Airbus bags Asian deals

AirAsia Chief Executive Tony Fernandes flew into the UK to finalise an order for 100 Airbus A321neo jets.

Farnborough, England - Airbus bagged deals worth $20 billion to seize the initiative at a rain-soaked Farnborough Airshow on Tuesday, but industry executives said the mostly lacklustre event confirmed a recent boom in aircraft orders was finally fizzling out.

AirAsia Chief Executive Tony Fernandes flew into the UK to finalise an order for 100 Airbus A321neo jets to support the low-cost airline's expansion, confident of striking a deal at bargain prices as planemakers brace for a slowdown.

The 185-seat A321neo is worth $125.7 million per plane at list prices, but AirAsia is expected to pay a fraction of that after placing orders for hundreds of jets and establishing itself as one of Airbus's largest customers.

Fernandes told a news conference the A321neos were in addition to the A320neos, and not replacements. Some of the new jets would be for the Malaysian-based airline's leasing business, he added.

“With this aircraft we believe we will hit 100 million passengers in the not-too-distant future,” Fernandes said, adding negotiations started over a meal in an Iranian restaurant in London last year, for which he said he paid the bill.

People familiar with the matter told Reuters on Sunday that AirAsia was studying a dual listing in Hong Kong and moving towards setting up a joint venture in China as part of plans to become a pan-Asian player.

The company said in a statement earlier on Tuesday that it was not currently pursuing any new joint venture proposals and was not formally considering a dual-listing.

But Fernandes told reporters that if AirAsia had an opportunity to be in China, “we will 100 percent be there.”

AirAsia was interested in connecting secondary and tertiary cities in China, he said, adding the company's new head of North Asia had a very clear mandate to build businesses in that area.

The plane order triggered fraught last-minute negotiations for the contract to supply engines, with papers spread out in the corner of an airline award ceremony, but AirAsia was not expected to drop usual supplier CFM for rival Pratt & Whitney.

Separately, India's GoAir said it had signed a preliminary agreement to buy 72 A320neos, worth around $7.7 billion at current list prices and doubling an existing order.

Qatar buys into LATAM

Europe's Airbus and US rival Boeing have enjoyed years of strong growth thanks to rising air travel and demand for new fuel-efficient models.

On Monday, they both increased their forecasts for aircraft demand over the next 20 years, betting rising wealth in Asia would continue to boost airline passenger numbers.

But analysts are worried growing risks to the global economy, from slowing growth in China to Britain's decision to leave the European Union, could dry up orders or even lead to some cancellations.

Indeed, air show participants report a lower level of dealmaking than in recent years.

Airbus sales chief John Leahy expressed confidence that record production plans would be upheld, thanks in part to a strategy of building up spare orders, but some airlines that have dominated previous events are widely said to be quietly rescheduling their orders for Airbus or Boeing jets.

“For both Boeing and Airbus, the question still isn't whether or not all the aircraft they produce will have a taker, but who this taker will be and at what price,” said Bertrand Grabowski, managing director at Germany's DVB Bank.

Fernandes said his airline, which now has ordered a total of 575 Airbus jets, saw brisk growth across the region and could have bought even more. The airline had come through recent share price turbulence and “stuck to its guns,” he added.

But several aerospace delegates and analysts expressed concern at what they see as a rush to supply airplanes to the Southeast Asia region and elsewhere, with uncertain implications for investors in manufacturers like Airbus and Boeing.

“They are valued off an optimistic picture of 2019 and 2020, not off a very expensive and underpeforming near term,” said Agency Partners Nick Cunningham.

Underscoring the growing clout of Asia and the Middle East in the industry, Qatar Airways meanwhile announced a deal to buy up to 10 percent of Latin America's largest airline LATAM Airlines in a $613 million deal.

That follows the Gulf airline's purchase last year of 15 percent of British Airways owner International Airlines Group , which like Qatar and LATAM is a member of the Oneworld airline alliance.

Boeing said an undisclosed Chinese customer had signed a commitment for 30 of its 737 family of planes, in a deal worth more than $3 billion at list prices, while European travel firm TUI finalised an order for 10 737 MAX 8 jets and one 787-9, worth $1.4 billion at catalogue prices.

Airbus confirmed an order from German airline Germania for 25 A320neos, worth $2.6 billion, confirming a Reuters report.

REUTERS