%90%80%70%60%50%40%30%20%10%0%

Undecided CFM Leap X PW1000G

PW1000G: 51%

CFM Leap X: 48%

Undecided: 1%

A320 Neo Engine choice results(percentage)

The Airline EconomicsA320neo Engine Survey

So here it is:Aircraft Economics puts its stake in thesand and in this battle confirms thatbased on all facts to hand the PW1000G isthe better choice for the A320neo at this time. For airlines ordering this aircrafttype, an engine deal, based on the current projections being met, made with P&Wduring the fist half of 2011, will leave you secure in the knowledge that you havemade the right choice. It is round oneto P&W. While there has been concernsabout the reliability of the geared turbofan (GTF), P&W’s testing work appearsto have reduced those concerns signifi-

100%

80%

60%

40%

20%

0%APAC Americas Europe Middle East/Africa

Undecided CFM Leap X PW1000G

Regional split as percentage of total vote cast

cantly. The simplicity of the GTF withonly seven moving parts that are not life-limited is also a factor to note.

Of course this is a battle that is not yetfully joined as the engines in question areunder testing and development but order-ing early means heavy discounts and againit is the PW1000G that gives solid cause forcheer and therefore it is that team whichhas the edge in a battle that they may justwin and in the process drive P&W back tothe very top in the global aero engine mar-ket. CFM with their Leap X will be lookingto the C919 to provide such price savingsover western manufacturers that they will


A320NEO

the A320neo, will be able to achieveimproved prices for these new prod-ucts. The 737NG proved that that a newaircraft, although far superior, does notguarantee the market will fork out theextra cash. Airbus, CFM and P&W willbe hoping that the market is ready. 2011will tell if the A320neo is the must havestopgap aircraft with the shortest lifes-pan of all time. n

have an unbeatable combination in theirpartnership with the Chinese come 2018.CFM, when asked if the Leap X would beused on any 737 replacement or if a wholenew engine will be designed, gave the clearanswer that the Leap X would be offeredfor a 737 replacement and a new enginewill not be designed.

It remains to be seen if the manufac-turers of both engine types, and indeed

A SELECTION OF COMMENTS FROM THE VOTE:

Pratt & Whitney 1000G Geared fan should produce better overall component efficiency (low speed fan, high speed turbine) than Leap-X changes

Pratt & Whitney 1000G Overall better technical platform with more headroom for efficiency growth.

CFM Leap-X Pratt & Whitney 1000G Both are equally good

CFM Leap-X Quality, reliability

Pratt & Whitney 1000G Newer technological baseline most likely presents the best option for future efficiency improve-ments.

CFM Leap-X Development of existing CFN56 engine (CFM56-5B6...)

CFM Leap-X More proven technology. The GTF is brand new, unproven in service

Pratt & Whitney 1000G Better reputation

CFM Leap-X High risk of maintenance cost of PW1000G gear. Poor experience of bringing new engines tomarket - PW6000.

CFM Leap-X Track record of performance, reliability and meeting commitments all favor CFM.

CFM Leap-X CFM RELIABILITY

Pratt & Whitney 1000G Lower fuel burn & maintenance costs

Pratt & Whitney 1000G Newer technology

Pratt & Whitney 1000G The gearing of the fan allows more optimal rotational speeds for different engine sections there-fore increasing efficiency. Gearbox should not give operational issues.

Pratt & Whitney 1000G The P&W engine looks to have better economics

Pratt & Whitney 1000G Theoretically the Geared Fan can provide a better fuel consumption therefore it seems to be a bit more economical and “cleaner”.

Pratt & Whitney 1000G It actually exists while the GE/CFM engine is only a concept in beat testing.

CFM Leap-X GTF is unproven technology

CFM Leap-X GE’s track record on delivering performance is far superior to PW

CFM Leap-X Higher industrial reliability

CFM Leap-X CFM’s design direction seems to have a better chance of achieving the results.

CFM Leap-X Commonality with existing choices

Pratt & Whitney 1000G More mature and efficient

Pratt & Whitney 1000G PW1000G is a comprehensive solution that provides improved fuel burn, reduced noise and emissions lowering cost of ownership to the airline customer. Validated by demonstrator and engine core test programs, the PW1000G engine is running validation and certification testsnow and will have over a million hours of service on the MRJ and CSeries applications before the A320neo enters service .... providing the lowest risk engine choice.

CFM Leap-X Because of the success the CFM56-5B has had on this airframe

CFM Leap-X Commonality and development history

Pratt & Whitney 1000G I think it is too early to know which will prove superior in service. Pratt has better claims now.


A320NEO

Materials:composite. 3-D woven, resin

transfer molding (RTM) to be exact.We have been running a demonstratorengine for about two years (a LEAP-Xfan mounted to the front of a -5C enginecalled MASCOT) and done cross wind,acoustics, and performance testing.CFM has also completed blade outand bird ingestion rig tests that mir-ror certification requirements and arereally happy with the results. The fandemo engine is currently undergoing a5,000-cycle endurance test.

Third-generation 3-D aero designs.

the HPT will use the samematerials and have the same temper-ature profile as the current CFM56product line, but CFM is using newcoatings and advanced cooling tech-nology to allow the core to operate atmuch higher temperatures. It is alsotesting composite matrix ceramicHPT turbine shrouds, which havebeen used in military engines forquite some time.

eCore Demonstrator 1, which was a sin-gle-stage turbine core that let it test bladeaerodynamics in the compressor and theinteraction between the combustor andthe HPT, among other things.

Demo 2 and plan to be on test by mid-year. This particular core is very closeto the final LEAP-X configuration (10-stage compressor, two-stage turbine).

that will run in 2012, and that test will be used to tweak anything that needsmore work before they take the first full engine to test in early 2013. CFM willflight test on its own flying testbed in2014 before it begins flight testing with the airframers.

design freeze by year-end 2011. n

CFM LEAP X engine development pro-gram update:

consumption vs. today’s best CFM56(Tech Insertion)

by 50% compared to current CAEP/6requirements

-lations (depending on the application)

today’s CFM56

CFM56 product line - roughly between 20,000 and 30,000 pounds

-ern powerplant) ; Airbus A320neo.Both are scheduled for commercialservice in 2016.

depending on the application

18 blades vs. 24 on the CFM56-7B; theCFM56-5C for the Airbus A340-200/-300, which is roughly the same size fan,has 36 blades

20:1 (at levels comparable to the GE90and the GEnx)

(TAPS) 2

public

Why should a customer choose the CFM offering over the P&Wengine?

“When airlines chooseCFM, they are choosing the company thathas produced the most reliable enginefamily in the history of the single-aislemarket. Beyond the hardware, though,they are choosing the company with areputation for under committing andover delivering; we simply don’t makepromises we can’t keep.

Leap X will benefit from more than520 million flight hours of CFM56experience and from the lessonslearned from supporting the industry’slargest commercial fleet – a fleet thataverages a departure every 2.5 sec-onds. CFM customers log an averageof eight cycles a day, and many of themhave turn times of 30 minutes or less.A lot of airline business models simplywouldn’t work without the inherentreliability CFM56 engines provide. Weunderstand that, and that’s why everytechnology decision we have madeon Leap X first went through a filterof how it could impact reliability andmaintenance costs.

As a result, we have an engine thatrepresents a quantum leap in fuel con-sumption and environmental impact, yet still maintains the reliability and main-tenance cost levels our customers havecome to rely on. We expect the Leap Xto deliver the best performance and reli-ability for the A320neo.”

CFM:The company line


A320NEO

that a program’s first engine to testtypically runs approximately 75 hours.They are at 175 hours and plan toaccumulate over 200 hours before con-cluding the initial test program on this first engine.

the results of P&W’s GTF Demon-strator Program, which ran in 2008,and more importantly confirmed thetechnology readiness of the GearedTurbofan design.

engines for the Mitsubishi RegionalJet are undergoing assembly. Enginetesting will initiate early this year with engine certification in 2012. (The first engine will go to test in March.)

with more than 260 hours of testing.Results validated performance goals. n

Why should a customer choose the P&W offering over the CFMengine?

“Airlines flying thePW1100G powered A320neo can expect20% cash operating cost benefits at theengine level compared to today’s engines. This is achieved through reduced fuel andmaintenance costs as well as lower envi-ronmental fees with significantly reducednoise and emissions.

The geared architecture gives thePW1000G a fundamental advantage infuel burn, environmental performanceand operating cost. We estimate thisbenefit translates into potentially $3Mper aircraft relative to competing prod-ucts and $1.5 million per aircraft per year compared to today’s engines.

We expect the PurePower engine fam-ily will accumulate more than one million hours of revenue service performanceprior to entry into service with the Airbus A320neo.”

“Less parts = less cost: When youcompare a typical conventional two spool turbofan and the PW1000G geared tur-bofan engine, there are up to seven more stages of life-limited parts (LLPs) in aconventional architecture as compared tothe GTF – that means the GTF has 20%less life limited parts than the competi-tion. The final configuration of the GTFwill have a third fewer blades and vanesthan current CFM56 engines and poten-tially around half that of the Leap X.”

Pratt & Whitney PW1000G engine devel-opment program update:

is currently at P&W’s West Palm Beach facility and has completed more than175 hours of testing since its test pro-gram began in Sept. 2010:

-acteristics with the ‘game-changing’Geared Turbofan™ technologies, andhas confirmed the projected fuel con-sumption efficiency of the PurePowerPW1000G engine family.

To date, the test program included:

engine up to rotor speeds 5% above the red line speed of the low spool turbineand fan drive gear system to clear certi-fication requirements

verification of the engine fuel and lubri-cation systems

have the production nacelle with allthe nacelle acoustic treatment, we con-firmed the overall engine design willachieve 50% noise reduction comparedto today’s engines.

the planned reductions in nitrogenoxide and carbon dioxide.

initial expectations with testing ofthe first engine planned to continuethrough March.

P&W:The company line


A320NEO ENGINE SELECTION

The 2011 Paris Air Show sawa torrent of orders for theAirbus A320 new engineoption (A320neo) with 380firm and 284 option aircraftbooked. But for each air-

craft order announced there was alsogood news in the engine manufacturer’schalets, with engine selections being con-firmed at the same time. Under normalcircumstances there would be nothingunusual in that. However, the A320neooffers a choice of two significantly dif-ferent engines, engines that might wellchange the aviation landscape in theyears to come. What are these engines?

