Airbus has successfully completed the first test flight of the A320neo. It touched down in Toulouse, southwest France, 27 years after the original A320 first took to the skies.
Powered by a new type of jet engine from Pratt & Whitney, the A320neo flew for two hours and 22 minutes, launching a year of flight trials. The same family of aircraft will also offer a competing engine from CFM International, a joint venture between General Electric and Safran.
Airbus is aiming for savings of 15 percent per seat compared with the current generation of medium-haul passenger jets.
It said this gap would increase to 20 percent by 2020 thanks in part to a further two percent improvement due to be delivered by Pratt & Whitney, on top of its 12 percent contribution to the current improvement. The rest will come by adding more seats.
With airlines running on wafer-thin profit margins and spending about 40 percent of their operating costs on fuel, such savings are central to a huge sales battle.
Rival Boeing is bringing out its own updated version of the 737 just over a year after Airbus and the two companies face a gradual threat to their duopoly at the small end of the market from new competitors in Canada, Brazil, China and Russia.
A smooth entry to service will however cement their position as market leaders for years to come, analysts say,
Airbus has sold 3,257 A320neos and said it expects this to reach 3,500 by the end of the year. Together, Airbus and Boeing have sold well over 5,000 of the planes.
Both companies have announced increases in production as a result, and are considering further increases.
Airbus chief executive Fabrice Bregier however said it was in "no rush" to make a further output decision.
The flight went ahead in September as planners hoped after last-minute signs of concern about the engine's readiness and the recent resumption of flight tests on Bombardier's CSeries aircraft, which uses similar Pratt & Whitney engines.
An engine blowout in May had halted CSeries flight testing.
The companies indicated they were convinced that the Airbus version of the engine would not be affected by the same problems and that the aircraft would enter service with the same high reliability as the existing generation of small jets.
"It is a great engine that is going to change the economics of the airline industry," said Alain Bellemare, chief executive of UTC Propulsion and Aerospace Systems at Pratt & Whitney parent United Technologies.