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A321neo – A Winning Formula

October 2, 2017

The values of those some ten A321neos already in service are remaining stable and even with the problems associated with the PW1100 engine, there is not expected to be much change in the near term with the type expected to be a clear winner for both investor and operator.

The A321neo powered by the PW1100G has become the airframe/engine combination of choice even as Airbus continues to offer the existing A321ceo powered by CFM56/V2500 engines through the period of transition which is now expected to continue for later than originally planned. The rationale for the development of the neo centered on the need for operators to contain their operating costs in the face of unstable fuel prices. The need for aviation to also improve its public image with respect to environmental compliance also perhaps made it more of an imperative to proceed with the neo.

The A321neo is essentially the same as the existing A320 but with new engines and minor modifications. The Airbus A321neo family is a series of airliners developed since December 2010 by Airbus with the suffix “neo” meaning “new engine option”. It is the last step of the A320 Family Enhanced (A320E) modernization program, which was started in 2006. The A320neo family replaces the original A320 family, which is now referred to as A320ceo, for “current engine option”. In addition to the new engines, the modernization program also included such improvements as: aerodynamic refinements, large curved winglets (sharklets), weight savings, a new aircraft cabin with larger hand luggage spaces, and an improved air purification system. Customers have a choice of either the CFM International LEAP-1A33 or the PurePower PW1133G-JM from Pratt & Whitney. The existing A321ceo engines have a fan diameter of 68 inches. This increases to between 81 inches on the A321neo for the PW1133 but 78 inches for the LEAP -1A32. The ability to choose between engines continues and this allows not only competition between the two manufacturers in terms of pricing but also technical improvements. Airbus has already announced that the PW1100G engine on the A321neo will be the subject of a PIP (Product Improvement Package) within a few years of service entry of the A321neo amounting to perhaps a 2 percent improvement in the specific fuel consumption (SFC). PIPs take years to achieve to achieve and introduce such that a 2-3 percent represents a significant improvement. This PIP was due to be introduced in 2019 but because of the problems associated with the engine this has been delayed to perhaps 2021.

To support A321neo development, Airbus employed a “minimum-change” strategy that involves reinforced wing structure, fuselage and passenger-cabin adaptations, a reinforced center wingbox, new pylons (or struts) and modified engine systems. The wing reinforcement is restricted to the outer span and is weight neutral. The empty weight of the A321neo is increased by 1.8 tonnes due to these changes. A321neos are approved on the current type certificate and flight crews will not need a new type rating. The first A321neo flight took place in February 2016. The first A321 was delivered to Virgin America on lease from GECAS and powered by LEAP engines. There have been delays to the delivery of aircraft and as of August 2017 only six A321neos had been delivered. In October 2014 Airbus started to market the A321neoLR. This lone range aircraft features a higher MTOW of 97 tonnes with three auxiliary fuel tanks. The variant was launched in January 2015 on the basis of an order from Air Lease Corporation. The range is 4,000 nautical miles, some 500 nautical miles further than the 93.5 tonne A321 or 1,000 nautical miles further than the 89 tonne A321. The first A321LR was scheduled to be introduced into service in late 2018 but given the delays this may now need to be delayed until 2019. The A320LR offers the ability to nearly match the operational range of the B757 and as such the aircraft is to be used on some transatlantic operations as well as flights to Hawaii.

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Airbus has come to appreciate that the existing door configuration of the A321, some of which are larger than necessary for the usual loading of catering, offer the opportunity to install more seats. This has been further facilitated by changes in lavatory designs and less focus on galleys. Smaller galleys can now be accommodated given the lesser interest in offering a full meal service. The redesigned lavatories still offer reduced mobility capability by removing a dividing wall between two lavatories. Cabin-Flex is being made available as from the second quarter of 2018 and offers the ability to carry 240 passengers. Door 3 is moved back by four frames and can be deactivated in a low density configuration. Door two is permanently deleted. Provisions for a second overwing exit are included. To achieve a high density configuration two overwing exits are needed and Door 3 is activated. Vietjet is to operate the aircraft with 230 seats.

The premium attributed to the A321neo and B737MAX over existing products continues to remain valid even if the amount has declined slightly. There has been considerable speculation that due to the fall in the price of fuel then both lease rentals and values warrant a lesser premium over existing products. Instead of a $40-50,000 premium in the lease rental of a new A321neo there have been media comments that this has fallen to only $15-20,000 per month. Such a perceived fall ignores that lease rentals for aircraft being delivered today, tomorrow and next year were agreed many months if not years ago. Moreover, the cost of A321neos being delivered today still attract a premium of more than $5-7 million over the A321ceo such that lessors would be unlikely to accept a $15,000 per month extra for a seven year lease as there would be no return on their investment. It appears that such a decline in lease rental premium by the media is more a product of perception than reality. Launch customers for a new program usually secure higher levels of discounting to compensate for teething problems and lesser than optimum specification on service entry. However, the discounting on the A321neo is likely to be more of an issue for the engine manufacturer rather than for Airbus. The engine manufacturers will be offering significant discounts on installed engines as usual but will be managing to secure returns via their support programs which generate revenue from day one of operation rather than five years into the future.

In terms of orders for the A321neo as of the end of August 2017 this had reached 1,429 from 44 customers which compares with 1,791 orders for the A321ceo which were secured over more than 20 years clearly indicating the increasing preference for the larger A321. Ten lessors have ordered 295 A321neos with Air Lease Corporation ordering 141 and only 11 A320neos. AirAsia has ordered 100 as has American. Wizz Air though is the largest customer, ordering 110 A321neos. A321 deliveries already account for more than 40 percent of all A320 family deliveries, a statistic that has forced Boeing to eventually respond with the B737-10.

 

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