How are they different and why are theypotentially so important?

To begin our analysis, a bit of basicphysics. Newton’s second law of motion explains that the force acting on a body is equal to the mass of the body multi-plied by the acceleration imparted onthat body, and this is a fundamental ofjet propulsion. Military engines gener-ate thrust by accelerating a mass of airrearwards at very high velocities. Com-mercial engines generate thrust byaccelerating a significantly larger massof air rearwards at a relatively slowervelocity. The part of the engine responsi-ble for producing this accelerating force

– thrust – is the fan that generates around75% of the engine’s thrust, the remaindercoming from the exhaust jet. The ratio of the amount of air that passes throughthe fan compared with the amount ofair passing through the central partof the engine – the core – is called thebypass ratio (BPR) and most commer-cial engines today are considered to be ‘high’ bypass ratio engines, with BPRs in the order of 5 or 6 to 1.

Over the years commercial enginemanufacturers have faced challengesto improve their products in responseto the demands of their airline custom-ers. The biggest challenges they have

A question of confidenceDavid Cook pulled engines out of fighter jets in his RAF days and sold engines to airlineswhen he worked for a major engine manufacturer. Now as president of independent ASMConsulting he offers his views on the new engines being offered for the A320neo.



aircraft, as will the increased surface areaof the nacelle surrounding the engine.While such things can be estimatedusing the sophisticated modelling toolsavailable to the design engineer today,the net benefit brought by these newengines will only be realised once theyhave flown on the airframe and their per-formance has been measured in flight.

But to understand these enginesbetter, let’s ‘lift the hood’ on the Pratt &Whitney (P&W) ‘Purepower’ PW1100Gand the CFM International Leap-Xengines to figure out how they work and what is so different about them, startingfirst with the PW1100G. Note that neitherof these engines exists yet and so these virtual guided tours are based on infor-mation already in the public domain aswell as individual briefings given to meby the respective engine manufacturers.

Approaching the PW1100G from thefront, the 81” diameter fan is impressivebut what is most noticeable is just howmuch daylight we can see through the fanblades, dramatically illustrating the 12:1bypass ratio. The blades are wide-chord,metallic and, while P&W remains coyabout their actual structure, I would imag-ine they are similar to the hollow titaniumblades found on the V2500 family. This isin itself a surprise as most engine manu-facturers are turning to carbon compositefor their fan blades. Evidently P&W hopesto demonstrate good damage toleranceand performance while designing a fanthat is still light enough to allow the useof a carbon composite fan case capableof withstanding a blade failure scenario.

Opening up the casings displaysa three-stage low-pressure compres-sor and short, compact eight-stagehigh-pressure compressor. Each high-pressure compressor stage is a ‘blisk’,where the compressor blades are an

a major issue, the debate regarding cli-mate change has increased attention onfuel burn, not just from the point of view of airline economics but also in terms ofthe sustainability of oil reserves and the generation of greenhouse gases suchas carbon dioxide. A step change infuel consumption was required from the engine designers, large enough to sat-isfy the operators but also large enough to justify launching a new aircraft – or re-engining existing aircraft families.

Aircraft engine design is a fine bal-ance of compromises. The enginemust be safe, reliable and efficient, atground level as well as at altitude, infine weather or foul, and produce lowlevels of noise and harmful emissionswhile costing nothing to maintain. Ingeneral terms (and my engine designer friends will be quick to point out this isa very broad statement) the simplestway to improve the fuel consumptionof a high BPR engine is to increase theBPR even more and make better useof the air that flows through the core togenerate the mechanical power neces-sary to turn a larger fan producing more thrust. The two engines offered on theA320neo have much higher BPRs thantheir current equivalent engines, andare elegant examples of how the various design compromises can be resolved to achieve similar results while using tworadically different concepts.

The engines proposed for theA320neo have fan diameters consider-ably larger than the current A320 familyengines, and this shows there are alsoconsiderations with regards to theengine’s installation on the aircraft. It’sall very well for the engine designer toimprove fuel burn by increasing BPR, butthe increased frontal area of the largerfan will impose an increase in drag on the

faced in recent years have been toreduce fuel consumption while alsoreducing engine noise. The high bypass ratio engine responded well to this chal-lenge: the slower fan airflow reducednoise while improved engine thermo-dynamics associated with the high BPR concept have contributed to an averageimprovement in fuel consumption of 1% per year over the past 50 years. How-ever, in more recent times the industryfocus has changed. While noise is still

A320 ENGINE CHARACTERISTICS

Current Airbus family Airbus Neo family

Engine manufacturer IAE CFM P&W CFM

Aircraft model A319 A320 A321 A319 A320 A321 A319 A320 A321 A319 A320 A321Engine model V2500-A5 Series CFM56-5B Series PW1100G Series CFM Leap-X SeriesThrust range 22,000 to 33,000 lbs 22,000 to 33,000 lbs 23,500 to 32,100 lbs 22,000 to 33,000 lbs?Fan diameter 63,5” 68,3” 81” 78”

BPR 4.9 4.8 4.5 6 5.7 5.5 12 10+Cruise sfc (lbs/lb/hr) 0.543 0.545 V2500-A5 minus 15% CFM56-5B minus 16%Noise (epndB margin to stage 4) 19-20 19-20 15-16 16-21 14-17 8-16 Stage 4 minus 16dB Stage 4 minus 10-15dBNox (margin to CAEP 6 limits) 8% 7% 1% 32% 28% 20% CAEP 6 minus 50% CAEP 6 minus 50%



gearbox is not expected to be a sourceof problems for the airlines.

Turning now to the CFM Leap-Xengine. The fan diameter is slightlysmaller than the PW1100G, 78”, andthe wide-chord fan blades are black,suggesting they are made from carbonfibre. The Leap-X fan blade is a verysophisticated design, using the latest incomposite materials technology to pro-duce a blade that is both light, strong anddamage-tolerant. While the three-dimen-sional weave structure of the blade fibresis hidden beneath an aerodynamicallysmooth coating, the same weave pattern of interlocking strands is clear to see inthe structure of the fan casing, giving the engine a modern, jazzy look.

Viewed from the side, the engine givesthe impression it is noticeably longer thanthe PW1100G and, on opening the cas-ings, it is clear why. Behind the fan is athree-stage low-pressure compressorfollowed by a 10-stage high-pressurecompressor, the first nine stages of whichare blisks. The combustor is an updatedTAPS low-emissions design, offeringNOx levels 50% below CAEP 6. However,it is in the turbines that the real differencebetween the Leap-X concept and itspredecessors in the CFM stable can be found. There are two stages of high-pres-sure turbine rather than a single stage inthe CFM56-5B and seven stages of low-pressure turbine rather than four. Theoriginal CFM56 design was optimisedtowards low maintenance costs, hencenine stages of high-pressure compressorand a single-stage high-pressure turbine.To achieve the levels of fuel economydemanded by the market today, consid-erably more attention has been focused

the gearbox is rather large and heavy,but P&W would argue the weight pen-alty of the gearbox is offset by the use ofa shorter, lightweight, high-speed enginecore. Some might also question the effectof such a key component on the engine’sreliability and cost of maintenance. P&Wwould respond by pointing out thereare no expensive life-limited parts in the gearbox, that the shorter core has fewer rotating parts and aerofoils, and that theconcept has been extensively tested todemonstrate its reliability.

Although the Purepower series ofengines has been described as beinga new engine concept, there is in factnothing new about geared turbofans.Both the Garrett TFE731 and the Lycom-ing ALF 502 engines use gearboxes and have clocked up many hours of businessjet and airline operation. While theseengines have had reliability issues, fewof the known problems have been asso-ciated with the gearbox. Although theengine industry pretty much turned awayfrom geared fan technology back in the 1980s, P&W has been quietly workingaway, refining the concept through more than 30 years of testing and develop-ment. The proof will, of course, comeonce the engine enters service but the

integral part of the disk. The combustionchamber looks familiar, a trademark P&W‘Talon’ design but using state-of-the-art technology to obtain NOx emissionlevels 50% below the latest Committeeon Aviation Environmental Protection(CAEP)6 standards. Behind the combus-tor is a two-stage high-pressure turbinedriving the high-pressure compressorand a three-stage low-pressure turbineusing what looks like rather conven-tional materials. So far so good – a short, simple engine using recognisable tech-nology with low parts count contributingto low maintenance costs. But goingback to the front of the engine, there isa large steel casing sitting between thefan and the low-pressure turbine shaft.It is a planetary gearbox, transmittingpower from the low-pressure drive shaft to the fan via a number of smaller ‘planet’ gears, and it is this unit that makes thePurepower series of engines so different.

As previously mentioned, there isa need to increase BPR while improv-ing core efficiency. As fans get largerthey must rotate more slowly, to avoidthe blade tips going supersonic, butto improve core efficiency one wouldnormally look to increase combustiontemperatures and have the turbinesspinning faster – a classic engine design conundrum. The Purepower engines arewhat are called geared turbofan (GTF)engines: instead of the low-pressureturbine driving the fan directly throughthe low-pressure shaft, the fan is driventhrough a gearbox, thus allowing boththe low-pressure turbine and the fan torotate at their most optimal speeds. The use of a gearbox does, however, bringwith it some issues. As a component,

ENGINE DEVELOPMENT PROGRAMME TIMELINES

Programme 2010 2011 2012 2013 2014 2015 2016

Bombardier ‘C’ Series / PW1500G Series

FETT Flight test Certification EIS

Mitsubishi Regional Jet / PW1200G Series

FETT Certification? EIS

Airbus NEO / PW1100G Series

EIS?

COMAC C919 / Leap-X1C Series

EIS?

Airbus NEO / CFM Leap-X Series

EIS?

FETT = First engine to test EIS = Entry into Service



P&W would now have customers believethe engine is stuffed full of new technol-ogy. Conversely, it was initially believedthe Leap-X engine was to be a jewel ofall the latest technology available to theindustry today, but CFM now insists itis not such a leap (no pun intended) inthe dark and that all the new technologyincorporated into the engine has beentested and proven to bring measurablebenefit. What is clear is that all this newtechnology, whether from P&W or CFM,has a price. It has long been a tradition inthe engine industry that engines are soldby thrust, not hardware, which is why acustomer would pay significantly more fora high-thrust engine on an A321 than fora lower-thrust model, built using exactlythe same hardware, on an A319. Analysisof recent media reports suggests airlinesare going to be paying more than $1 mil-lion an engine extra, in terms of list price,for these new models compared with theprevious models at equivalent thrusts.

