Airbus sells 234 planes to Lion Air in $ 24 billion deal

Reuters: Europe’s Airbus grabbed a record order worth $ 24 billion at list prices from Indonesian budget carrier Lion Air on Monday, shaking arch-rival Boeing’s grip on one of the world’s fastest-growing airlines.

The blockbuster order for 234 medium-haul jets underscored the rise of a powerful new breed of Asian carrier and was immediately hailed for its impact on European jobs in contrast to turmoil over a disputed bailout to Cyprus.

“Thanks to this contract, Airbus will be able to secure 5,000 jobs over 10 years,” French President Francois Hollande said at an ornate signing ceremony at the Elysee Palace. Hollande, whose approval ratings have sunk to around 30% amid worries about unemployment, oversaw the deal before leaving for talks with German Chancellor Angela Merkel on further industrial co-operation modelled on Europe’s plane maker.

The contract, as reported earlier by Reuters, trumped a record deal Lion Air had struck with Airbus’s US rival Boeing in front of President Barack Obama in 2011. The plane makers are locked in a battle for global orders in the 150-seat category estimated at $ 2 trillion over 20 years.

Indonesia’s Lion Air has been rapidly expanding its fleet to meet the need for medium-haul jets in the world’s fourth most populous country, an archipelago of 17,000 islands. Co-founder Rusdi Kirana said he would use the aircraft to start up new airline ventures underpinned by Asia’s growth.

He also told Reuters in an interview that Indonesia’s top domestic airline would aim for a stock market listing in 2015 after ditching the plan due to market volatility a year ago.

“What will I do with them? I will set up new airlines in other countries, in the Asia-Pacific region,” Kirana said.

He dismissed concerns about Asia’s ability to absorb large quantities of new aircraft such as over 200 Boeings already ordered by Lion Air and hundreds of Airbus aircraft destined for Malaysian rival AirAsia.

“People who say that don’t understand the market in Asia,” he said. He also rejected industry speculation that newly ordered planes would be used to set up a leasing business.

Still, the purchase is likely to inflame a battle for supremacy between Lion Air and AirAsia, the low-cost carrier founded by Malaysian entrepreneur Tony Fernandes. Lion Air is about to start up a domestic Malaysian rival to AirAsia, which has long been exclusively an Airbus operator. Some industry watchers have warned of a potential price war.

Fernandes could not be reached for comment on the deal but lost no time in trumpeting the success of his own group’s Indonesian operations on his personal Twitter feed.

Shares in EADS fell 1.8% on Monday, reflecting a wider market reaction to the latest developments in Europe’s financial crisis. The stock has surged 42% this year, helped by demand for fuel-saving jets and a higher dividend. The massive Airbus order comes after a three-year courtship of Lion Air, long seen as a fortress for Boeing.

Lion Air’s order includes 109 A320neo and 65 A321neo planes – with the neo designating the newest fuel-saving type of the narrow-body jets – as well as 60 current-generation A320 planes.

EADS strategy chief Marwan Lahoud told Reuters the deal was properly financed, making use of European export credits “in normal proportions.” Lion Air used a similar system of US export credit guarantees to finance its large Boeing order.

A source close to Boeing said no single manufacturer could have met Lion Air’s entire fleet needs and that the planes ordered from Airbus would not displace any in Boeing’s pipeline. While below a recent peak, airplane demand remains robust as airlines and lessors modernise fleets in a bid to drive down fuel costs, while emerging markets continue to grow strongly.

In deals totaling $ 35 billion, Germany’s Lufthansa last week ordered 102 Airbus and Boeing jets, Turkish Airlines picked up 82 from Airbus and Ireland’s Ryanair is expected to sign for some 170 Boeings on Tuesday. The values represent official prices but, in practice, strategic airlines win significant discounts for big orders.