AirAsia in $4 b talks for 50 Airbus A320 jets

Reuters: AirAsia is studying a potential $4 billion deal to buy another 50 Airbus A320 passenger jets, its founder told Reuters last week, extending the budget carrier’s dramatic growth, months after it placed a record order for 200.

Asia’s largest low-cost carrier is ready to swoop on the current version of Airbus’s passenger jets, known as the A320 or A320ceo, while waiting for a more fuel-efficient version of the 150-seat plane it ordered in record quantities last year.

“In my mind, that is an aircraft order that we would need, but we haven’t made the right analysis yet,” Tony Fernandes said in an interview.

“We have to look at whether we buy or lease. My sense is that we are short of aircraft, and our team is now evaluating.”

Fernandes was speaking after taking delivery of the Malaysian budget carrier’s 100th A320, a narrowbody plane that competes with the Boeing 737 - two industry best-sellers that have powered the growth of low-cost airlines.

In total it has ordered 375 Airbus aircraft.

Economic growth, urbanisation and rising disposable incomes are spurring rapid passenger growth among Asian low-cost carriers, helping to shield Western planemakers from the malaise gripping developed economies.

A decision by Airbus and later Boeing to update their best-selling models with new engines to curb record fuel bills has produced a wave of orders in the last 12 months.

AirAsia ordered 200 of the revamped A320neo versions worth $18 billion in mid-2011. A fierce regional rival, Indonesia’s Lion Air, deliberately topped the deal by one jet with a 201-plane purchase from Boeing months later.

AirAsia may, however, need more of the current model to meet its expansion plans until the newer A320neo reaches the market from 2015 onwards. Its growth plans include Japan.

“We will obviously be talking to Airbus about more A320ceos,” Fernandes said.

Despite their importance in many fleets, some airlines are hesitant about buying the existing models, fearing that the value of their investment will plunge when the new A320neo and Boeing 737 MAX enter service, depressing resale prices for the older version.

But some in the industry believe resale values may decline less sharply than widely expected as Airbus and Boeing, bruised by past production problems, switch over their production lines gradually. If airlines can cut a good deal on the purchase price, the older models can still look attractive, a source close to the talks said.

Although spending most attention on the new models, Airbus and Boeing need to fill up production slots of the older planes to ensure a smooth transition, and in some cases are tying in deals for old models together with sales of new ones.

Airbus has set an internal target of selling 300 of the A320ceo models this year, while acknowledging that Boeing will probably win the overall order race for the first time in six years as it catches up on sales of the newly revamped models.