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Swatch CEO Warns Strong CHF Endangers Industry: Tages-Anzeiger 2014-01-11 11:48:53.201 GMT

By Andy Hoffman Jan. 11 (Bloomberg) -- Swatch Group AG won’t raise prices for consumers despite strong CHF, CEO Nick Hayek says in interview with Tages-Anzeiger. * CHF is a “latent danger for entire Swiss industry”: Hayek * Swatch won’t outsource parts production to cheaper overseas suppliers: Hayek * Losses of CHF100m in last six months due to exchange rate: Hayek * Workshop fire at Swatch’s ETA unit in Grenchen, Switzerland, will delay delivery of some parts for one to two months: Hayek * Delivery delays will result in provisional sales loss of CHF40m, which will be recovered with later sales: Hayek * NOTE: Futures Traders Trim Bets on Swiss Franc Gain Versus Dollar NSN MZ7D830J1H79 <GO> * NOTE: Swatch Jumps as Outlook Boosts Optimism for China Demand Rebound NSN MZ6S3N6VDKHS <GO>

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--Editors: Anthony Aarons, James Amott

To contact the reporter on this story: Andy Hoffman in Geneva at +41-22-317-9218 or ahoffman31@bloomberg.net

To contact the editor responsible for this story: Thomas Mulier at +41-22-317-9201 or tmulier@bloomberg.net

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BN 01/11 05:22 *NISSAN'S INFINITI BRAND BOOSTS CHINA SALES 54% IN 2013

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MORE: Nissan’s Infiniti Brand Boosts China Sales 54% in 2013 2014-01-11 06:22:35.242 GMT

By Jim McDonald Jan. 11 (Bloomberg) -- Sales of the Japanese automaker’s luxury Infiniti brand jumped to 17,108 units, according to a release by the company. * "We expect to see continuous growth from our business in China. I would not at all be surprised to see if the current 50% annual growth may well be repeated during 2014:’’ Infiniti President Johan de Nysschen says today in Beijing. * Infiniti to begin pilot local production in Nov. and full- scale output in first quarter of 2014: de Nysschen

Story Link:NSN MZ81PY6JIJUR<GO>

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--Editor: Paul Tighe

To contact the reporter on this story: Jim McDonald in Tokyo at +81-3-3201-3190 or jmcdonald8@bloomberg.net

To contact the editor responsible for this story: Paul Tighe at +61-2-9777-8626 or ptighe@bloomberg.net