So, which engine do you choose foryour brand new A320neo? So far thisarticle has focused on the technicalcharacteristics of the engines and, if you were a technical vice-president of anairline there would be plenty for you todiscuss and debate. However, readersfrom a financial background might bemore interested in analysing these twoengines from a risk perspective.

While these two engines are oftendescribed as being ‘new’ engines, there is, in reality, no such thing. All engines

on the aerodynamic efficiency of thecore, hence the additional high-pressureturbine stages in the Leap-X. Similarly,to drive the fan slowly, at optimum effi-ciency, three additional stages havebeen added to the Leap-X’s low-pressureturbine to squeeze the last drop of energyout of the exhaust gases. One final pointfor the more discerning – the N°4 bear-ing, the Achilles heel of previous CFM56models, has been redesigned, whichshould further enhance reliability.

Something not present in this engineis the telltale grey of ceramic compos-ite material, which is a surprise. Whenthe Leap-X programme was originallylaunched, at the Farnborough Air Showin 2008, extravagant claims were madeabout the use of exotic materials toachieve performance improvements.While these materials will eventually findtheir way into the engine in time, CFMemphasises that, as the Leap-X engineintended for the A320neo will oper-ate at temperatures similar to today’sengines, it will be built using relativelytraditional base materials. Some newheat-resistant coatings will be used, andblade cooling will be improved, but theonly ceramic material will be found inthe high-pressure turbine shrouds. Thischoice of materials is important becausewhile some would argue more stagesand more rotating parts contribute toincreased maintenance costs, this wouldbe an over-simplification. Cost of spareparts, availability of repair techniquesand competition in the parts-repair mar-ket are also important factors in drivingrepair costs down, and these criteria arefacilitated by using materials that areknown to the industry and repairable inan airline’s workshop.

There are the two engines presentedin a virtual head-to-head comparison.On the one hand is the PW1100G: aGTF engine, short and compact, andwith fewer rotating parts so maintenancecosts should be low. Its gearbox is, insome people’s minds, a major unknown.On the other hand is the Leap-X: longer,but with a smaller fan diameter and morerotating parts. It is relatively conserva-tive in its choice of materials. But here isa contradiction in the engine manufac-turers’ marketing strategy: initially thePurepower engine series was presentedas a fairly low-tech, rugged design but

are produced following extensive designand test programmes and these twoengines are no exception. P&W hasbeen working on the geared turbofanconcept for more than 30 years, eversince its abortive attempt to secure anInternational Aero Engines GTF applica-tion on the Airbus A340 in the mid-1980s.The Leap-X engine is the offspring of atechnology acquisition programmelaunched in the latter years of the 20th

century aimed at equipping CFM withthe technology it felt it would need tosupport a new Boeing aircraft that, aseveryone believed at the time, wouldenter service around 2013. And so, assuch, neither engine should present abig risk in terms of technical maturity.But the aviation world is full of surprises, as CFM found out when it introducedthe CFM56-7B, a low-risk derivative of a well-established engine family. While the engine has settled down and is now pro-viding excellent service, it did experience



some quite unusual, and unforeseen,problems in the beginning.

Many airlines that have ordered theA320neo have justified their choice ofengine based on their appreciation of therespective manufacturer’s track record.P&W has extensive experience on theA320 family through its IAE joint venture and, as stated before, it has been work-ing on the GTF concept for a long time.P&W is also further into its engine devel-opment programme than CFM, and can probably back up sales pitches withmore hard data.

The Purepower series of engines hasalso been selected for other aircraft,such as the Mitsubishi Regional Jet, theBombardier C Series and the Irkut MC21.Pre-production engines are flying, hard-ware is being tested, components arebeing torn down and examined in micro-scopic detail. P&W claims that by thetime the PW1100G enters service on theA320, the Purepower GTF engine con-cept would have already accumulatedmore than one million operating hours onother aircraft programmes. CFM is alsointo a heavy programme of componenttesting but its engine will not enter serviceuntil several months after the PW1100G.

In justifying the choice of the Leap-Xengine, customers such as SAS and Air

Asia refer to their previous experiencewith CFM products. It is one thing to beable to relate to previous product experi-ence, but this is the crucial issue with bothof these engine programmes – not onlyare they revolutionary concepts in theirown right but they are also completely dif-ferent from their manufacturers’ previousproduct lines. P&W has never put a GTFinto service before and the Leap-X prob-ably has more in comparison with GE’sGenX engine than with other engines inthe CFM product line. This suggests that,in these cases, previous experience hasrather limited value as an engine selectioncriterion. So how do you choose? In theend it comes down to a question of confi-dence. Who do you believe will be betterable to respect programme milestones?Who is better able to accommodate thehead-spinning ramp-up required to intro-duce several programmes to the marketat the same time? Who is better able to

manage their supply chain to avoid prob-lems that could ground the whole fleet?Who is better able to sort out technicalproblems quickly if things do go wrong?Both manufacturers have valid argumentsto answer these questions – but only time,and experience, will tell.

The choice of an engine is difficultenough for an airline but how doesan aircraft leasing company make itschoice? If a lessor is looking to acquirea large number of A320neos for leasingto the airline community, which enginemodel should it select? The answer issimple – both. Both engines offer stepchanges in fuel economy backed upby comprehensive OEM fleet hourmaintenance agreements. Both enginemanufacturers are committed to mak-ing these programmes work to ensuretheir future in the civil aero-engine busi-ness. Both engines are available on anumber of different aircraft applications(the American Airlines order has signi-fied the launch of the 737 re-enginedwith the Leap-X). The market (with alittle help from Airbus) will, in the longterm, ensure a more or less 50/50 split inmarket share with regards to A320neoengine selections.

But the market should not get over-excited about re-engining programmes.Engine manufacturers are used to play-ing the long game and we should notforget what this is really all about – theengine selection for the next generationof single aisle airliners (NGSA). WithAirbus, and now Boeing, committed tore-engining programmes, the timescalefor an NGSA has certainly been pushedout to the right, but both engine suppli-ers have their sights firmly fixed on thislonger-term objective. And they are notalone – Rolls Royce, although margin-alised for the moment in this particularmarket segment due to its unwillingnessto join P&W in a new IAE-type joint ven-ture, is quietly pursuing its own mid-thrustengine development programmes. Andwho’s to say that, in the meantime, theremight not also be new entrants into thismarket – the Chinese, for example? In 10years’ time the fight to secure a place onone of these re-engining programmesmight, in hindsight, seem just a minorskirmish compared with the battle toequip the next generation of completelynew single aisle aircraft.

GUIDINGYOUR END

OF LIFE ASSET STRATEGIES

INVENTORY NAVIGATORS

TMINAVGROUP, LLC


MAX V NEO

In one corner there is theA320neo, an aircraft conceivedin a hurry but with an impres-sive sales record. In the othercorner is the 737max; conceived

in a far greater hurry and playing catch-up. So which aircraft is better and whatare their chances in the race for marketshare? As with all aircraft purchases, itdepends on the operator’s circumstancesand considerations in purchasing theaircraft type, for example, fleet com-monality, reliability, cost and trust inan original equipment manufacturer’s(OEM’s) product.

The reasoning…The A320neo was designed in a hurry,and though this was not a reaction-ary measure from Airbus, it was JohnLeahy, its chief operating officer, whoforced the programme through. Leahyalready knew that a new technologicalleap in aircraft design and power beingdeveloped by Nasa was not going to beavailable for commercial service before2030-35. Armed with this knowledge,and the fact that airline customersdemanded more fuel savings, Leahyconcluded that there was a window topush through an aircraft programmethat would both answer the need for fuelsavings and create additional revenue atlittle R&D cost to Airbus – a rare win-win scenario. This is a ‘stopgap’ strategy,but the reasoning from the point of viewof both the seller and the buyer is sound.

Although most aircraft lessors dislikethe idea of the Neo due to its effect onresidual values and A320 lease rates, theyhave little choice but to order the aircraftto serve the needs of their customers. Ifthe 2030–35 timeframe is correct, thenew aircraft types have a market leadinglife of around 15 to 20 years, slightly lessthan today. Yet this might well becomethe new standard while the industrypasses through a period of technological

change with age caps on imported air-craft becoming commonplace.

Behind the scenes, CFM Interna-tional (CFMi) was encouraging bothAirbus and Boeing to re-engine the A320and the 737NG in order to sell its ownnew engine – the Leap X. CFMi realisedthat if Airbus launched the Neo, Boeingwould have no choice but to re-enginethe 737, which would most likely be sole-sourced with CFMi engines. CFMi wasdesperate that there should be no all-new aircraft at this time and appears tohave been pulling the strings of the two-airframe manufacturers (see issue threeof Airline Economics). When presentedwith the Pratt & Whitney (P&W) GTFengine, Leahy asked for the engine to besent to Toulouse to be scrutinised beforebeing put onto an A340 for a full series oftests. Impressed with the results, Leahybegan working on a way to use the newengine option on Airbus aircraft.

At this point, Airbus had a problem.P&W was delighted that Airbus wasimpressed with the new engine but there was Rolls Royce to consider; it also hada new engine fit for a re-engineered nar-rowbody aircraft. Airbus insisted on goingthrough International Aero Engines(IAE) to get the GTF engine, thinkingthat IAE shareholder Rolls-Royce would come to the table under the banner ofIAE (Rolls-Royce has since sold its stakein IAE). It did not, however, and no con-sensus was reached between the enginemanufacturers, leaving Airbus, whichwas absolutely convinced it did not want its aircraft to be sole-sourced, no choicebut to go it alone with P&W.

