AirAsia becomes biggest Airbus airline

Monday, 27 June 2011 00:52 -     - {{hitsCtrl.values.hits}}

LE BOURGET, France (Reuters) :AirAsia last week thundered into the Paris Air Show with an expected order for 200 revamped A320neo jets plus 100 options - a $17 billion deal making the Malaysian firm Airbus's largest airline.

AirAsia chief executive and Formula One boss Tony Fernandes flew into France overnight to sign off on what one Paris brokerage termed an "amazing" 200-plane deal, which is also seen as a coup for engine maker CFM International .

The deal is expected to wrap up a frenetic Paris Air Show which confirmed a strong rebound in Asian demand and sent industry records clattering like an airport departure board.

It also marks an attempt by Airbus to prove the case for its decision to update the best-selling A320 passenger plane, the backbone of low-cost airlines, and put pressure on rival Boeing which is undecided whether to match or trump that move.

The AirAsia order is set to eclipse a $16 billion order for 180 aircraft from India's Indigo, sealed on Wednesday, as the biggest ever civil aircraft order by the number of planes.

In a key detail, AirAsia also plans to take another 86 aircraft already on order from Airbus to feed growth in its markets, quashing speculation of conversions to the new plane.

The higher than expected figure of 200 planes was first reported by Reuters on June 10. On Wednesday, industry sources disclosed talk of 100 additional options.

The largest ever order for A320-family aircraft is the third biggest in value for the European plane manufacturer behind major wide-body orders from Emirates and Qatar Airways.

Qatar was tipped to buy five Airbus A380 superjumbos this week but a deal has so far failed to materialise. Flightglobal reported a rift between the airline and Airbus over its plans for a redesign of the larger A350-1000 wide-body aircraft.

The A320neo is a version of Airbus's best-selling 150-seat passenger jet offering fuel savings with new engines from 2015.

The deal adds to evidence of a multi-speed recovery that has seen Asian economies plan for frenetic transport growth, especially in the low-cost sector.

Underscoring how price-sensitive travel has shifted the balance of power in the industry, AirAsia and IndiGo are now Airbus's first and second largest airline customers, lagging only the U.S. leasing giants ILFC and GECAS .

Another low-cost airline, India's GoAir, confirmed a previously announced order for 72 A320neo aircraft.

Airbus has reported firm or provisional orders for 545 A320neo aircraft. Including pre-show deals, there are signs it will reach close to 1,000 A320neo firm deals or provisional agreements by the end of the week.

It is a show of force from the subsidiary of Europe's Airbus but also seen as a deliberate gamble directed at Boeing in a market for small airliners worth $2 trillion over 20 years.

Industry analysts say the rush of orders may put pressure on Boeing to make up its mind whether to re-engine its competing 737 airplane in 2016 or wait a few years longer and build an all-new model from scratch to offer even greater benefits.

Boeing has said it will make the strategy decision affecting airlines and its suppliers by around the end of the year, and has vowed not to base its thinking on what Airbus does.

Analysts say the defection of a Boeing customer could however push the U.S. planemaker into acting more swiftly.

AMR Corp's American Airlines, the operator of an all-Boeing jet fleet, is in talks with Airbus about buying at least 100 narrowbody planes, Bloomberg reported. Boeing said this week it would not be surprised to see Airbus approaching its customers to try to flaunt the A320neo.