AirAsia to buy 40 Airbus A320 planes

AirAsia to buy 40 Airbus A320 planes

Vijay Joshi, Associated Press, Kuala Lumpur, Malaysia

Malaysian budget carrier AirAsia signed an agreement on Friday to buy 40 Airbus A320 passenger jets under a route expansion plan, and announced it would start flying to China in April.

The US$2.5 billion deal is a major blow to Airbus' trans- Atlantic rival Boeing, which had tried hard to clinch the AirAsia deal. This is the third time Airbus has persuaded a major all- Boeing, low-cost carrier to switch brands.

"Boeing competed aggressively and I would think the offers from both manufacturers are very similar," Airbus Chief Commercial Officer John Leahy told a news conference to announce the deal.

"But you must remember, our planes consume less fuel and have lower maintenance costs, better performance," he added.

He said some 87 percent of plane orders from low-cost carriers this year have been for Airbus, showing the European plane- maker's lead in the market. "We are looking forward to filling needs in Asia," he added.

The latest deal - Asia's single biggest order for A320s this year - could further fuel a spat in the World Trade Organization (WTO) between the United States and the European Union over government support for Boeing and Airbus.

The United States claims that European government subsidies have allowed Airbus to undercut Boeing's prices, giving Airbus an unfair advantage in the marketplace and harming the U.S. aerospace industry.

AirAsia, the region's most successful no-frills carrier, would not say how much it paid for each aircraft, except to put the worth of the deal at about $2.5 billion.

It was not clear if this implied that AirAsia paid the list price of about $65 million for each plane or whether the airline was simply giving a figure for the whole deal before a discount.

A source familiar with the deal had told Dow Jones Newswires on Thursday that AirAsia is getting a discount of about 30 percent on each plane.

Leahy, the Airbus official, also declined to give the commercial details of the deal. "That's a word I don't understand - discount?" Leahy said.

AirAsia will take the delivery of the first A320 in January 2006 and the remainder will arrive over a five-year period with an average of one aircraft a month, the airline said in a statement.

The deal also includes an option to buy another 40 of the 180- passenger A320s and provides training to the airline's crews, engineers and maintenance staff.

"We definitely will exercise (the option)," said AirAsia Chief Executive Tony Fernandes, citing the company's increasing focus on developing its three major markets - Malaysia, Thailand and Indonesia.

He said AirAsia will eventually convert its all-Boeing fleet of 26 737s - with an average age of 16 years - into an Airbus one. It expects to buy 10 more Boeings by June 2004 under an earlier deal.

Meanwhile, the airline's subsidiary, Thai AirAsia, will begin its first flight to China from Bangkok, Thailand in April. The airline hasn't chosen the destination city in China yet but it would be within a three-hour flight range, said Thai AirAsia Chief Executive Tassapon Bijleveld.

AirAsia owns 49 percent of Thai AirAsia, while Thailand's Shin Corp. holds the remaining 51 percent.

AirAsia, which currently serves routes in Malaysia, Indonesia and Thailand, carried 1.8 million passengers in 2003 and expects 3.2 million passengers this year, rising to 6 million in 2005.