The perceived momentum that the A320NEO has is the subject of  a lot of speculation for the past month.  One comment getting repeated early and often by Airbus is that airlines don’t necessarily have a right to convert existing orders for 1st generation A320 class aircraft over to the A320NEO targeted for delivery sometime in 2016. 

Indeed, the orders it has garnered so far has been part of a larger orders for a mix between the 1st generation and NEO versions.   There are a few things worth remembering here.  First of all, 2016 is far enough in the future that airlines are only just approaching the time in which they would consider such purchases in most cases.  Second, Airbus’ really firm order for this aircraft is, so far, only from Virgin America.  Other orders are under a Memorandum of Understanding (MoU) which can remain quite fluid in terms of details.

Airbus needs the NEO to be successful right out of the gate.  Their stumbling around on the A350 is still firm in the minds of many airlines and what they’re proposing in the NEO is actually quite similar in approach to their first proposals for the A350.  If they garner enough orders, legitimacy ensues and they avoid criticism.  They also don’t want to kill their momentum on the A320 either.  The development for that 1st generation of aircraft is paid for and every aircraft they push out the door and into the hands of a customer embodies a lot of profit. 

It’s a delicate dance they have to perform for the next 12 to 18 months and keeping customers entrenched in the 1st generation A320 allows them to earn profit to pay for their other programs in development such as the A400 and A350 as well as keep face over the A380 which, at this point, appears doomed to be an unprofitable airliner. 

Speaking of the A380, one of those recent A320NEO orders includes the cancellation of 10 A380 aircraft as well.  ILFC has decided to pass on that airliner and stock up on A320 aircraft instead.  That is a smart decision for the lessor. 

If anyone believes that airlines will be forced into making new orders if they want the NEO version, they’re kidding themselves.  Airlines transfer orders from one aircraft type to another all of the time and neither Airbus nor Boeing would ever want to appear to not being cooperative with the airlines.  Keeping airlines in their camp is extremely important and not being flexibile is one way to encourage a customer to look at a competitors offerings.

John Leahy of Airbus predicts as many as 500 firm orders by this year’s Paris air show.  It is possible but I think we’ll see maybe orders for 200 to 300 aircraft and perhaps less than firm orders for another 300 by that time.  500 firm orders would be pretty impressive and I suspect it would drive Boeing crazy as well.

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