At this point, the board was set andthe pieces were in motion. The A320neowas launched leaving Boeing worriedthat it did not have the time to launchthe 737 replacement all-new aircraft itpreferred. It is assumed that Boeing washoping the Neo would fail to win orders,which is understandable considering the

market’s negative reaction to the Neo.Meanwhile, in Toulouse, Airbus

realised good sales figures for the Neocould force Boeing to make a snap deci-sion to re-engine. But it became clearthat if Boeing went down the single CFMiengine route, which seemed likely, theA320neo could open up a serious mar-ket lead. It was at this stage that seniorindustry leaders began to assess themerits of the Leap X and the P&W GTF.“The trouble with the Leap X engines isthat they don’t look as good on the Neoas the GTF does,” one source told AirlineEconomics. “The CFMi Leap-X1A has a78-inch fan – it’s all the same technol-ogy – but if you can take a fan down by10inches in this industry, everything elsebeing equal, you’ve just added 5% [to theperformance margin]. CFMi will arguethat it has made the engine smaller tocompensate and so have saved 1% onweight and drag; but that’s still a 4% dis-advantage [on the GTF]. The end resultis that you’ve got a really big gap betweena P&W Neo and a CFMi Neo.”

As it turned out, Leahy was not bluffingabout his prediction for the success of the Neo. He did have airlines lined up readyto pay a premium for an A320neo, which flew off the shelves. The 2011 Paris Air

A question of circumstanceThe 737max vs the A320neo – Airline Economics provides a definitive guide to bothaircraft programmes and which aircraft to buy now.

Before you read this article:In the course of its research Airline Economicshas gained direct input from the signatories onboth sides of agreements for the aircraft andengines in question, from airlines, originalequipment manufacturers and lessors. We alsohave had input from people involved in deals andengineering input fromthoseworkingonthepro-grammes. Airline Economics is now aware howmuch was paid for what, what mistakes weremade, and knows who is worried. See AirlineEconomics, issues one, two and three, 2011, forbackground on these aircraft and their engines.Thank you to those that helped with this article.


MAX V NEO

ity ticket with CFMi and the Leap X, andthis seems to be its greatest weakness. ABoeing source argues that the manufac-turer has more engine specialists thanGE and P&W combined and so is sureof its advantage, claiming it would nothave brought anything to market thatcould not win. However, this contradictsAirbus’s findings. Somebody has to bewrong. So who is it?

Since the launch of the 737max, Boeingbeen engaged in promoting the 737NG as 8% more economical than today’s Airbus A320 and that the new 737-8max will be7% more economical than the A320neo.Airbus has dismissed these claims – as

The AA order essentially forced Boe-ing’s decision. When Leahy obtained acommitment in Boeing’s core home mar-ket at a premium, the Boeing reactionwas immediate. Boeing went into nego-tiations with only the 737-800NG onthe table – it came out with the 737max.CFMi controlled much of the proceed-ings with its drawing-board solution tothe 737NG engine clearance problem.CFMi said it could make the fan diam-eter of its Leap X engine smaller whileat the same time improving the newaircraft’s performance over the exist-ing 737-800NG. However, Boeing hastaken this performance gain and appliedit directly against the A320neo to dem-onstrate that the Max is in many wayssuperior. The figures are hotly disputed.

Both Airbus and Boeing take theiraircraft specifications and apply themin a way that makes them ‘best in class’.They also produce equally convinc-ing sales pitches, and both Airbus andBoeing defend their respective aircraftadmirably. The important issue is thatBoeing is wedded to the engine-exclusiv-

Show morphed into the A320neo show,which was disappointing for Boeing, as it was still holding out hope it would havetime to launch an all-new 737NG replace-ment. Time was running out.

Meanwhile, it was all-out war for engineorders where the A320neo was concerned.Airline Economics learned early last yearthat CFMi made it a priority in 2011 to “capture market share at all costs”, whichled to slashed prices and virtually freeengines. One airline was offered such a lowprice that it was suspicious of its claimedperformance and promptly ordered P&WGTF engines saying: “If they are free theyare obviously no good.”

Boeing was scrambling during thefirst half of 2011 trying to find an answerto the Neo challenge, and was investigat-ing whether it could launch an all-newaircraft in the same timeframe as theNeo to meet customers’ demands. Butthen came the American Airlines (AA)tender for new narrowbody aircraft. TheAA deal had echoes of the split deal inthe 1980s when AA ordered both A300-600Rs and 767-300s.

Although most aircraft lessorsdislike the idea of the Neo dueto its effect on residual valuesand A320 lease rates, theyhave little choice but to orderthe aircraft to serve the needsof their customers

800nm sector

Nominal performance Standard profile and weights*fan area LEAP-1A versus CFM56-5BDrawings not made to scale

Thanks to Sharklets A320neo delivers full SFC benefit

EngineSFC -15.3 %

+1%

ReferenceA320 CFM

Fuel Burnsavings %

Improvedcore

~7%

+32% more area* ~7%

Powerplant integration ~1%Sharklets -2.4%

Example of A320neo LEAP-1A versus A320 CFM56

- Extra MWE < 2t - Drag+2.7%

-15.0% A320neoversusA320

FIGURE 1: A320NEO FUEL BURN SAVINGS RATIONALE (800NM SECTOR)


MAX V NEO

have airlines and lessors – and has sought to keep its message clear based uponfacts. Boeing has revealed its comparison chart (see figure 2) but have the facts been checked? Airline Economics contendsthat airlines have but the media has not,so seeks to put the record straight here.

Boeing says that the Max will have asimilar seat-mile and trip-cost advan-tage relative to Neo as the 737NG didagainst the A320. The A320neo willbe 12 seats smaller than the 737max-8and weigh more. Aircraft size selectionis always a trade between trip cost andseat-mile cost. Trip cost is known as risk(it has to be paid no matter how high theload factor is) while the seat-mile costis the reward (as the airplane is filled,unit costs decline, increasing margins).Choosing to buy an airplane with lowertrip and seat-mile costs is a no-brainer.This is why the 737-800 does so well rel-ative to the A320 and this is why the Maxis going to do just fine against the Neo.

When asked about the fan diameterBoeing says that, if a bigger fan is better,why not just hang a GE90 on the Neo?Bigger fan equals more drag and moreweight, it says, and the fan is optimisedfor each airframe. Our aircraft weighsless (and carries more) and thereforeneeds less thrust (less maintenance andbetter fuel burn) and therefore needs asmaller fan (lighter and less drag). Everylessor and aircraft investor will tell youthat one of the big reasons why NG isa better investment than an A320 isbecause A320’s multiple engine choicesfragment the market of potential cus-tomers. The bottom line is that the NGdid just fine against multiple enginechoices on A320 and there is nothingthat changes that dynamic for Max vsNeo,” says a Boeing source.

This is the argument from Boeing thatforms the core of its sales strategy. Logi-cal, but it all depends on what you meanby ‘better’.

The OEMs are experts in defining theparameters that will show their productin the best light (see figure 2). AirlineEconomics would tend to agree withBoeing that fuel burn per seat is probablya sensible gauge, as it allows for a com-parison of the different sizes of the twoaircraft. But what of fuel burn? Per hour,and at what speed or altitude? Per trip?If so, what sector length? Is it specific

This is where we should raise somequestions about the engine installa-tion. The A320’s engines are hung lowunder the wing, minimising interferencebetween the nacelle and the wing. TheMax’s installation will push the engineeven further forwards and upwards thanon the 737NG, creating the potential formore interference between the nacelleand the wing.

(See issues one and three, 2011, ofAirline Economics for the full enginecomparison, company lines, investorpolls and inside information on the P&WGTF and the CFMi Leap X. Available atwww.aviationnews-online.com/airline-economics).

The problem for Boeing is what wasthe 737NG’s past strength – the sole-source engine – is now a disadvantage.The 737max has an exclusive agree-ment with an engine that the majorityof sources claim cannot compete withthe P&W GTF, even before taking intoaccount the implications of making theLeap X smaller for the 737max. Thisattitude appears to be playing out in themarketplace, where operators, whenthey have compared the aircraft with theMax, are switching to the Neo – even Boe-ing’s previously exclusive customers. Tomake that switch to the Neo, it has to beblatantly obvious the aircraft is believedto be better than the Boeing offering, orit wouldn’t be worth the change.

So what now for Boeing?If Boeing has got a sub-optimum re-engined aircraft, it can’t do much about itunless the airframe is changed completely,which means it will not get the same rat-ing again. It is worth remembering that,in what has been described as “the great-est marketing job of all time” by a seniorAirbus executive, Boeing convinced theFederal Aviation Administration thatthe 1967 type rating was still valid in themid-90s when it launched the 737NGeven though the majority of the aircraftwas changed completely. That is highlyunlikely to happen again.

If Boeing does go back to the drawingboard on the Max, it will need to deal with problems such as the lack of room inside the current aircraft, making way for big-ger landing gear. It would have to changethe fuselage, the centre section, wing, fly-by-wire – by then we are talking about a

fuel consumption, that is, pounds of fuelburned by the engine per pound of thrustproduced, the usual parameter of enginemanufacturers? Engine fuel burn? Perwhat? Per hour, per mile, per trip, perpassenger seat mile? Aircraft fuel con-sumption, within a specific range?

The only way the market will reallyknow is when all aircraft/engine con-figurations have been certified and theperformance data published. Until thenwe can only guess.

While the engine manufacturersare still being coy about the details oftheir engines (especially with regardsto weight), the Leap-X1B for the Max isexpected to be lighter than the X1A forthe Neo. The fan is smaller, with lowerthrust. So it should not be surprising if ithas one or two stages of LP turbine lessthan the higher powered Airbus engine(compare 5B LP turbine configurationwith 7B LP turbine configuration: 5B– thrust to 33k lbs, 5 stage LPT, 102,4”engine length, 5250 lbs; 7B – thrust to27k lbs, 4 stage LPT, 98,7” engine length,5216 lbs).

As for Boeing’s drag argument – it is correct. A higher bypass ratio (BPR) usu-ally means lower SFC but with these bigfans you get to a point of diminishingreturns in that the more you increase thebypass ratio, and hence the fan diameter,the better the SFC of the engine. But thenyou get more drag from the fan frontalsurface and the wetted area of the nacelle,which increases the overall fuel burn of theaircraft. The Max will have a smaller fan,and so lower BPR and higher SFC, but lessfan and nacelle drag. Ryanair chief execu-tive Michael O’Leary is not convinced bythis drag gain. He is impressed by the fuel-burn improvement the A320neo promisesto deliver, but not by the 737max, and saysthe fuel burn improvement on the Maxis inferior. He particularly fears that theheavier CFM Leap-1B engines and thesubsequent heavier airframe will offsetthe better SFC, when compared with theCFM56-7B(E).

