Tuesday , October 16 2018

AirAsia A330 order helps Airbus survive death match with Boeing

Bloomberg

Airbus SE managed to stave off a devastating blow to its struggling A330neo widebody program from chief rival Boeing Co., securing a commitment for 34 more planes from the aircraft’s biggest customer, AirAsia Group Bhd.
While the $10 billion order from the Malaysian airline’s long-haul arm ranks among the larger deals announced at the Farnborough air show this week, its impact was even greater. Airbus’s US rival lodged an intense campaign to dislodge AirAsia’s existing 66 orders — none of them yet delivered — and lure the Malaysian airline to its own hot-selling 787 Dreamliner.
“It was a close fight,” AirAsia Chief Executive Officer Tony Fernandes told reporters near Kuala Lumpur. “Until a week ago, I wouldn’t have really known which way we were swinging.”
A loss would have been crushing for Airbus and for the neo, a re-engined version of its twin-aisle A330 with fuel-saving winglets and a new turbine from Rolls-Royce Holdings Plc. Before the show started, the plane’s order book stood at 224, and any backslide would have risked hurting the plane’s sales prospects.
“This is an extremely important moment for Airbus,” chief salesman Eric Schulz said separately at the expo southwest of London. “AirAsia X is the largest, fastest growing low-cost business in all of Asia. This is a very key customer.”
As it stands, AirAsia now accounts for 38 percent of the A330’s backlog. Its primacy gave Fernandes a tremendous amount of leverage in negotiations, and from all evidence he took full advantage.
“We were thinking hard whether we keep the 66 A330neos,” Fernandes said. “That is what we were working on, to see which aircraft we want to buy: Do we buy Boeing? Do we buy Airbus?”
AirAsia X will use the biggest A330-900 variant, according to a statement, taking the group’s total order book for the plan to 100. AirAsia Group shares gained as much as 1.9 percent in Kuala Lumpur.
While an anticipated order for 100 A321neo narrow-body aircraft failed to materialise at the show, Fernandes said the airline needs capacity and will buy more planes. That order would have totaled $13 billion at list prices, before customary discounts. “I focussed on this one first,” he said.
The new planes will help Fernandes further his plan to build a pan-Asian budget airline. The AirAsia X long-haul arm now operates about 20 routes.
Five or six of the new planes for AirAsia X will arrive in 2020 and be used in Thailand, Malaysia and Indonesia, Air Asia X Malaysia CEO Benyamin Ismail said at the briefing. Another 10 are scheduled for delivery in 2021 and will also be used in Thailand and Indonesia.
The A330neo, designed as a quick and easy upgrade to its A330 predecessor, previously suffered months of setbacks after being edged out by Boeing in key contests. Most recently, Airbus lost an order when India’s Vistara chose the 787. On Thursday, Boeing finalised a 787 sale to Hawaiian Airlines, which had canceled its A330neo contract in March.
In addition to the AirAsia X order, Airbus has sold eight more A330neos at the show, two to Uganda Airlines and six to an undisclosed buyer.
Fernandes said the negotiations on the Airbus order continued “until late last night.” He stayed home rather than make the trip to London in order to celebrate with a larger group of AirAsia staff, and because he had to meet with the chief regulator in the state of Sabah over low-cost terminal issues.
He said the decision to go with Airbus resulted from the biggest analytical undertaking that he’d done in 16 years since taking over AirAsia.

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