Airbus conducts maiden flight of hot-selling A320neo

Thu Sep 25, 2014 1:38pm EDT
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By Tim Hepher

TOULOUSE France (Reuters) - Airbus (AIR.PA: Quote) successfully staged the maiden test flight on Thursday of an upgraded passenger jet on which it expects to generate hundreds of billions of dollars of revenue, buoyed by an increase in the company's jet demand forecast.

The A320neo touched down in Toulouse, southwest France, 27 years after the original A320 first took to the skies and opened up fierce competition with Boeing's medium-haul 737 in a slice of the jet market estimated at $2 trillion over 20 years.Powered by a new type of jet engine from Pratt & Whitney (UTX.N: Quote), the A320neo flew for two hours and 22 minutes, kicking off a year of flight trials. The same family of aircraft will also offer a competing engine from CFM International, a joint venture between General Electric (GE.N: Quote) and Safran (SAF.PA: Quote).

Airbus is aiming for savings of 15 percent per seat compared with the current generation of medium-haul passenger jets.

It said this gap would increase to 20 percent by 2020 thanks in part to a further two percent improvement due to be delivered by Pratt & Whitney, on top of its 12 percent contribution to the current improvement. The rest will come by adding more seats.

With airlines running on wafer-thin profit margins and spending about 40 percent of their operating costs on fuel, such savings are at the center of a huge sales battle.

Rival Boeing is bringing out its own updated version of the 737 just over a year after Airbus and the two companies face a gradual threat to their duopoly at the small end of the market from new competitors in Canada, Brazil, China and Russia.

A smooth entry to service will however cement their position as market leaders for years to come, analysts say,

Shares in both companies have risen sharply since the decision to revamp their most-sold aircraft was announced in 2010 and 2011. Airbus shares rose over 2 percent on Thursday.   Continued...

The Airbus A320neo (New Engine Option) is pictured after its first flight in Colomiers near Toulouse, southwestern France, September 25, 2014.   REUTERS/ Regis Duvignau