Those who have alreadychosen the CFMi engine are

that is why CFMi called it theLeap X?

brand new aircraft. This is the scenariothat is no doubt running fear throughthe corridors of GE in Cincinnati. CFMi/GE understands that if it can’t deliver onthe promises of the Leap X engine to keepBoeing on track with the re-engine of the 737, it will face substantial competitionfrom P&W and Rolls Royce. One sourcesays: “In such an event, Boeing could tryto claim it can now offer the GTF on the737 and optimise it for an 82-inch fan soit gets one inch more than the Neo.”

This could be great for Boeing andto the detriment of Airbus, yet Boeingwould have to burn bridges with CFMi.For Boeing, both the new aircraft option and the option of getting the GTF on wingless radically work to destroy the synergyadvantage of having all CFMi-737NGengine fleets. If Boeing were to drop theCFMi engine and go with Rolls Royce or P&W, chaos could ensue in the market. Itis possible, though. A Boeing senior staffmember states: “There is a reason why weneed a couple of years to work through all

these issues. But that does not mean wedo not have a very good idea of where the final products will end up.”

Leahy must have known that thelaunch of the Neo, if it worked, wouldforce one of two things out of Boeing: itwould either be brave and launch a newaircraft and then Airbus would be in a fix, or Boeing would be forced into a reaction-ary and rushed decision to re-engine the 737NG, playing right into the hands ofhis team. It was the latter that transpired.Boeing completed its mistake by havingCFMi exclusivity. CFMi has to come upwith an engine that is a smash hit, butmany still don’t know how it is going todo that with a lower fan ratio.

Where the programmes are nowThe launch of the Neo was quick butorderly, with all programme details andlaunch customers in place by the time itwent public. The same cannot be said ofthe 737max, even though Boeing claimsto have launched the Max in a similar

methodical manner to the Neo, with air-lines queuing up to order the new option.

The realityBoth aircraft were conceived out of

consultation with airlines; the differenceis that the Neo was driven by market lead-ership while the Max was designed as areactionary measure. It was rushed to mar-ket, and that shows. This is an opportunityfor themanufacturers to push to market anaircraft without the usual R&D costs asso-ciated with a new aircraft programme. Theaircraft also allow for the manufacturers toincrease their aftermarket share at point oforder – a core future revenue driver wherethe OEMs are concerned.

Lessors have little choice but to orderboth aircraft types, knowing that theimpact of the 737NG on the 737 classic willbe played out all over again for a far smallergain than was expected. Meanwhile, theA320 suffers from its own success. The air-craft was mass produced to such an extentthat the market is flooded. Lease rates for

MAX V NEO


lower fuel consumption

Base

-1%

-2%

Fuel burn/seat162 Seats

65”68”

Ref

150 Seats

A320-3%

-4%

-5%

-6%

68” A320

-13.5%Engine

technology*Remove

tip fences +1%6%737-800 61” -7%

-8%

-9%

-10%

+3.5%

technology

Integrateddrag & weight*

Add larger winglets -3%

Improved-1% -12%Engine

technology

737 800 61”

-11%

-12%

-13%

-14%

-15%

78”81”

A320neo

12%

paft body

1%

+2%Integrated

drag & weight

gy

-15%

-16%

-17%

-18%

-19%Typical mission rules

A320neoCFM LEAP-1A orPW 1100G (GTF)

* GTF components slightly different but have same net effect as LEAP68”737 MAX 8 17%

CFM LEAP 1B

COPYRIGHT © 2011 THE BOEING COMPANY

-20%Typical mission rules500 nmi tripTwo-class seating

All 737s include optional winglets A320neo includes winglets

CFM LEAP-1B

FIGURE 2: 737 ENGINE AND INSTALLATION OPTIMISATION DRIVES LOWER FUEL CONSUMPTION

For NG and A320, calculations are based on actual fuel burn, not specific fuel consumption (SFC). For Max and Neo it is the

projected fuel burn where SFC is one of the variables in the analysis.


MAX V NEO

all the A320 family aircraft are falling fast,and lessors with large amounts of these aircraft on their books now need to con-sider what to do next. The introduction ofthe A320neo will not have too much effecton the A320 classic market, as it is alreadyfalling fast some years before a Neo rollsout of the factory door. However, this ishaving a reactionary impact that mightyet see A320 lease rates stabilise as lessorsmove to buy up A320s with lease contractscheaply and then run the contracts out andsell off the engines at the end of the life andpart out. It looks as if the 737NG lease ratesand values will start to soften (not just the-700s) in the next two years as that marketalso reaches proliferation.

ConclusionThe 737max does have a significant weak-ness, and that is in the power plant andthe ground clearance. There is increasingevidence that the Pratt & Whitney engineis exceeding expectations in all aspectsof testing. There remains the possibility,however unlikely, that the A320neo couldhave a massive advantage over the 737maxif it has P&W engine on-wing.

At the time of going to press, CFMi hadnot responded to requests for comment.Boeing and CFMi might point to the P&Wengine being untested as a reason to pur-chase their product, but the whole Maxprogramme is also unclear and untested.Airline Economics believes Boeing couldfind itself with no option but to approachP&W and/or RR to provide alternativeengines for the Max, which in turn willhave profound effects on the CFMi rela-tionship and destroy the fleet synergy ofthe Max with the older 737s.

Aircraft lessors need to service therequirements of the market, to get in earlyon the order books, and maximise their chances of premium leases and marketvalue, so they will order both the Max andthe Neo, regardless. The bottom line for therest of the market rests on purchase price

versus cost savings. This is the decidingfactor in the argument, and at the momentfavours the A320neo. When ordering air-craft, operators and/or investors mustbase a decision on the facts to hand, unlessthey are offered a deal that displaces thislogic. In the end both the Max and Neo willcompete on price. Boeing hopes that: “Justlike the NG has consistently commanded apremium over A320s, so will the Max overthe Neo. The only question that remainsis how big the Max price premium will beover the Neo,” says a source in the US.

Another issue is that, in 2011, a largenumber of A320neo orders were driven bystart-up airline requirements. Given theeconomic decline since then, Boeing mighthave missed the boat for this market.

Can you purchase a Max or Neo earlyand make a gain? As with all aircraft in thepast, the answer is yes.

Longer term, on maintenance Boeingargues the Max will have the edge becauseits engines are smaller and CFMi has aproven reputation for reliability. But atthis stage the details of both aircraft arenot complete.

Residual values are a variable in allthis, and are the crunch factor if avia-tion companies are to rely on capitalmarkets financing more often in future.For an investor the main worry is guar-anteed returns over a set period andresidual value of the asset at the end ofthe investment term. Based on historicalinformation, one could argue the 737max will hold its value over the A320neobecause, traditionally, Airbus has pro-duced more aircraft and saturated themarket at a faster pace – reducing long-term residual values and rental rates. Thisresults in the A320neo depreciating morequickly than the 737max.

A start-up airline in the market forthe very best deal might have to go withthe A320neo with P&W engines on wing,presuming the slots are not all taken forthe delivery periods. Delivery times arewhere the 737max will gain a few addi-tional orders, but it would probably beprudent to wait to see what Boeing does,and then turn to the lessors if time scalesand financing require.

It would be logical for airlines with aCFMi-powered fleet to opt for the CFMiengine, there is no argument there. But those who have already chosen the CFMiengine are taking a leap of faith – maybe

that is why CFMi called it the Leap X?If you can get the new version at the

same price as the old, you are going tobuy the one with the better technology.Airbus, however, is starting to raise theNeo price, which again puts those whoordered early in an excellent position.So the Max remains a gain in any event,while the boat has been missed for air-lines seeking a Neo for pure list price gain,due to its success to date and order slotsbeing sold out. Boeing is ensuring theMax has more range capability over theNeo, which might be of interest to some.

Boeing conceded to pressure to re-engine the NG when American Airlines and CFMi pushed it to match the A320neooffered by Airbus. However, in hindsightthis ‘commitment’ from the now bank-rupt American Airlines was not worth thetrouble it caused Boeing. Perhaps Boeingexecutives should have held their groundand been prepared to take the AA hit whilewaiting for a better opportunity to trumpAirbus and launch a completely newaircraft. If they had done so, it is highly con-ceivable that Boeing would have offered achoice of engines on that new aircraft.

Some might think Boeing has made amistake, but it has the talent, knowledgeand experience to correct it, and to ensureits aircraft are better than the A320neo. Ifthat means P&W or RR engines on wingor a totally different CFMi offering, so beit. There is an opportunity to get on the737maxorder books and trustBoeingtodothe right thing, and in so doing buy whatcould be a great aircraft cheaply.

The Airline Economics view: Orderthe 737max now as a large block order(or ensure contact and collaborationwith another large order signatory)and pressure Boeing hard for a greatinvestment opportunity. Or for the saf-est guarantee of best performance in thehere and now, order the A320neo withP&W GTF on wing.

