Indonesian budget carrier Lion Air will buy 60 aircraft from Boeing in a USD$3.9 billion deal that will help the young airline expand routes across Asia, a spokesman for the airline said on Thursday.
Hasyim Arsal Alhabsi said the deal was for firm purchases that covered Boeing's 737-800 and 737-900 narrow body airliners.
The deal marks one of the biggest transactions for corporate Indonesia since the 1997-98 Asian financial crisis, and underscores the pick-up in economic growth and business confidence under the seven month old government of President Susilo Bambang Yudhoyono.
It is also an unusually large purchase of aircraft, especially for such a new airline. The carrier said the deal was worth USD$3.9 billion, a figure that corresponded to the list price of the aircraft, but airlines routinely get hefty discounts, especially for large orders of narrow-body planes.
Alhabsi said an agreement with Boeing would be signed in Washington during a visit this week to the United States by Yudhoyono. Boeing has said it would sign a deal on Thursday.
"The number is 60," Alhabsi said, adding that the exact number of each version to be bought would be worked out later.
"In the contract, Boeing will come up with several financing schemes. It's up to us to pick which one. They will help us to find a way to finance this."
First deliveries would occur in early 2006 and be completed within five to six years, Alhabsi said.
"We want to use (the new planes) for new routes as well as replacing what we lease right now. We want to go to the region, Australia, India, China and Hong Kong," Alhabsi said.
Brent Mitchell, an analyst at Shaw Stockbroking in Melbourne, said that while airlines needed a lower cost base to survive, the Asian region was already becoming congested with new budget airlines.
"I think you have to say it's high risk. A major concern would be the fuel costs and safety and compliance issues (which) crucially become an important and costly factor," Mitchell said.
Singapore Airlines has set up a regional budget carrier named Tiger Airways. Malaysia has AirAsia, entrepreneur Richard Branson established Virgin Blue in Australia while Qantas has set up budget offshoot JetStar and an affiliate called JetStar Asia.
