October 23, 2014 / 12:48 PM / 3 years ago

Engine parts supplier questions case for Airbus A380 upgrade

An A380 Airbus arrives on the tarmac during the Airbus annual press conference in Colomiers, near Toulouse, January 13, 2014. REUTERS/Regis Duvignau

BERLIN/PARIS (Reuters) - The case for developing new engines for a sales-boosting upgrade to Airbus’s A380 passenger jet has been called into question by a partner in one of the planemaker’s engine suppliers.

A lean sales patch has increased pressure on Airbus (AIR.PA) to bow to the demands of its biggest customer - Dubai’s Emirates airline - for new engines for the 525-seat A380, the world’s largest airliner, to improve its efficiency after the recent launch of rival Boeing’s (BA.N) 406-seat 777X.

“In principle, it’s a challenging business case, whether it makes sense to develop an engine just for the A380, bearing in the mind the potential order book,” Reiner Winkler, chief executive of MTU Aero Engines MTXGn.DE, told analysts.

“You’ve seen the volumes. That’s a decision for Airbus and the OEMs (manufacturers). We don’t see any risk for our existing order book,” he said on a conference call on the German company’s third-quarter earnings on Thursday.

MTU supplies an important set of parts for the GP7000 engines built for the A380 by Engine Alliance, a joint venture between General Electric (GE.N) and Pratt & Whitney (UTX.N).

Engine Alliance competes with Rolls-Royce (RR.L) to supply engines for the A380 double-decker, four-engined jet.

Emirates president Tim Clark told the Financial Times in July that his airline could buy between 60 and 80 A380s in addition to the 140 it has already ordered, provided that Airbus agreed to update the engines. He said this would give a 10-12 percent overall boost to the aircraft’s efficiency.

Last month industry sources said Airbus was expected to agree to the revamp, though it faced a dilemma over timing. Delaying too long could inhibit a recovery of sales of its flagship product and moving too early could limit the amount of new technology available and strain engineering resources.

Any re-engined aircraft is more likely to be introduced in 2022 or 2023 rather than the 2020-21 timeframe originally suggested, industry sources say.

ROLLS-ROYCE DESIGN

In May Fabrice Bregier, chief executive of Airbus Group’s main planemaking division, said it would keep evolving the A380 in response to the 777X, but that Boeing’s newest jet would not pose a challenge until after 2020.

Boeing says the 777X will have the best economics per passenger seat in its category, but Airbus says its rival’s claim depends on denser and less comfortable seating.

An Airbus spokesman said there was nothing to add on Thursday to the company’s recent comments on the A380.

“We are always looking at incremental innovation, but we are not looking at re-engining the A380 at the moment. We are concentrating on today’s aircraft,” he said.

If Airbus does decide to create a re-engined jet, nicknamed the A380neo, analysts expect it to do so with Rolls-Royce which says its Advance design would burn 20 percent less fuel and could be ready to enter service from 2020.

Engine Alliance, whose shareholders have steep production ramp-ups ahead of them on other projects, is unwilling to take on an all-new development but may continue to fine-tune existing engine variants, according to people familiar with the matter.

Growing competition between GE and Pratt & Whitney in the big-volume market for smaller jets may also have made them less willing to share technology on larger engines, said Sash Tusa, aerospace & defense analyst at Edison Investment Research.

Meanwhile, Airbus is thought to be aiming to finalize deals to add one or two new customers for the A380 and sales chief John Leahy told Reuters last month that it could add at least one new name to the A380 fleet by year-end.

It is also seeking buyers for two complete and one partially complete A380 originally ordered by Japan’s Skymark Airlines 9204.T. Airbus revoked an order for six A380s from the Japanese budget carrier this year in a row over unpaid deposits.

Editing by David Goodman

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