UPDATE 1-Revamped Airbus A320neo debuts as oil slide continues

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By Tim Hepher
DUBLIN, Jan 20 (Reuters) - European planemaker Airbus
AIR.PA said on Wednesday it had delivered the first A320neo, a
fuel-efficient upgrade of its best-selling jetliner, to German
carrier Lufthansa LHAG.DE .
The delivery marks the culmination of a five-year plan to
give a new lease of life to Airbus's profitable A320 narrowbody
jet family by revamping it with new engines.
The handover is a boost for United Technologies (N:UTX) UTX.N unit
Pratt & Whitney, whose decision to develop a new generation of
engines accelerated plane projects from Canada to Russia and
triggered a heavyweight riposte from Airbus and Boeing (N:BA) BA.N .
Both have amassed thousands of new orders and shored up
their domination of the global jet market by refreshing their
short-haul models, though Canada's Bombardier BBDb.TO and
Brazil's Embraer EMBR3.SA continue to compete hard for sales.
But the arrival of the first re-engined jet coincides with a
slump in oil prices that has sparked debate over the
sustainability of demand for fuel-saving jets, as well as
financial market losses caused by concerns over the economy.
Aircraft financiers have been busy for the past few years
bankrolling orders of the A320neo and Boeing's rival 737 MAX,
due to enter service in 2017.
But at the industry's annual gathering in Dublin this week,
financiers have been split over what the slide in oil prices
from $114 a barrel in June 2014, to barely $28 today, means for
both demand and the revenues linked to the two revamped models.
Brent crude fell 4 percent on Wednesday to $25.54 a barrel.
"There's plenty of competition for A320neos, but it's not as
keen as it once was," said Gueric Dechavanne, vice president for
commercial aviation services at Collateral Verifications, an
aircraft valuation company.
"People are not willing to overpay for a plane; there's a
lot more caution out there," he said.
For some airlines and major leasing firms, the aircraft is
still an effective hedge against a new rebound in oil prices.
"It is just 15 months since oil was at $100, and that is not
lost on airlines. The only way to manage that over the longer
term is to have a modern asset, so I don't see any let-up in
demand for new aircraft," Aengus Kelly, chief executive of
AerCap AER.N , the world's largest independent lessor, said.
"If a CEO of an airline is looking at taking aircraft for
the next 12-14 years he will never trust in fuel staying at
these prices."
The jet was delivered after a delay of three weeks caused by
what Airbus officials described as problems with documentation.
Qatar Airways earlier refused to take the first aircraft,
sacrificing its place at the head of the queue to a European
rival, after balking at lingering teething problems.
The plane is also offered with alternative engines supplied
by French-American joint-venture CFM International, owned by
Safran SAF.PA and General Electric (N:GE) GE.N .