The Opportunity in Emerging-Market Bonds

Editor's Note: Fine is a managing director and portfolio manager with Van Eck Global. Though his main fund, Van Eck Unconstrained Emerging Markets Bond Fund (ticker: EMBAX) has lost 5.87% in the last 12 months, it beat the average emerging-markets bond fund tracked by Morningstar by two percentage points. Many emerging market (EM) government bonds offer superior risk/return profiles to the developed market (DM) government bonds that make up the bulk of bond portfolios. The question of which bond markets one should be exposed to has become more acute in the wake of the Federal Reserve's moves to taper its quantitative easing policy. Moreover, the weak performance of many emerging market bonds in the wake of the taper has led many investors - particularly U.S. individuals - to exit EM debt portfolios but maintain their DM debt portfolios. We argue that this is the wrong response. First, Most EM governments have lower debts and deficits than DM governments. Much lower. On average, EM government debts equal about one-third of GDP, compared to the over one times GDP that characterize DM governments. Fiscal deficits in EM economies are around 2.5% of GDP, compared to over 5% of GDP for DM economies. Lower debts mean lower leverage and greater space to stimulate via borrowing should the need arise, and lower deficits mean less dependence on market conditions. Second, many EM governments have central banks that adhere to the now seemingly old-fashioned focus on inflation. This is certainly not the case for the major DM central banks (the Fed, European Central Bank, Bank of Japan, and Bank of England). All of these DM central banks have seemingly replaced what used to be considered the orthodox approach of a singular focus on inflation, with multiple mandates ranging from employment, to nominal GDP growth, to financial stability. And they are doing so with experiments that basically involve the expansion of their balance sheets (as with the Fed's quantitative easing policy) to address these problems. When we examine country fundamentals (which include variables such as current account deficits, debt levels, fiscal deficits, and banking system health) and compare them to real interest rates (for local currency bonds), we believe a number of emerging countries have a winning combination of strong fundamentals and high real interest rates. In Europe, Hungary stands out with roughly 5.5% local currency yields and only 0.9% headline inflation, in a country with a current account surplus. In Latin America, Brazil stands out, with local yields over 10%, inflation around 6%, in a country that is a net creditor, has hiked interest rates, and has already seen market concerns reflected in its asset prices. In Asia, nominal interest rates are generally low, but Korea's currency is supported by a strong current account, and this could continue. At the riskier end of the spectrum, Sri Lanka has 9% yields with inflation below 5%, although its fiscal stance is problematic. Also, Vietnam has 8.25% interest rates, with inflation at 6%, with a strong current account balance and a government that is prioritizing macro stability. The abandonment of orthodoxy in the face of the 2008-2009 global financial crisis is especially striking given that when EM economies faced similar crises (such as the Asian and EM financial crises of 1997/1998), DM governments conditioned their assistance to EM economies on inflation-targeting by the central bank, fiscal austerity, and allowing insolvent banks and corporations to default. DM governments facing their more recent crisis, by contrast, expanded central bank mandates, grew government spending, and created too-big-to-fail banks and corporations. Funny how "orthodoxy" changes when it's your turn for a crisis...especially when the orthodox, but difficult, policies that DM governments imposed on EM economies worked! The Asian and many EM economies are today almost all net creditors to the U.S., and didn't suffer acutely during the 2008/2009 crisis because of the tough medicine they took earlier on. In fact, their lower debts and deficits, and stronger banking systems allowed them to stimulate from a strong base. Now, all is not good with EM debt. Starting in late May, the broad category called "EM debt" sold off significantly in response to the Fed's moves to taper its government and mortgage bond purchases. US Treasury yields rose, and many EM government bond yields rose even more. Moreover, there are a number of EM economies that are vulnerable. We believe that South Africa, Turkey, India, and others do not have the combination of high reserves, strong fiscal policy, and inflation-targeting central banks that characterize other EM economies. They also don't have high real interest rates, and their large current account and fiscal deficits keep them dependent on market conditions. But, our response is to not own them, rather than pan all "EM debt". Which leads us to our third reason to favor EM debt over DM debt: many EM governments have already responded properly in the face of the Fed's taper. Consider Brazil, which has hiked interest rates by 275 basis points since April and is still hiking. After a 25+% decline in its currency between March and August 2013, it intervened using its own reserves, which is credible because they are high (the country is a net creditor to the U.S.). This has laid the foundation for a turnaround in its current account balances going forward. Recent data also indicate that inflation remains anchored, despite currency weakness. Not bad. Pretty good, actually. And, most importantly, another reminder of the combination of good initial conditions (low debt, etc.) and good policy (independent central banks) that seems to characterize many EM economies...but alas not G-4 economies. Finally, private financial actors are not the only ones who matter. EM local-currency debt is steadily becoming a global reserve asset. EM central banks, which are generally speaking net creditors to the U.S. (!), are increasingly buying the bonds of other EM countries. This is in no small part due to their growing respect for... well, the same fundamentals that they themselves have! - low debts and deficits and inflation-focused central banks. By the way, if you're worried about "duration", We believe you should be worried about developed-market bonds more than EM bonds. When we examine the relationship between the steepness of 2s/10s in U.S. treasuries and other bond markets, we find that the long-term correlation is highest for other developed market bonds. For EM bonds, it depends, with a few exhibiting a similarly high correlation, but most exhibiting a lower or inverse correlation. Our point is not that they're all good, but that idiosyncrasy abounds. Again, our conclusion is that many EM bonds offer a defense, whereas DM bonds do not.

Total joins UK’s pursuit of shale boom

Total of France is to become the first major oil company to explore for shale gas in the UK, in a big boost for government efforts to create a US-style fracking boom on British soil. The deal, to be announced on Monday, will be seen as a big vote of confidence in the UK’s fledgling shale industry. The coalition has made the exploitation of Britain’s unconventional gas reserves a top priority, offering tax breaks to shale developers and promising big benefits to communities that host shale drillers.

