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.