This current scenario is no differentthan the 787/A350 situation but it is aroll reversal. This time Airbus launchedthe better aircraft. It is highly likely thatBoeing will do with the Max what Airbus did with the A350. It will go back, changethe aircraft, raise it, and then CFMi willroll up at the door with an engine 1” or solarger (diameter) than the one on the Neoand Boeing will be able to move forward.Airline Economics sees this as likely.

variable in all this, and arethe crunch factor if aviationcompanies are to rely oncapital markets financing more


MAX V NEO

TABLE 1: AIRBUS A320NEO ORDERS (AS OF FEBRUARY 13, 2012)

Customer Country Region Model Engine Order date Firm Status Options Total options

Virgin America US North America A320neo LEAP-1A 29-Dec-10 30 firm 0

ILFC US North America A320neo LEAP-1A 26-Apr-11 15 firm 0

ILFC US North America A321neo LEAP-1A 26-Apr-11 25 firm 0

ILFC US North America A320neo PW1100G 26-Apr-11 60 firm 0

SAS Sweden Europe A320neo LEAP-1A 20-Jun-11 30 firm 0

GECAS US North America A320neo LEAP-1A 20-Jun-11 60 firm 0

ALC US North America A320neo open 20-Jun-11 20 MoU 14 14

ALC US North America A321neo open 20-Jun-11 16 MoU 14

Transasia Taiwan East Asia A321neo open 21-Jun-11 6 firm 14

LAN Chile South America A320neo open 22-Jun-11 20 firm 14

IndiGo India East Asia A320neo PW1100G 22-Jun-11 150 firm 14

GoAir India East Asia A320neo open 23-Jun-11 72 firm 14

Air Asia Malaysia South East Asia A320neo LEAP-1A 23-Jun-11 200 firm 100 114

American Airlines US North America A321neo open 20-Jul-11 130 MoU 280 394

Lufthansa Germany Europe A320neo PW1100G 27-Jul-11 25 firm 394

Lufthansa Germany Europe A321neo PW1100G 27-Jul-11 5 firm 394

Cebu Pacific Philippines Southeast Asia A321neo open 8-Aug-11 30 firm 10 404

Garuda Citilink Indonesia Southeast Asia A320neo LEAP-1A 9-Aug-11 10 firm 25 429

CIT US North America A320neo LEAP-1A 10-Aug-11 15 firm 429

CIT US North America A320neo PW1100G 10-Aug-11 30 firm 429

CIT US North America A320neo open 10-Aug-11 5 firm 429

Qantas Australia Oceania A320neo open 6-Oct-11 78 firm 194 623

TAM Brazil South America A320neo open 20-Oct-11 22 firm 623

Jetblue US North America A320neo PW1100G 27-Oct-11 40 firm 623

ALAFCO Kuwait Middle East A320neo PW1100G 14-Nov-1114-Feb-12

85 firm 653

ACG US North America A320neo open 15-Nov-11 30 firm 653

Qatar Airways Qatar Middle East A319NEO PW1100G 15-Nov-11 6 firm 653

Qatar Airways Qatar Middle East A320neo PW1100G 15-Nov-11 30 firm 30 683

Qatar Airways Qatar Middle East A320neo PW1100G 15-Nov-11 14 firm 683

Transaero Russia Europe A320neo open 15-Nov-11 8 firm 4 687

Republic Airways US North America A319NEO LEAP-1A 1-Dec-11 20 firm 687

Republic Airways US North America A320neo LEAP-1A 1-Dec-11 60 firm 687

Undisclosed Undis-closed

Undisclosed A320neo open 20-Dec-11 35 firm 687

Volaris Mexico South America A320neo open 27-Dec-11 30 firm 687

Spirit Airlines US Middle East A320neo open 29-Dec-11 45 firm 687

Norwegian SAS Norway Europe A320neo open 25-Jan-12 100 MoU 50 737

Avianca TACA Colombia South America A320neo open 26-Jan-12 33 firm 737

TABLE 2: BOEING 737MAX ORDERS (AS OF FEBRUARY 13, 2012)

Customer Country Region Model Engine Order date Firm Status Options Total options

American Airlines US North America B737 MAX-8 LEAP-1B 27-Jul-11 100 MoU 100 100

ACG US North America B737 MAX-8 LEAP-1B 17-Nov-11 35 MoU 100

Lion Air Indonesia Southeast Asia B737 MAX-9 LEAP-1B 18-Nov-11 201 firm 150 150

Southwest Airlines US North America B737 MAX-8 LEAP-1B 13-Dec-11 150 firm 150 300

Norwegian SAS Norway Europe B737 MAX-8 LEAP-1B 25-Jan-12 100 firm 100 400


737-800 VS A320-200

737-800 Vs A320-200For those shopping for 160-seat aircraft, Airline Economicshas gathered the relevant information on the main contenders.

Airbus predicts, ifoil continues on itsupward trend, that4,000 A320neos will besold over 15 years from2011. Pratt & Whitney

estimates that it will capture at least50% of this total, which looks set tobe the case. CFM will continue to dowell; the Leap X is a great engine thatprovides mixed fleets with a degree ofsynergy.

Despite the flurry of ordersannounced for the A320neo airlinesand lessors appear to be united intheir dislike of the new aircraft. Boeingobviously has issues with it, Zolotuskysays: “I cannot think of a single air-plane introduced by Boeing or Airbus

that has so uniformly and universallyfaced opposition from the financialcommunity. Lessors don’t like it;bankers don’t like it; equity investorsdon’t like it. The low level of financiers’acceptance is unparalleled. For them,they view it as an asset that will dis-rupt the current A320 values and willnot be long enough in its own life toestablish and new platform and stablevalues.”

Undoubtedly the Neo will bringdown residual values for the currentA320 type, which happens with allreplacement aircraft. However, thisis the first aircraft that has united thefinancial community against it froman investment point of view. And inthis market, where banks are look-

ing very closely at what assets theyfinance, this could prove fatal for theNeo program – at least for those air-lines seeking to finance deliverieswithout support from the export creditagencies.

Bertrand Grabowski of DVB BankSE was quoted by Bloomberg as say-ing that the value of A320neo may drop“significantly” once next-generationsingle-aisle aircraft begin entering themarket, which could happen within adecade. He went further to add “Whydo you [Airbus] propose to the mar-ket an aircraft which is going to bean interim arrangement?” “That’sbizarre.”

“Banks or leasing companies aregoing to be exposed,” said Andrew


737-800 VS A320-200

Before, during and after the financial crisis A320-200 & 737-800 against current A320neo

Average Current Market Value Dry Lease Rates (averages)

Manufacturer Type list price As at (Year) Oldest Newest Oldest Newest

Airbus A320-200 $64.50m 2006 $11.95m $40.15m $0.155m $0.395m

Airbus A320-200 $66.75m 2007 $11.29m $45.8m $0.150m $0.410m

Airbus A320-200 $76.90m 2008 $11.00m $41.10m $0.135m $0.365m

Airbus A320-200 $76.90m 2009 $7.40m $38.50m $0.100m $0.325m

Airbus A320-200 $76.90m 2010 $6.80m $37.80m $0.100m $0.325m

Airbus A320-200 $85.00m 2011 $5.00m $39.30m $0.070m $0.320m

Airbus A320neo $90.60m 2011 n/a n/a n/a n/a

Boeing 737-800 $67.75m 2006 $29.75m $43.00m $0.290m $0.405m

Boeing 737-800 $70.75m 2007 $32.17m $49.88m $0.330m $0.425m

Boeing 737-800 $74.50m 2008 $25.90m $41.90m $0.255m $0.370m

Boeing 737-800 $74.50m 2009 $23.10m $40.10m $0.220m $0.340m

Boeing 737-800 $74.50m 2010 $20.70m $39.20m $0.220m $0.340m

Boeing 737-800 $80.80m 2011 $19.70m $40.75m $0.235m $0.350m


737-800 VS A320-200

Koystya Zolotusky of Boeing Capital.“LCCs first and foremost have a muchhigher utilisation of its aircraft rela-tive to network carriers. The way toachieve high utilisation rates is to havean extremely reliable airplane. If youare going to have an all-new engine,you cannot hope to have reliabilityat the level we deliver in the currentengine/airframe combination.”

The annual average market val-ues for the A320-200 and 737-800 showclearly the rush to market for newaircraft as oil topped $145 a barrel,the subsequent tail off as liquidityand passengers dried-up and now the

Miller, chief executive officer of Syd-ney-based CAPA Consulting, whichadvises airlines and industry inves-tors. “When a new model is announced,the depreciation of the existing modelgrows.”

The driving force behind the popu-larity of A320 and 737 aircraft has beenthe growth of the low-cost carriers.Their operating model of high turn-arounds and high aircraft utilisationmeans fleet and engine commonalityis of the up most importance.

“The biggest and most importantdriving force is that the 737/A320market is the low-cost carrier,” says

A320-200 & 737-800 MARKET VALUES (PAST FIVE YEARS)

10

20

30

40

50

60

2006 2007 2008 2009 2010 2011

Valu

e in

US

$ m

illio

ns

A320-200 oldest A320-200 newest 737-800 oldest 737-800 newest

Year

AIRCRAFT

MANUFACTURER

AIRCRAFT TYPE AIRCRAFT VARIANT TOTAL IN

SERVICE

TOTAL

IN STORAGE

CURRENT

TOTAL

Airbus A320 110 (CFM) 1 0 1Airbus A320 200 (Engines Unannounced) 0 0 0Airbus A320 200 ACJ (Engines Unannounced) 0 0 0Airbus A320 210 (CFM) 1386 66 1452Airbus A320 210 (CFM) Sharklets 0 0 0Airbus A320 210 ACJ (CFM) 4 0 4Airbus A320 230 (IAE) 1064 44 1108Airbus A320 230 (IAE) Sharklets 0 0 0Airbus A320 230 ACJ (IAE) 1 1 2Airbus A320 200 neo (Engines Unannounced) 0 0 0Airbus A320 200 neo (PW) 0 0 0Boeing 737 (NG) 800 214 2 216Boeing 737 (NG) 800 Winglets 1976 26 2002Boeing 737 (NG) 800A 3 5 8

gradual return to a stable market oflate 2005 levels. The older A320-200sheld their values during the surge of2006 and 2007 and continued to dur-ing 2008 as new aircraft orders ceasedon the main but the return to marketin 2009 saw a resetting of values at anew lower level that has been erodedfurther during late 2010 to date asoil has again marched above $100 abarrel. The older 737-800s, althoughsome nine years newer than the olderA320-200s are also seeing their valuesfall into a new bracket far below thetracked margins of pre-2008. This,much like the older A320-200s, marksa new chapter of cheaper aircraft, achapter where parting out is the onlylogical option. The new A320-200scontinue to track the fortunes of the737-800 as closely now as ever.

In the leasing market the rates ofreturn have also reflected market con-ditions well with 2011 seeing 737-800lease rates inching ahead while thesame for the A320-200 fall off slightly.On the main, the market has beenstagnant since early 2009 with verylittle sign that improvements in leaserates on the types are on the horizonat the moment. It will be interestingto see if the 737-800 continues to pullaway from the A320-200 to create a sig-nificant rate of return gap over the 2ndhalf of 2011. Older 737-800s have seen aslight increase in rates of return alsofrom 2009/10 levels but the older A320-200s continue to tail off as they movetowards 25 years of age in some cases.