Total will announce on Monday a deal to join a shale gas exploration licence in the Midlands currently operated by Ecorp of the US, according to people familiar with the matter. The other partners in the project are Dart Energy and UK-listed Igas and Egdon Resources. George Osborne, chancellor, has argued that shale has “huge potential” to broaden Britain’s energy mix, create thousands of jobs and keep energy bills low. But the entry of Total will antagonise anti-shale campaigners who are strongly opposed to fracking. They say the process, which involves injecting water, sand and chemicals underground at high pressure into shale rock to release the oil and gas trapped inside, can contaminate groundwater and cause earthquakes. They also worry about the air pollution and heavy traffic resulting from large-scale fracking operations. Shale gas explorer Cuadrilla Resources faced fiery protests by anti-fracking campaigners last summer when it attempted to drill for oil in the leafy Sussex village of Balcombe. However, ministers have insisted shale gas development should go ahead, citing the broad economic benefits it has brought the US. A boom in North American production from shale means natural gas in the US is now three to four times cheaper than in Europe. Cheap gas has driven down household energy costs for US consumers and sparked a manufacturing renaissance. The coalition says Britain could potentially enjoy a similar bounty. It points to recent estimates that there could be as much as 1,300tn cubic feet of shale gas lying under just 11 English counties in the north and Midlands. Even if just one-10th of that is ultimately extracted, it would be the equivalent of 51 years’ gas supply for the UK. Ecorp’s licence covers the Gainsborough Trough, a geological basin that is part of the Pendleian Shale in Lincolnshire. Though Total’s investment may be relatively small in value, the area is thought to be rich in gas. Little exploration has occurred there so far. Total has long been interested in investing in the UK’s shale reserves. The company is shut out of its home market, France, which has banned fracking. Total was one of a number of majors who approached Cuadrilla last year about buying into its licences in the Bowland Shale in north-western England, one of the most potentially attractive areas in the UK. In the end, it was beaten by Centrica, owner of British Gas, which bought a stake in the licences last June. Total will be the second French group to enter UK shale gas sector. Last October, utility GDF Suez announced a deal with Dart Energy, saying it would fund the drilling of up to four exploration wells in the Bowland Shale over the next three years.

US activists shop for Wm Morrison stake

Activist investors including Elliott Associates, one of the most aggressive US hedge funds, have built a stake in struggling grocer Wm Morrison and are pushing for a radical shake-up of its property portfolio. The pressure comes at a torrid time for Morrison, which became the standout loser of the Christmas trading period when it reported dismal trading on Thursday.

Dalton Philips, the supermarket’s chief executive, is already under scrutiny from shareholders. Earlier this week, several top 10 investors told the FT they have questions about his strategy for Britain’s fourth-biggest grocery chain by market share. Elliott, controlled by US billionaire Paul Singer, is one of the most unpredictable players in America’s activist investor industry, and is involved in a protracted fight with the Argentine government over its refusal to accept the country’s proposed debt restructuring. The hedge funds are seeking an overhaul of Morrison’s property portfolio, said people familiar with the situation. Elliot holds positions in a number of UK-listed food retailers, the people said. The value of Morrison’s properties – estimated to be worth about £10bn – is almost twice its market capitalisation, which is £5.5bn following a sharp fall in its share price on Thursday. It owns the freehold to about 90 per cent of the property. When Mr Philips updates investors on a review of the retailer’s property portfolio later this year, he is widely expected to announce that Morrison will sell and lease back some of its stores. This would dismantle a key plank of the tenure of Sir Ken Morrison, who ran the grocer for 50 years. He consistently dismissed such a move and viewed ownership of the stores as “essential” to the company’s success. However, the activist shareholders are pushing for the company to go further than a sale and lease back. One option they believe could create more value is the route taken by Canadian grocer Loblaw, which hived off its property assets last year and sold 20 per cent to investors. However, Morrison is thought to be very reluctant to go down the route pursued by Loblaw, where Mr Philips was chief operating officer before he took the helm at Morrison in 2010. Elliott and Morrison declined to comment. The dire trading at Morrison has prompted some analysts to suggest that the retailer could be the target of a break-up bid. Mike Dennis, analyst at Cantor Fitzgerald, said Morrison was “vulnerable to a break-up by outside interests” that could see it return to its roots as “a small regional supermarket group”. Elliott has been involved in several high-profile activist battles in recent years including at National Express, the UK transport group, Actelion, the Swiss biotech company and Riverbed, the US-based technology company. Earlier this week it forced McKesson to increase its bid for rival pharmaceuticals group Celesio by €0.50 a share.

