Airbus considers A380 revamp to lift sales: sources

By Tim Hepher

SINGAPORE (Reuters) - Airbus (AIR.PA) is exploring fresh ways to improve sales of the world's largest passenger jet after receiving a potentially crucial signal of support from at least one of its engine makers, industry sources said.

Faced with patchy demand for the A380 superjumbo, Britain's Rolls-Royce (RR.TO) has indicated it may be willing to upgrade its Trent 900 engines to help Airbus dig its way out of a recent sales trough, the sources said, asking not to be named.

However, no decision has been taken and Airbus has said its first priority is to keep carrying out gradual improvements to the 525-seat aircraft, which entered service in 2007.

Rolls-Royce declined to comment on the reported proposal.

A spokesman for Airbus said the European company was "always looking into all kinds of avenues to keep our aircraft at the cutting edge" and listed areas continually being reviewed, including latest developments in engine technology.

"There are lots of studies but they do not necessarily need to become true," he added.

The A380's four engines are currently supplied by either Rolls-Royce or rival U.S. consortium Engine Alliance, owned by General Electric (GE) and Pratt & Whitney (UTX).

Engine Alliance said it was actively pursuing sales campaigns for contracts to power the aircraft, which is sold separately from its engines even though both are included in the A380's $414 million official sticker price.

"We are also looking into possible enhancements to continually improve the performance and reliability of the GP7200 engines," it said in an emailed statement.

Two industry officials described speculation of a relaunch of the A380 with modernized engines - duplicating a strategy that has proven astonishingly successful for the world's most popular short-haul passenger planes - as premature.

FORECAST MISSED

Airbus said it aimed to get 750 total orders when it unveiled the double-decker passenger jet.

But 13 years after it was first launched, sales have remained at less than half that level as airlines focus attention on advances in the latest twin-engined jets.

As of end-2013, Airbus had orders for 304 superjumbos.

Last October, Reuters reported Airbus had approached both engine makers to assess what improvements in performance they could deliver from around 2020, as it was forced to consider cutting production due to weak sales.

A surprise order for 50 more of the planes from the A380's largest customer, Emirates, in November effectively pulled the program back from the brink and won Airbus more time, but analysts say the company must still consider future options.

By taking advantage of marked changes in fuel efficiency that become available to engine makers every 10 or 20 years, on top of regular improvements of 1 percent a year, "re-engining" can lower fuel costs and inject new life into old jet designs.

A crucial hurdle is securing the agreement of engine makers who must make investments that run into hundreds of millions of dollars for the most modest modifications. The average estimated cost of upgrading is $1 billion for the engine alone.

Industry sources say Engine Alliance appears more reluctant than its UK rival to invest in further significant developments because of its unresolved questions over the business case.

As sole engine supplier, GE also has a major stake in the success of Boeing's recently launched 777X 406-seat twin-engined jet, which partially competes with the larger A380.

Pratt & Whitney is focused on delivering a new type of engine it has developed for popular short-haul aircraft.

Despite the talk of modifications, one customer is expected to reiterate confidence in the existing design and reject the need for a facelift at next week's Singapore Airshow.

Doric Lease Corp placed a tentative order for 20 planes worth $8 billion at list prices last June and is looking for customers to take them on operating leases. Industry sources say it could confirm the order at the February 11-16 event.

Doric declined to comment on the order or the possibility of future upgrades to the A380, but a source close to the company said an engine redesign was not under consideration.

Doric has said it is confident of finding new airlines willing to take the A380 as currently designed, especially once airlines adopt a more standardized use of its floor space.

(Additional reporting by Cyril Altmeyer; Editing by Greg Mahlich and Anthony Barker)