Lion Air Challenges AirAsia With Malaysian Low-Cost Carrier

PT Lion Mentari Airlines will set up a low-cost carrier in Malaysia, challenging AirAsia Bhd. (AIRA), the region’s biggest discounter, in its home market.

Malindo Airways will begin flights in May and may have about 100 planes within a decade, Ahmad Johan, president of National Aerospace & Defense Industries Sdn., told reporters in Kuala Lumpur today. National Aerospace will own 51 percent of the new airline, with Indonesia-based Lion Air holding the rest.

The carrier pits Boeing Co. (BA)’s record customer against the biggest buyer of Airbus SAS narrow-body planes as Lion Air and AirAsia compete for budget travelers in Asia. The region’s total air-travel may grow 6.4 percent a year through 2031 because of economic growth, according to Boeing.

“We are looking at selling tickets at AirAsia’s pricing or may be lower,” Lion Air President Director Rusdi Kirana said today. Malindo Air plans to fly to countries including Thailand, China, India, Japan and Australia, besides offering services within Indonesia and Malaysia, he said.

Lion Air signed a record order for 230 Boeing 737s in February, which was worth $22.4 billion at list prices. The deal, which also included 150 options, was Boeing’s biggest in terms of dollar value and plane numbers. The carrier flies to more than 36 destinations within Indonesia and overseas, according to its website.

100 Planes

The airline has forecast passenger growth rates of 15 percent a year as it adds more planes. Its fleet may expand to 470 planes by 2025, Kirana said in November. The carrier has 100 planes now. Malindo Air will draw its fleet from planes Lion Air Group has ordered, including the 787s for possible Europe flights, Kirana said today.

Shares of AirAsia sank 2.7 percent to 3.19 ringgit in Kuala Lumpur trading, the lowest close since Oct. 10. The carrier has grown into Asia’s biggest discount airline since its takeover by Tony Fernandes and partners in 2001. The carrier, based in Sepang, Malaysia, has subsequently set up ventures in the Philippines, Japan, Thailand and Indonesia.

The airline last year ordered 200 Airbus A320neo aircraft valued at $18 billion in the biggest order for the French planemaker. It may sign a deal for as many as 100 more A320s at the Berlin Air Show, which starts today, Chief Executive Officer Aireen Omar said last month.

Jetstar, the budget arm of Qantas Airways Ltd., is also building up a network of low-cost carriers across Asia. The airline already has ventures in Singapore, Vietnam and Japan, and it’s setting up another in Hong Kong.

Batik Air, Lion Air’s long-haul carrier, will begin operations in March with six Boeing 737s and five 787s, the company said today.

To contact the reporter on this story: Manirajan Ramasamy in Kuala Lumpur at rmanirajan@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.