Airbus about to close US$23b jet sale to AirAsia

London

AIRBUS SE is closing in on US$29 billion of deals with Asian carriers that are expanding their fleet because of surging travel demand in the region, according to people familiar with the matter.

The European manufacturer is working on a blockbuster agreement to sell US$23 billion worth of aircraft to AirAsia Group Bhd, the continent's biggest budget carrier, said the sources, who asked not to be identified discussing private talks. Taiwanese startup StarLux Airlines confirmed a plan to buy wide-body A350 jetliners valued at about US$6 billion. The deals are based on list prices, and discounts are customary for bulk orders.

The AirAsia orders are still subject to final negotiations, said the sources. While no deal has been reached, the sides are close enough that at least part of the sale could be announced during the Farnborough Air Show outside London, the industry's largest trade expo this year, the sources said.

The Malaysian airline, already the second-biggest customer for Airbus' re-engined A320 narrowbody, is weighing an order for as many as 100 A321neo aircraft, according to people familiar with the discussions. AirAsia is simultaneously close to agreeing to order an additional 34 A330neo widebodies, which would bring its total backlog for that aircraft to 100.

AirAsia shares jumped as much as 2.6 per cent to the highest intraday level in almost two weeks in Kuala Lumpur trading.

The purchase of the A321neos would catapult AirAsia ahead of India's Interglobe Aviation Ltd as the biggest customer for Airbus' marquee narrowbody jet, extending the Malaysian carrier's existing orders to 504 planes.

Even more crucial for Airbus, a decision to take more of the larger A330neos would reaffirm AirAsia's commitment to that widebody programme amid heavy competition with Boeing Co's fast-selling 787 Dreamliner.

The new planes would help AirAsia chief executive officer Tony Fernandes further his plan to build a pan-Asian budget airline. In India, he is planning more domestic flights, while international operations are on the cards early next year. AirAsia Group also has a long-haul arm, AirAsia X Bhd, whose more than 20 destinations include Auckland, Tokyo, Sapporo, Chengdu, Shanghai, Melbourne and Honolulu.

StarLux said that its chairman Chang Kuo-wei was due to sign a preliminary agreement on Monday to purchase 12 A350-1000 aircraft and five of the smaller A350-900s. Deliveries are expected between 2022 and 2024.

The A350, Airbus's most-successful new-generation wide-body, competes with Boeing's rival 787 Dreamliner and the US planemaker's coming 777X. Aviation portal Flight Global reported in March that StarLux, founded by former Eva Airways chairman Mr Chang, was in talks with both companies for aircraft that it could use to begin long-haul service to North America by 2021.

Airbus and Boeing are poised to announce a slew of orders at the Farnborough Air Show, which started on Monday. While Airbus's A330neo has proven less popular than the A350, sales activity is starting to pick up.

That plane has a current backlog of 224 aircraft including 10 booked last month from an unidentified customer expected to be disclosed at the show as Indonesian discount carrier Lion Mentari Airlines PT. BLOOMBERG