737-800 VS A320-200

Boeing has seemed to rush to mar-ket with the 737Max but the realityremains. The reality remains that the737-800 is good enough to compete tothe end of the decade so an all-newoffering for entry into service around2020 would be the logical option thatwould be supported by lessors. The737-800 purchase price saving overthe A320neo means that it cannot bebeaten on economics and the provenreliability of both the airframe andthe CFM56 engines is a real winner.That said if you are currently runningan A320 family fleet then you have nochoice but to move for an A320neoas upgrade or replacement. Wehave been here before, when Boeinglaunched the 737NGs they completelyundermined the residual value of whatbecame the 737 classic fleet, manyairlines and lessors were left withno choice but to move to rebalancetheir portfolio towards the NG andremarket the classic before the periodbefore values of the same plummetedwhen production levels of the NG gottowards the 50% of existing 737 clas-sic fleet levels. Airbus is banking thatits move would bring about a re-run ofthe 737NG launch and at the momentthere is no reason to think that thiswill not be the case. Moreover, nowthe market has shifted to being a 50%lessor controlled split in most regionsand the lessors, although livid with themove by Airbus to the neo, will indeedbe forced to re-balance their books atspeed. In a leasing market the cus-

tomer demands the latest technologyand so this has to be provided. So Air-bus is able to bring about a series ofwhat are in effect forced orders forthe neo in a market where conditionsfavour a far faster run of orders thanthat enjoyed by the 737NGs upon itslaunch. If this happens Airbus is ableto increase its profile in the aftermar-ket which is now a core aim. So forAirbus the A320neo is a very soundprogram with very little R&D spendto worry about.

The problems for Airbus are how-ever numerous. The launch of theA320neo should all but kill-off thelong-term prospects for the A320-200

but this will only occur if Airbus canachieve the desired 15% savings mar-gin, as Phil Seymour of IBA says “Thedoubts on the fuel efficiency claims ofboth the CFM Leap X and the P&W GTFare due to the fact that they are biggerand heavier engines so the aircraft willbe heavier and burn more fuel anyway.The Sharklets also accounts for someof the fuel efficiency of the A320neo,says Seymour, and when taking intoaccount the different maintenancerequirements and the different spareparts for the engine, increased train-ing costs, the absolute fuel costsreduction for the whole airplanemaybe adds up to a 3% saving in fuel.

A320-200 & 737-800 DRY LEASE RATES (AVERAGES) FOR PAST FIVE YEARS

0.1

0.2

0.3

0.4

0.5

2006 2007 2008 2009 2010 2011

Am

oun

t in

US

$ m

illio

ns

A320-200 oldest A320-200 newest 737-800 oldest 737-800 newest

Year

TOTAL

ON ORDER

GRAND TOTAL TOTAL LETTER

OF INTENT

TOTAL ON

OPTION

TOTAL OPTION

LETTER OF

INTENT

AVERAGE AGE TOTAL

OPERATOR

0 1 0 0 0 24 1304 304 162 56 2 0 232 2 0 0 0 0 2630 2082 9 219 0 7 159100 100 0 0 0 40 4 0 0 0 3 4714 1822 18 200 0 7 12810 10 0 7 0 10 2 0 0 0 2 245 45 22 0 0 360 60 175 0 0 316 232 0 60 89 8 391433 3435 107 482 63 5 15714 22 0 0 0 1 3


737-800 VS A320-200

financing cost with the maintenancecost, although the maintenance costincreases, the finance or lease costsof older aircraft is actually lower. Thecombined curves means there is noreason not to hang on to an aircraftuntil it is well into its third decade.”This taken against the backdrop ofglobal uncertainty means that airlinesneed to be sure, more than ever, thatthey are getting the best economicsfrom the smallest possible outlay andwith this in mind the A320-200 shouldprove to be a serious bargain if valuesstart to fall and this, ironically, couldwell see the economics of the A320-200 improve rapidly against both theA320neo and the 737-800.

It remains to be seen if the A320neo,will be able to achieve improved pricesin the medium term. The 737NG provedthat that a new aircraft, althoughfar superior, does not guarantee themarket will fork out the extra cash.Whatever happens Boeing will launchsomething to upgrade or replace the737-800 by 2025 at the latest and assuch many are right to argue that theA320neo has a very short life span.Indeed, the A320neo was launchedwith all eyes looking East to COMACand their C919. The lifespan will in theend be dictated by Boeing and COMACas if their aircraft can move towards a15-20% fuel saving on the current 737-800NG then the future is theirs.

So in our A320-200 & 737-800NG VsA320neo the winner is the 737-800NG.

Airbus refutes these claims however:“The 15% fuel improvement is 15% netbenefit of engines on the airframe,”says Alan Pardoe, marketing com-munications director. “The improvedfuel burn of the new engines beforethey are installed on the airplane ishigher than 15%. The Sharklets on theaircraft along with the new engines onthe wing, less the incremental weightof the heavier engines give a 15% netbenefit in terms of fuel burn.”

As we all saw with the MD11, it canall go wrong for the manufacturer andclaims at the launch of a program canoften be overestimated in the extremeto the cost of airlines. Until the air-craft is in the air with an airline andperforming the reality of the econom-ics is unknown. The manufacturerwill always argue that an aircraftreplacement is needed. “When yousit down in front of Airbus and Boe-ing they show you the maintenancecost curves which after about year 14start to increase rapidly because theaircraft starts to age and you get cor-rosion and fatigue problems,” saysSeymour. “The manufacturers tellyou that after year 14 you will spendfar more on maintenance than youwill have done in the past and thatit is a better investment to get rid ofthose older aircraft and replace themwith new. Manufacturers are boundto say that as they are in the businessof building aircraft. What we havefound is that when you combine the

It is cheaper and better in manyrespects than the A320-200 and at thismoment, unless Airbus is able to bringforward some concrete evidence of a15% net saving on fuel burn, then it isby far safer in economic terms. UnlessAirbus is able to hit or beat the 15% netsaving on fuel burn, the 737-800 will bemore economical as cost at purchaseand known economics put it ahead ofthe A320neo over a ten year periodand well ahead over a five year period.The real versus story for the AirbusA320neo is coming from COMAC withtheir C919. The C919 was not includedin this article because there remain somany variables that it would be impos-sible to be accurate in any way. TheC919 has had its wings clipped back bythe launch of the A320neo and COMACwill have to double efforts to get theirengine offerings and aftermarket sup-ply chains fully mapped out to attractairlines away from Airbus and Boeing.Assuming that COMAC can get every-thing that it says it can ready on timethen the A320neo might look like a bitof a long-term disaster as the weightdifference is (on the table at least) sig-nificant to say the least. Boeing willsurely be looking to what is going onin China, not France, to decide whatmove to make on the future of the Maxdesign and engine choice. There islittle to say about the Max as it seemscertain it will change a lot before itsfirst flight date to match or even betterthe A320neo.


MAINTENANCE

The A320 family can be cred-ited for Airbus’ successas an aircraft manufac-turer, particularly as it nowenjoys one of the widest

customer bases in aviation history.Air France took delivery of the first

A320 in 1988 and since then the A320family – which includes the A318, A319,A320 and A321 – has amassed over 7,000 orders with more than 4,600 aircraftdelivered to almost 330 customers andoperators worldwide.

This impressive sales record makes it the world’s best-selling commercialaircraft and therefore a maintenancecash cow.

The introduction of the A320neo will have little effect on the aircraft type’spopularity as it has over 95% airframecommonality with the existing modelsmaking it an easy fit into existing fleets. The global A320 fleet continues to growat a rate in excess of 10% and this willincrease as from Q4 2012 to 42 aircraftper month from the current 36. Pro-duction rates will steadily rise to 38 inAugust 2011 and to 40 in the first quarterof 2012.

Inspecting the A320The A320s maintenance check inter-vals have been raised several timessince its launch. And Revision 28, which was added to its Maintenance PlanningDocument (MPD) in November 2004,stated that although daily and weeklychecks were still required every 36hours and eight days, the tasks weresplit among three different sub-groups-- flight hours, flight cycles or calen-dar time. This gave the airline a greatdeal more flexibility because the check intervals could be defined by the mostappropriate usage parameter for thatcarrier.

Maintenance glitches such as prob-lems with the air conditioning andbrakes have been ironed out and fly-by-wire technology is fully accepted. Airbusis aware that airlines are constantlylooking to reduce maintenance costsand MPD Revision 28 allowed opera-tors to extend the intervals betweenmaintenance checks. A checks could be conducted every 600 hours (previously500 hours), C checks every 20 months(previously 15 months) and heavychecks after six years and 12 years (pre-

viously five and 10 years). Equalisedchecks that focus on optimised usageof each part have also been introduced.

CSA Czech Airlines is an example ofa carrier that has adopted the intervalsoffered by MPD Revision 28 and so far it is working well for them. At the time the revision was introduced, the responsewas very favourable from airlines. Stu-art Mann, Airbus’ director of productmarketing of the A320 family at that timesaid: “Airlines love the extra flexibilitythat MPD 28 gives them and, naturally,they get the maximum time out of all thecomponents between overhauls.”

A popular maintenance option onthe A320 is the Airbus AIRMAN system, which allows the aircraft to transmitfaults to the ground during flight. Thissoftware tool enables the necessaryresources and maintenance personnelto be in place when the aircraft touches down and thus reduces the time the air-craft spend not in revenue service.

Although unbundling the checks and specifying three different usage param-eters for the individual tasks meantmore flexibility for airlines, it also posed more challenges. Airbus acknowledged

A320-FAMILY MAINTENANCE:Airline Economics surveys the best maintenance providers for A320-family aircraft


MAINTENANCE

has grown from five years to six, and therequirement for structural inspectionshas been relaxed from every 10 years(originally eight) to every 12 years. The result of that change, according to Air-bus, was that each operator was able to optimise the checks intervals accordingto its own aircraft utilisation.

The number of landing gear over-hauls required each year equates tothe number of 10-year-old aircraft inthe fleet. But A320 deliveries are stillaccelerating. They climbed dramati-cally from 168 in 1998 to 222 in 1999, thenstayed in the mid-200s before starting toclimb rapidly again in 2005 to reach 387in 2008. Although the requirement over the next five years is relatively stable,the growth of the overall landing gearoverhaul market has resulted in severaloverhaulers of A320 gears such as AFIKLM E&M, Finnair, Lufthansa Technikand Turkish Technic to enter the mar-ket.

