Airbus and Boeing are sweating this summer over whether to upgrade their best-selling aircraft with new, more efficient engines, a move which could reshape the $80 billion jetliner industry.
Billions of dollars in profits and trade balances are at stake as they act to fend off emerging competition from Canada, China and Russia.
Behind them the world's leading narrow-body engine makers — Britain's Rolls-Royce, U.S. groups General Electric and Pratt & Whitney and France's Safran — battle for supremacy over the next wave of technology.
With aviation staging a fragile recovery from recession, big planemakers are under pressure to provide savings in fuel.
But each must do so without damaging the resale value of jets already in the market, as control of the industry steadily passes to the financiers or 'Wall Street pilots' running the leasing industry.
"Narrow-body planes are the cash cow of Airbus and Boeing's businesses. The consequences of what they do are profound," said Les Weal, a director at U.K.-based aviation consultancy Ascend.
Act too soon or attack old designs too aggressively and they risk upsetting the value of a backlog of 4,200 undelivered short- or medium-haul jets worth $300 billion at list prices.
Move too late and they risk leaving themselves at the mercy of the next technological leap expected next decade.
Until now, the world's top two planemakers have resisted changing winning designs that raked in thousands of sales of short-haul jets and gave birth to the low-cost airline industry.
But they are being forced to defend their duopoly as newcomers like Bombardier chip away at the 100-200 seat market, helped by engines that already offer big savings.
The solution being pondered by Airbus and Boeing is a switch to similar new engines on existing planes. A final decision from both companies is expected by the year-end.
This could offer fuel savings of some 12-15 percent from 2015, pending a deeper and more noticeable shake-up of engine design that could cut costs by up to 30 percent from 2025-27.
Such a move only makes sense if the short-term or tactical engine is allowed a long enough production run — most estimate 10 years — to make its development worthwhile.
With greater reliance on slim-margin single-aisle jet sales, Airbus is expected to move first to defend its A320 range.
But CEO Tom Enders — fearing a repeat of costly delays on the A350 and A380 — is asking tough questions about resources.
The EADS board too has received a presentation on the approximately $1 billion "re-engining" scheme but is unwilling to take a decision without a detailed roll call of engineers.
That caused a headache for Airbus marketers at last month's Farnborough Airshow. They managed to buy time from airlines close to buying Bombardier's C-Series. For now, the plan seems to have worked as Canada's campaign at the show bombed with no sale.
"There are two ways of interpreting this," said Teal Group consultant Richard Aboulafia of the Farnborough order book.
"Either that Airbus and to a lesser extent Boeing were able to block the C-Series by promising alternatives with new engines very soon, or that this industry has been taken over by people who are happy with the status quo."
Most analysts believe Airbus is likely to re-engine the A320, and expect Boeing to follow suit with the 737.
Boeing Commercial Airplanes Chief Executive James Albaugh rejected the notion that it is waiting for Airbus, but in practice analysts say moving second may be more comfortable.
If it passes on the re-engine idea, it would be gambling that the next generation might be ready sooner than Airbus thinks, and would grab the advantage if this assumption were right because Airbus would be stuck with less efficient re-engined planes.
But so far only Rolls-Royce is said to take an optimistic view on the early arrival of new engine technology.
Leeham Co analyst Scott Hamilton said a re-engining would cost Airbus $1 billion to $1.5 billion and Boeing about twice that, but this compares with $10 billion to $15 billion for an all-new airplane project.
Resale values of Boeing 737s did not suffer as badly as most feared when Boeing last overhauled the design in the 1990s.
A bigger concern may be that airlines start to hold off buying planes from as early as 2020, half way through the desired production run, in anticipation of new gains around the corner.
Despite these risks, Airbus watchers say it has all but made up its mind to 're-engine' barring any surprises on resources.
This decision and Boeing's response may well affect the shifting alliances of the world's top engine firms.
Relevant plane engines are dominated by two transatlantic alliances: CFM, a Safran-General Electric partnership, which has a monopoly on the 737, and a younger and more dispersed grouping fostered by Airbus called International Aero Engines (IAE).
IAE leaders Pratt and Rolls-Royce appear split on whether it makes sense to invest in the short-term tactical engine, and so far Pratt is marketing its new "geared turbofan" alone.
Its engine has so far won over a majority of new entrants in Canada, Russia and Japan. CFM's rival Leap-X engine has won the attention of a future Chinese challenger to Airbus and Boeing.
Rolls, which is pioneering open-rotor technology, is widely said to favor going to work on a strategic new engine. But Robert Nuttall, vice president of strategic marketing, said it would "never say never" to a re-design.
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