Weekly Market Update: Markets Frozen in Neutral

- Tepid markets were the rule this week, as the DJIA racked up its second consecutive week of losses while the S&P500 eked out a small gain. European markets slid sideways and Asia equities saw some pretty steep losses. There were no surprises in the BoE or the ECB rate decisions and the FOMC minutes were pretty much as expected. Friday's US payrolls report was perplexing, as the headline NFPs fell wide of expectations and well below recent performance at +74K even as the unemployment rate fell to 6.7%. In Europe, peripheral nations held very successful debt auctions even as unemployment rates in core states hovered near all-time highs. For the week, the DJIA slipped 0.2%, the S&P500 gained 0.6% and the Nasdaq rose 1%.

- There was plenty of controversy over the December jobs report. The economy added 74K jobs in December, the lowest increase in a year and a half and well short of the 197K expectation. On the other hand, the unemployment rate dropped to 6.7%, for the lowest rate since October 2008. The NFP miss was hard to explain away, while the material decline in the unemployment rate spurred plenty of debate. Factors behind the discrepancy have been chalked up to weather effects, a plummeting participation rate, and the impact of the run-off in unemployment insurance benefits, among other things. Various commentators opined that the jobs report alone was unlikely to alter Fed's course on tapering QE.

- The minutes from the FOMC's landmark December decision to taper QE asset purchases were released on Wednesday. The minutes showed the FOMC is looking to take a cautious approach to the taper and focus on preventing asset bubbles. Some committee members expressed concern about the potential for an unintended tightening of financial conditions if a reduction in asset purchases was misinterpreted as a signal the Fed would tighten rates sooner. There was little interest in changing thresholds for raising interest rates, as a change could undermine the credibility of the FOMC's forward guidance.

- Chinese equity markets fell for a second consecutive week. Analysts say the declines have been exacerbated by the resumption of IPOs in China after a year-long suspension. Importantly, the pricing of IPOs is no longer capped, allowing investors to dump in funds in expectation of a healthy pop on the first trading day, leading to billions of yuan periodically locked up in this part of the market, worsening the liquidity crunch. The first two IPOs, selling a combined CNY932 million, launched on Wednesday and were both over 100x oversubscribed, resulting in a massive CNY128.2 billion in funds being frozen. Fifty companies are set to come to market in China this month alone, including a record 18 next week.

- In other China news, the NDRC said it would allow local governments to restructure debt by selling bonds. Recall that at the very end of December, a government audit showed a big increase in local government debt, with local and central government debt rising to 37.1% of GDP in June 2013 from 34.1% in 2010.

- Liberty Media has revised its relationship with subsidiary Sirius XM by announcing its goal to acquire the shares in the satellite radio provider it doesn't already own. The non-binding offer is to pay a tiny premium to the closing price of Sirius when the offer was made of about $3.68 per share. Press sources suggest the Liberty offer for Sirius may be a prelude to a formal offer for Time Warner Cable via Charter Communications. Back in mid-December, Charter was said to be preparing a "bear hug" offer for Time Warner valued under $135/share, well below the $150/share it reportedly desires.

- Alcoa unofficially kicked off earnings season on Thursday. The firm's adjusted earnings were a bit subpar but revenue looked good, although traders do not seem impressed that the firm's FY14 global aluminum demand forecast remains unchanged at +7% from the FY13 forecast. Shares of AA fell more than 5.6% in trading on Friday.

- US retail names disclosed December and holiday season same-store sales reports this week, in addition to a few poor quarterly reports. On the whole, the picture was ugly, with slumping comps rationalized by appeals to intense competition for sales, unenthusiastic consumers and tough comparisons to a year ago. Tiffany and Macy's were the exceptions to the terrible holiday results from retail, with holiday SSS +6% and 4.3%, respectively. Target disclosed that more data was stolen in the December security breach than originally thought, including names, mailing addresses, phone numbers or email addresses for up to 70 million individuals, separate from payment card data.

- Shares of trucker YRC Worldwide fell more than 30% this week as the Teamsters voted down a new contract with drivers that would have cut salaries by 15% in order to help the company restructure its debts and stay out of bankruptcy. While the implosion of the contract will not necessarily mean bankruptcy, the company - which cancelled talks with lenders - will likely have to sell assets, consider strategic options, and go back to the Teamsters with a new offer.