Upgrades - Airbus-developed lateraltrim solutionsAirbus is using data from its Produc-tion Aircraft Test System and additionalproblem analysis tools to optimise per-formance of its A318, A319 and A320aircraft. Lateral trim solutions devel-oped by Airbus can decrease possibledrag, reduce fuel consumption andoptimise flight paths for its A318, A319and A320s.

The project made swift progressusing the data from Airbus’ ProductionAircraft Test System (PATS) – used toverify aircraft during pre-delivery pro-cesses – along with problem analysistools from consultant company Shainin.

“As technicians we expected a tech-nical solution, however Shainin arestatisticians,” said Eric Papy of Air-bus’ Mise au Point (MAP) design office representative team in Hamburg,Germany. “They wanted very specificinformation from PATS, from measur-ing aircraft on the final assembly lineand the wings at Broughton. It was sta-tistical analyses that found the answer.”

Shainin devised a mathematical for-mula for predicting roll values for each aircraft ahead of its first flight, allowing the MAP team to make any necessaryadjustments during assembly – virtu-ally eliminating the need for re-flights.

this by introducing standard mainte-nance packages representing threecommon types of aircraft yearly utili-sation ranging from 1,800 flight hoursannually to more than 3,500. Airlineswere then able to choose the ready-made solution that corresponded mostclosely to their yearly utilisation. Tak-ing the process further, some operators have almost eliminated conventional C checks by following an equalised main-tenance programme. This programmedistributes traditional A- and C-checktasks among equal maintenancepackages. Having applied it while main-taining the easyJet A320 fleet throughseveral years of growth, SR Technics(SRT) says the equalised maintenanceor E check concept reduces aircraftdowntime by a total of 17 days during a six-year period.

The E checks are sequenced into 36labour packages, each requiring eighthours of ground time, which can be per-formed during a night stop. No C-checksare required, and the six-year/24,000flight hour intermediate layover (IL)check is due around the time of the 36th E check.

The service package offered by SRT consists of fleet technical management,component and parts management,E-check maintenance managementand line maintenance management.The maintenance can be conducted atan SR Technics facility or subcontractedto the operator’s selected provider. SRTsays it has cut the average turnaroundtime for the IL check, including strip-ping and repainting of the fuselage andvertical tail, from 21 to 14 days. “Westarted together with Airbus to ramp up the maintenance activity on the A320,”says a source at SR Technics. “[Thisincluded] the complete reshaping andreorganising of the maintenance pro-gram out of the traditional maintenanceprogram and into an aquiline mainte-nance program. After six years we aredoing the E check in Malta but we have started to do it in Zurich.”

Landing gear overhaulLanding gear overhaul for the A320 fam-ily is required every 10 years or 20,000flight cycles, but the fatigue thresholdwas increased from 20,000 to 24,000flight cycles. The zonal check interval

Maintenance cost per hourSome of the most detailed studies of aircraft main-tenance costs have been carried out on behalf ofEurocontrol’s Performance Review Commission,which has been working for some years to estab-lish the marginal costs associated with air trafficdelays. Researchers from Westminster University,Imperial College, London, and Lufthansa Systemsfound that unit maintenance costs, including anallowance for overheads such as administrationand facilities, equated to approximately 15% ofblock hour direct operating costs (DOC).

For the A320, the researchers concluded, mainte-nance cost per block hour in 2008 ranged betweenEUR570 and EUR770 for high and low cost sce-narios, with a base figure of EUR620. The figuresfor the A319 ranged from EUR580-800, with abase of EUR630, while the A321 base costs wereestimated at EUR720 with a low of EUR660 and ahigh of EUR910. For comparison, the equivalentfigures for the Boeing 737-800 were estimated torange from EUR500 to EUR670, with a base figureof EUR670.

Global A320 fleet by operator region

Africa: 1%

Middle East: 5%

Americas: 29%Asia-Pacific: 26%

Europe: 36%

MRO operations, whether airline-affil-iated, independent or OEM-operated,have responded to an increasinglycompetitive environment by developingmore inclusive services to make fulleruse of their capabilities and resourceswhile helping their customers containcosts.

Lufthansa Technik’s comprehensive suite of total support offerings coverslanding gear, engines, components andmaterial, while overall Total TechnicalSupport can be combined with Techni-cal Operations Management and themanagement Technical OperationsWebsuite.

And at a time when cost control ismore crucial than ever, the companysays its Total Component Support(TCS) service provides what are nor-mally mutually exclusive benefits: lowcosts, yet with the greater aircraft avail-ability that normally demands heavyinvestment in a big stock of spares.

MAINTENANCE

Middle East, CIS and northern Africaas well as Turkey itself. The TurkishAirlines subsidiary is building a newnarrowbody MRO base, the HABOMAviation MRO Centre at Sabiha Gökçen International Airport. The estimatedtotal investment requirement for theairframe and component maintenancecentres on the whole is around $500million. By the year 2020, HABOM isestimated to generate a $1 billion sharefrom airframe and component main-tenance segments. Turkish Technicwill be the permanent shareholder ofthe HABOM Project. Turkish Technicis also aiming to establish these newinvestments as an international jointventure with the participation of a lead-ing global company or companies. Withthis new investment, Istanbul will be themaintenance hub of the region within a short time period if all goes to plan. Theairframe maintenance centre facilitiesat Sabiha Gökçen International Airport will have a total 372,000m2 area. Therewill approximately 3,500 employeeswithin all the maintenance, repair andoverhaul centres which will be estab-lished within the HABOM Project.

Turkey hopes this impressive basewill become a global MRO hub, but it is prudent to wonder about the future forthe maintenance market in general. Thecurrent scenario is one of aircraft flying to bases; having checks performed and collecting the aircraft all via non-rev-enue flights. However, with oil pricesabove $110 a barrel and Goldman Sachs urging investors to poor into oil with abenchmark of $200 by 2015, it is unlikely that airlines will want to fly aircraft todistant maintenance centres and willopt for doorstep services. Such a trend will play into the hands of Lufthansa andespecially SR Technics as they expandto become global, independent MROsthrough the future slated purchase ofa US MRO supplier, possibly TIMCO.Given this scenario, it is difficult to seehow the future of very large MRO bases like the one being developed at HABOM can be assured. In the case of HABOM,this will not be possible without a verylarge route hub being created out ofSabiha Gökçen International Airport,which is not likely. But taking into theaccount the size of the Middle East fleet on order, the managers of the HABOM

project are hoping that they will bewell placed to cater to this ever-grow-ing market. But it is SRT, with its AbuDhabi Aircraft Technologies subsidiary,which seems best positioned to benefit, and further expansion of this site could prove highly popular with the airlines ofthe Middle East.

This train of thought is backed by Luf-thansa Technik’s Walter Heerdt, senior vice president marketing & sales. Whenasked by Airline Economics why hethought the LHT network gives theman edge he said: “Lufthansa Technik’sGroup network is definitely a big

advantage. The size, geographi-cal location and capability mix of oureight overhaul facilities in Europe andAsia secure that most of the NB andWB aircraft can be serviced close tothe customers home base. The size ofthe network guarantees slot flexibilityand capacity, which enable LHT to offer base maintenance services to all sizesof fleets.”

He adds: “We want to be perceivedby our customers as a reliable next-door supplier which provides them with exactly those services they individuallyneed in the expected quality. I thinkthat the mixture of our broad serviceportfolio, our world-wide network, thehigh quality and the motivation of ouremployees are guarantees for our suc-cess.

Lufthansa Technik is continuouslyinvesting in its facilities. Lean manage-ment, often in joint workshops with the customer, help to keep costs low or evendrive it down due to smart interfacesolutions. The exchange of best prac-tises within the LHT Base Maintenancenetwork constantly helps to drive down ground times, for example just recently an A319 D-check was completed in 16days.

The Lufthansa Technik productionprocesses have been standardizedthroughout the facilities by analysingand optimizing of all production stepsto secure higher efficiency in MRO ser-vices.

Customers also value the tightcooperation on base maintenanceprocedures as well as on optimizingof individual maintenance scheduleswhich lead to MRO cost savings for the airlines.”

LHT says membership of its compo-nents pool -- the equivalent of being partof a Boeing and Airbus fleet nearly 400strong -- reduces operating costs to alevel normally achievable only by oper-ators of much larger fleets. The servicecan be extended to include everythingfrom writing the specifications, initialprovisioning studies and home baseallocation to repair and overhaul,troubleshooting, documentation andengineering services. And it is tailoredto the operator’s specific requirements.

Dublin Aerospace was awardedEASA Part 145 approval in October 2009for its new maintenance and overhauloperation in the former SR TechnicsHangar 5 at Dublin Airport. Alreadyoffering heavy maintenance on theA318, A319 and A320 and overhaul, andmajor refurbishment of the Honeywell131-9[A] APU, the company achievedA320 landing gear capability in 2010.The company also offers on-wing repair services, including seal changes andgear replacement, at any location.

The Aer Lingus A320s that SRT used to maintain at Dublin are now handledby Sabena Technics.

SR Technics, the A320 maintenanceleader through their various agree-ments which include Easyjet andAirBerlin, has been trying everything itcan to cut turnaround times and costs.The operation in Zurich has been aparticular headache for the manage-ment. The buildings and hangers atthe SRT base in Zurich are not ownedbut rented. This means that when SRT came to streamlining its processes,it had to factor in various buildingregulations associated with the leaseagreement and to an extent this hasslowed and amended their progressas time has passed. Even so SRT hasbeen able to slash turnaround timesby shifting and amending the layout ofits various workshops, it has put tech-nicians together with managers andclient account managers, amendedlayout in all areas to make the processseamless and linier and adopted an inhouse program for staff and graduatesto develop new practices to help reduce turnaround times.

Turkish Technic too has been build-ing up its capabilities in Istanbul;targeting operators in Europe, the



DATA

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1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F

A319 AND A320 MARKET VALUES AGAINST 737-700 AND 737-800

B737-700

B737-800

A319-100

A320-200

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

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0.45

B737-700 B737-800 A319-100 A320-200

Dry Lease Rates for newest aircraft

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2011

2012

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0.15

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B737-700 B737-800 A319-100 A320-200

Dry Lease Rates for oldest aircraft

2010

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2012

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