Airbus wins record $18 billion order from AirAsia

Airbus (EAD.PA) has won a record-breaking order for 200 of its A320neo jets from AirAsia (AIRA.KL), capping a week where it has trounced rival Boeing (BA.N) in the fierce competition for plane contracts.

The massive contract is a show of force from Europe's Airbus as it battles Boeing in the market for single-aisle jets -- currently its A320 versus Boeing's 737 -- which is expected to be worth $2 trillion over the next 20 years.

The A320neo is a version of Airbus's best-selling 150-seat passenger jet offering fuel savings with new engines from 2015 and will heap pressure on Boeing to take a decision to either rework its current offering or come up with something new.

The deal wrapped up a frenetic biennial air show which demonstrated a shift in 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 (AIG.N) and GECAS (GE.N), and pushing Lufthansa (LHAG.DE) into third place as an Airbus operator by fleet size.

"The runaway success of the neo exceeds Airbus' expectations and it had to do the same with Boeing," said aviation analyst Scott Hamilton.

"This increases the pressure on Boeing severalfold to get moving with a decision to re-engine or do a new plane."

As champagne and calculators all but ran out, industry records were sent clattering like an airport departure board.

The AirAsia order eclipsed 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.

It was the second time in as many days that an Asia low-cost carrier had broken that record, adding to evidence of a multi-speed recovery that has seen Asian economies plan for frenetic transport growth, especially in the low-cost sector.

AirAsia chief executive and Formula One boss Tony Fernandes described a "remarkable ride" in the 7 years since taking a tiny Malaysian carrier and transforming it into Airbus's largest airline-operated fleet with 375 aircraft delivered or on order.

And although officially the airline is pausing for breath after placing the largest order by volume, sources close to the deal said that it left the door ajar to a new spurt in the Asian economy with the eventual inclusion of another 100 jets.

"There is a market of 600 million people in Southeast Asia and we have a huge potential to fly to places that people have never flown before," an emotional Fernandes told a Le Bourget news conference, wearing his trademark bright red baseball cap.

Shares in Airbus parent EADS (EAD.PA) bucked a weaker stock market on Thursday and rose over 1.6 percent to 22.2 euros.

Pressure on Boeing

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

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.

Traditional Boeing customer American Airlines (AMR.N) is evaluating Boeing and Airbus jets, an industry source said.

Boeing said this week it would not be surprised to see Airbus approaching its customers to try to flaunt the A320neo.

Some analysts told the company to speed up its decision.

"AirAsia is a great endorsement from an important customer," said Teal Group analyst Richard Aboulafia.

"Deliveries will stretch over a long period, but it's a great addition to the backlog. Boeing needs to get more aggressive about narrowbody new product development. Period."

Boeing does not tend to seal big orders at air shows but kept a mainly low profile as it ponders its next steps. However next year's show, held in Farnborough in the UK which rotates with Le Bourget, could put the planemakers in a more direct confrontation as each arrives with a fully formed strategy.

Airbus reported orders for 910 aircraft worth $88 billion at list prices. Boeing announced 141 planes worth $22.5 billion.

One order that was expected but did not materialize was a potential repeat order for A380 superjumbos from Qatar Airways.

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

[Source: By Victoria Bryan and Rhys Jones, Reuters, Le Bourget, 23Jun11]

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