- Both the BOE and the ECB left interest rates unchanged in their respective policy decisions on Thursday. In his post-rate decision press conference, ECB President Draghi shared even more dovish rhetoric in his continuing quest to force down money market rates and prevent more deterioration in the inflation outlook. EUR/USD moved lower as the press conference wore on but downside momentum was limited with no material changes in policy on tap. All in all, dealers seemed a bit perplexed that the euro did not sell off more. The BOE did not issue a statement after its decision, although earlier there had been some speculation that Governor Carney would amend forward guidance by changing the unemployment benchmark to 6.5% from 7.0%

- Now that they have exited their bailouts, Spain and Ireland held successful bond auctions this week. Spain sold €5.29 billion of new 2019 bonds and existing paper maturing in 2028. The yield on the five-year paper averaged 2.38%, a record low level. Orders for Ireland's 10-year bonds hit €14 billion, almost four times the €3.75 billion actually sold. Portugal is ready to exit its bailout in May, and the nation's debt agency received approximately €11 billion in orders for five-year notes at auction on Thursday, eventually selling €3.25B at 4.66%. Peripheral spreads fell notably following the auctions, with the 10-year Irish/German spread falling to 135 bps, its narrowest level since April 2010. The 10-year Spanish/German spread was around 180bp, the tightest since April 2011. Meanwhile, Italian and Greek December unemployment levels hit fresh record highs at 12.7% and 27.8%, respectively, while Eurozone unemployment hit 12.1%, just a hair below record highs.

Closing Market Summary: Stocks End Mixed Following Weak Jobs Report

The major averages ended the first full week of 2014 on a mixed note. The S&P 500 added 0.2% while the Dow Jones Industrial Average shed less than 0.1%. For the week, the S&P 500 gained 0.6% while the Dow slipped 0.2%.

Prior to the open, it was reported that job growth slowed considerably in December with the addition of just 74,000 jobs. This was well below the consensus, which called for a reading of 197,000. The unemployment rate plunged to 6.7% from 7.0% but that was a result of another sharp drop in the labor force participation rate. Furthermore, aggregate wages fell 0.1% after increasing 0.7% in November. The drop is expected to put downward pressure on consumption growth unless consumers decide to lower their savings rate.

The disappointing report pressured the dollar while metals and Treasuries rallied, suggesting a fair amount of participants expect the Fed to delay the next round of tapering. The dollar index finished near its low (-0.5% at 80.64) while Treasuries ended on their highs (10-yr yield -10 bps at 2.86%). Meanwhile, gold futures advanced 1.4% to $1246.60/ozt.

The strength in precious metals underpinned miners, which contributed to the strength of the materials sector. The Market Vectors Gold Miners ETF (GDX 22.01, +0.74) jumped 3.5% while the broader sector ended ahead of the remaining cyclical groups with a gain of 0.4%. Even though the sector displayed strength, there were still some pockets of weakness. Namely, Alcoa (AA 10.11, -0.58) fell 5.4% after missing bottom-line estimates by two cents. The company said it expects to see global aluminum demand grow at 7.0% in 2014, which matches last year's growth rate.

Outside of materials, the discretionary sector (+0.4%) was another notable outperformer among growth-sensitive groups. Homebuilders provided significant support as the iShares Dow Jones US Home Construction ETF (ITB 24.76, +0.35) jumped 1.4% amid today's retreat in yields.

Speaking of lower yields, they also factored into the outperformance of rate-sensitive telecom services (+0.4%) and utilities (+1.4%). The other two countercyclical groups were mixed as health care (+0.4%) outperformed while consumer staples (+0.2%) ended in-line with the S&P 500.

On the downside, the financial sector (-0.1%) was the lone decliner. Citigroup (C 54.72, -0.48) underperformed the other majors with a loss of 0.9%.

Despite the mixed finish, participants did not show strong demand for volatility protection as the CBOE Volatility Index (VIX 12.18, -0.71) fell 5.5%, ending at its lowest level of 2014.

Trading volume was well below average as only 655 million shares changed hands on the NYSE floor.

Outside of the aforementioned nonfarm payrolls, investors received another data point today. In November, wholesale inventories increased 0.5%, down from a 1.3% (from 1.4%) gain in October. The consensus expected wholesale inventories to increase 0.2%. Inventory growth over the past few months has been extremely strong, yet similar gains in sales suggest inventory growth trends can remain on the current path. Sales rose 1.0% in November after increasing 1.1% in October. On Monday, the December Treasury Budget will be reported at 14:00 ET.

