AirAsia Hands Airbus $12.6 Billion Jet Order on Travel Demand

AirAsia CEO: Been Dry Period for Aircraft Manufacturers
  • Carrier is biggest buyer of single-aisle aircraft at Airbus
  • AirAsia has 380 planes on order at European manufacturer

AirAsia Bhd., the region’s biggest discount carrier, agreed to buy 100 planes from Airbus Group SE to meet burgeoning travel demand on the continent.

The Sepang, Malaysia-based airline will buy A321neos in a deal valued at $12.6 billion based on list prices, the companies said Tuesday in a statement at the Farnborough Air Show outside London. Discounts are customary in the industry. The purchase brings AirAsia’s total orders for A320-series planes from the European manufacturer to 575 aircraft, Airbus said.

AirAsia, already the biggest single-aisle aircraft customer for Airbus, is increasing its bet that economic growth from India, China and Vietnam will spawn millions of new fliers in the world’s most populous continent. AirAsia Group Chief Executive Officer Tony Fernandes, 52, has built a pan-Asian budget airline that has grabbed market share from full-service carriers like Singapore Airlines Ltd. and Malaysia Airlines Ltd.

“The Asia Pacific is going to account for at least a third of all aircraft demand over the next 20 years” based on planemakers’ forecasts, said Simon Elsegood, an analyst at CAPA Centre for Aviation in Sydney. “There’s particularly strong demand for intra-regional connectivity in Southeast Asia and North Asia, and then there’s very, very strong demand within China itself for domestic flights.”

Asian budget carriers, following the growth of AirAsia, have purchased hundreds of jets from Airbus and Chicago-based rival Boeing Co. In 2013, Indonesia’s PT Lion Mentari Airlines ordered 234 planes from Airbus, the carrier’s second purchase contract for more than 200 aircraft. Go Airlines India Pvt. said Tuesday that it’s ordering 72 A321neos from Airbus, doubling its total purchases of the model.

Last year, Indian budget airline IndiGo confirmed a $27 billion commitment to buy 250 Airbus planes, underscoring growth plans for the decade-old budget carrier. IndiGo is the largest airline in India by market share. China Southern Airlines Corp. is Asia’s biggest carrier by fleet size, with more than 600 planes.

Fernandes, whose budget airline group operated 199 Airbus planes as of the end of March, has used major air shows to place large aircraft orders. Two years ago, at the Farnborough event, Fernandes said he’d buy 50 A330-900neo airliners in one of the biggest deals of that show, when business reserve gave way to raw emotion as executives of both companies exchanged kisses and man-hugs.

Fernandes assumed 40 million ringgit ($10 million) of debt when he bought AirAsia for 1 ringgit in December 2001, according to the airline’s website. The carrier had two old aircraft when he took charge. Prior to running AirAsia, Fernandes was an employee at Richard Branson’s Virgin Group. The budget airline now operates across India, China, Indonesia and is poised to start in Japan.

Discount airlines in the region are expanding amid a surge in demand. Home to the world’s fastest-growing major aviation market, India posted 20 percent growth in air travel last year, according to the International Air Transport Association. In comparison, passenger traffic in China rose about 10 percent and less than 5 percent in the U.S., IATA said in a December presentation.

Farnborough International Airshow 2016: Full Coverage

Before it's here, it's on the Bloomberg Terminal. LEARN MORE