Lion Mentari Orders 234 Airbus Jets to Challenge AirAsia

PT Lion Mentari Airlines ordered 234 planes from Airbus SAS, its second order of more than 200 aircraft in two years, as Indonesia’s biggest budget carrier expands its fleet to meet rising travel demand.

The order is the third major commitment for A320s in recent weeks, Airbus Chief Operating Officer John Leahy said yesterday.

Lion Mentari Air, which serves more than 36 destinations, is establishing a low-cost carrier in Malaysia to challenge AirAsia Bhd. (AIRA), Airbus’s biggest A320 customer. The carrier, which ordered 230 Boeing Co. (BA) planes last year, needs aircraft as it adds flights in a region where air travel is expected to grow more than 6.4 percent annually through 2031.

Lion Air already has 700 planes on order and expects to have ordered 1,000 planes within “two to three years,” President Rusdi Kirana said yesterday.

Airbus said it may boost production rates for the single- aisle jetliners beyond 42 a month following the order, which includes 60 current-generation A320s, 109 A320neos and 65 A321neos worth about $24 billion at list prices.

“It’s getting tight for deliveries,”Leahy said in an interview yesterday. “I have only a handful of delivery slots left for 2019. We’re looking at whether we can increase the rate.”

Airbus had held off on plans to accelerate output because of concerns about suppliers keeping up, he said.

Leahy said no firm decisions will be required for two years or so, and that Airbus would prefer to accelerate output after the ramp-up to all-Neo production from late 2015 through 2017.

Budget Airlines

Leahy declined to comment on pricing for the Lion order yesterday. Customers typically buy planes at discounts. The order pushes the carrier into the ranks of the top five A320 operators, after AirAsia, Deutsche Lufthansa AG (LHA), India’s IndiGo and EasyJet Plc.

More than a dozen budget airlines began operations in Asia- Pacific in the past 15 years as economic growth in China, India and Southeast Asia enables more people to fly for the first time. Singapore Airlines Ltd. (SIA) started Scoot and Tiger Airways Ltd. and Qantas Airways Ltd. (QAN) started Jetstar Airways Pty.

AirAsia 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 since set up ventures in the Philippines, Japan, Thailand, India and Indonesia.

In 2011, AirAsia ordered 200 Airbus A320neo aircraft valued at $18 billion in the biggest order for the planemaker.

Lion vs AirAsia

Discount carriers have secured about a quarter of the region’s air travel market in the past decade. The region will account for 33 percent of global passengers in 2016, according to the International Air Transport Association, and HSBC Holdings Plc has said four out of five airports in Asia are operating at or above their designated capacity.

Lion Air started operations from Indonesia in 2000 with one aircraft, according to the airline’s website. The airline was the launch customer for Boeing’s 737-900ER, it said.

Lion Air-backed Malindo Airways will sell tickets at prices matching “or maybe lower” than AirAsia’s, Kirana, Lion Air’s founder, said last year. Malindo will draw its fleet from aircraft ordered by Lion Air Group, including 787s for possible Europe flights, Kirana said in September.

To contact the reporter on this story: Andrea Rothman in Toulouse at aerothman@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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