Airbus Increases Their Prices

Demand over at Airbus has been on the rise. Due to this, the airplane manufacturer has announced that it will increase the price of its A320neo family of medium-distance jets. Apparently, the group wants to increase the price of these planes by at least 6.1 percent. This will take advantage of surging demand for the new fuel-efficient plane.

Reports show that the prices of the Airbus aircraft rose 3.9 percent on average. John Leahy, who is the chief operating officer for consumers at Airbus, said that the steeper increase of the A320neo reflects robust demand for the plane. In fact, the plane racked up some 1,226 firm orders last year. Due to this, the catalog price of the A320neo will rise by another $2 million.

Industry experts go on to support these claims from Airbus. In fact, they show that airlines last year rushed to get their hands on the first models of the A320neo planes. Airlines wanted to get their orders in quick, because it will be at least 2015 before the first planes are delivered, and that is assuming there are no delays. This rush has created a seller’s marketplace for this jet. Now Airbus looks to turn a hearty profit from this plane.

Of course, Airbus and Boeing both raise list prices every one to two years to reflect higher costs for labor and materials. Both manufacturers also have more pricing power as popular models, such as the A320 and Boeing’s 737, are sold out through the next couple of years. It was noted, however, that the 3.9 percent increase on Airbus’s full fleet was smaller than the 4.4 percent increase that was seen a year ago. The increase a year ago was said to be “needed” to help offset mounting investments and a weak dollar.

So why do so many people want the A30neo? Well, it has to do with the reduced fuel consumption of the planes. Apparently, these jets will use as much as 15 percent less fuel. This plane is of course getting Boeing to offer a re-engined version of its own 737, which should offer the same kind of stats.

Mr. Leahy went on to say that price increases apply to all new orders. How increases apply to existing orders will depend on the terms that were negotiated with each consumer. Each airline could see a different increase, depending on their terms. The logic they are using is that half of the savings an airline earns in reduced fuel and maintenance costs will go to the airline. The other half will go to the manufacturer. They will share some of that with the engine manufacturers, and some of it will go to Airbus.