Bingo. The 109-E was THE variant that made a huge difference. It got 400 hp+ (!) and a neat gain of 70 kph in top speed, from 490 to 560 kph.
This was of uttermost importance, because it put at a big advantage over the D-520 and the BEF / AAS Hurricanes. At this point in history, only the spitfire Mk.1 was left to compete with the 109E.
And we know the exact moment when that variant apeared on the Western front: mid-September 1939.
Now reel back the 109 to the B / C / D variants... and weep. According to the performance specifications above, these variants would be well within reach of Curtiss H-75s, D-520s, and not too superior to MB-152s and MS-406s.
This meant, fundamentally, that in the 1936-1939 era, France had fighters able to kick the ass of LW 109B, 109C and 109D. Yet, when Munich come in August 1938, Armée de l'Air commander Vuillemein told Daladier (more or less) "we can't fight, they have 109s". (Facepalm)
The 860 hp MS-406 was hampered by its barn-door-drag radiator, among many others flaws. Now the D-520, even with only 50 hp+ was 10 times better.
The 12Y was mostly stuck in the "30" series around 900 hp. Future belonged to the 12Z at 1200 hp+ BUT there were also intermediate, boosted 12Y like the -49 which had 1000 hp.
Remember Turbomeca ? they started in 1938 with a "miracle compressor" that was to boost the 12Y power by 100 hp.
Main problem, as usual, was that French piston-engine makers were a bunch of jerks. G&R and HS, notably. Guess why in 1946 SNECMA was created...
Vuillemin's quote makes sense because the MS 406 only entered service...in December 1938 (yes, a whopping 30 months after the first flight. Morane had serious problems).
At the time the best fighters France has are the 60-odd Spad 510s and the 120 Dewoitine 510s. Granted, both could work thanks to the maneuverability of the biplane and the greater service ceiling of all planes that allows them to start a fight from much higher, but that assumes that pilots took them high in the first place.
The D520 was still competitive with the Bf 109E because it isn't much slower but it has greater altitude performance, as well as some advantages in maneuverability.
Now, if you can get LN 161s instead of Morane 406s, and better yet if you can get them in service earlier than the Morane (which isn't impossible at all, Loire-Nieuport being a larger and more competent company)), you get an aircraft that in 1935-36 could achieve about 478kph at 4000m, and actually possibly a little more as we have no data on speed between 4000 and 500m. It seems it could exceed 480kph that way.
More importantly, it was among the fastest, if not THE fastest climber in the world at this time, with time to 7000m being 9min 41s, compared to 11min 7s for the Curtiss H75 or 18min (!) for the MS 406, and 12min to 8000m, similar to the Spifire Mk 1 bis. Time to 10 000m was a bit above 19min.
On top of that, it has an impressive practical ceiling of 11 000m, 1000m above the Bf 109E. These two characteristics make the LN 161 still relevant against the E in spite of a lower top speed, because it can exploit altitude instead.
More importantly, unlike the MS 406 which stayed in its 1936 configuration, the LN 161 was constantly refined and by 1938 was doing 496kph at 4000m (and possibly more between 4000 and 5000m), and gained a few seconds to altitude per each 1000m (so a minute or more when going to high altitude).
Had the LN 161 received thrusting exhausts like the British fighters or the D520 in 1939, as was likely to happen in an in-service 1939 LN 161, it would be close to 510kph.
It was also very easy to fly compared to the Bloch 150 series, and was a good firing platform.
The LN 161 is thus clearly an excellent competitor to German fighters even with its 860hp engine, matches the Hurricane in speed in spite of its weaker engine (which is normal because the Hurri was less structurally modern so had greater air resistance on the fuselage), and exceeds pretty much everything in climb rate. In theory it can even match the D520 if you put its engine in it, so it has quite a good development potential.
By the way, its successor was the CAO 200, and while it never got the intended engine and had some tail issues to fix, it would have been quite impressive. It also made use of welding.