Russell 2000 +0.1% YTD Nasdaq -0.1% YTD S&P 500 -0.3% YTD DJIA -0.8% YTD

Peugeot, Donfeng Eye Expanding Capacity in China

French Car Maker Is Looking to Boost Presence Outside Core European Market

French auto maker PSA Peugeot Citroen UG.FR -0.05% and its Chinese partner Dongfeng Automobile Co. 600006.SH -1.45% are considering building another assembly plant in China to meet fast-expanding demand for its vehicles.

Loss-making Peugeot said Friday that wants to grow outside its saturated core market in Europe, but lacks the financial strength to be able to invest the huge amounts that would be required to expand production and sales in China as well as in new markets in Asia, and is looking to deepen its 20-year partnership with Dongfeng.

Peugeot and Dongfeng are involved in discussions that could lead to Dongfeng taking substantial minority stake in the French company through a capital increase. The French government could also take a stake in Peugeot to balance Dongfeng's interest, according to people familiar with the discussions.

Peugeot and Dongfeng's existing joint venture DPCA already has three assembly plants in China at Wuhan, which produce the Peugeot 207, 307, 308, 408, 508 and 3008 models, as well as the C2, C-Elysee, C-Triomph, C4, C5 and C4L for the Citroen brand.

Peugeot also has a recently opened fourth production facility at Shenzen with another Chinese partner Chongqing Changan Automobile Co. 000625.SZ +1.24%

A spokeswoman for Peugeot said a decision where to locate the new factory of the Peugeot-Dongfeng will be taken this year, but said it could be at Chengdu, in the western part of China, rather than at Wuhan, where DPCA's three others plants are located.

DPCA is rapidly running out of capacity to cater to the steep rise in demand for automobiles in China. It produced 550,000 vehicles in 2013, and is targeting 650,000 this year. Annual capacity of the three existing plants will be raised to 750,000 by 2015, the spokeswoman said.

Airbus studies engine revamp of A330: sources

PARIS (Reuters) - After increasing sales of its A320 jet by revamping it with newer and more efficient engines, Airbus is studying whether to repeat the process with a larger jet, the A330, industry sources and analysts said.

Sales of the 20-year-old A330 have enjoyed an unexpected boom in recent years after Boeing's radically new 787 Dreamliner encountered three years of production delays and many airlines turned to the cheaper and proven Airbus model.

But the backlog of sales is dwindling and analysts say Airbus faces questions over whether it can maintain current A330 production rates in the second half of the decade without something else to offer airlines coping with high fuel bills.

Officially, Airbus is happy with the way sales of its most successful wide-body jet are holding up, following years of incremental improvements and increases in range and capability.

But suppliers and industry experts say behind the scenes, Airbus is looking seriously at whether to re-engine the A330.

"It is being discussed. It is one of the options in the mix," said an industry source briefed on the plans.

Airbus said it had nothing to add to recent comments made by a company official who told Air Insight website there was no immediate pressure to produce a revamped version of the aircraft. The firm is due to hold its annual news conference on Monday.

Analysts say such an upgrade would cost around $1 billion.

The decision could affect the wider contest between the world's top planemakers because some analysts say a fresh dose of competition from the A330 could, at least for a while, sap margins for the 787 by forcing Boeing to offer bigger discounts and keep up a lifeline of cash for other Airbus developments.

CONCERNS OVER RESOURCES

The A330 and A320 are the two main sources of cash at the European firm, which is the sole major competitor to Boeing.

However the proposal must overcome potential concerns about scarce engineering resources and satisfy Airbus bosses that it can generate an adequate return without drawing away sales from Airbus's own Dreamliner equivalent - the A350.

The industry source said Airbus was not expected to make a decision for at least a year.

That might leave time for Airbus to resolve questions over the future of its A350-800, the least popular variant of its latest aircraft model. Airlines are gradually upgrading to the next-largest model, which is seen as more efficient, and a revamped A330 could accelerate a decision to drop the A350-800.

Some analysts however say Airbus cannot afford to wait that long since the weakness of the A350-800 leaves Airbus with little to offer at the lower end of the lucrative market for wide-body jets carrying more than 200 passengers. The A350 series is mostly designed to carry more than 300 passengers.

"The most likely entry to service date (for a re-engined A330) would be 2018, but for that they would need to make a decision pretty soon," said Leeham Co analyst Scott Hamilton, who recently blogged about the A330 re-engining project.

"A re-engining would give the A330 another 10 years of life but it would accelerate the demise of the A350-800 which is likely to fall away as customers upgrade," he said.