Boeing strikes $4.13b deal with airlines from China and Malaysia

SINGAPORE: Boeing picked up $4.13 billion of orders from Asian carriers, underscoring growing demand in the region even after the aviation industry’s biggest annual show at Farnborough earlier this month racked up the lowest tally in six years.

Malaysia Airlines bought twenty-five 737 Max 8 planes at a list price of $2.75 billion and took options for a similar number in a combined deal valued at $5.5 billion. China Southern Airlines, Asia’s biggest by number of passengers, said unit Xiamen Airlines will buy six 787-9 Dreamliners at $230 million apiece.

The orders came on the back of about $34 billion of contracts Asian customers signed at this year’s Farnborough Air Show. Spurred by demand for new routes and extra frequencies, Asian carriers are expanding their fleets while the emergence of budget carriers have made air travel more affordable.

In China and India, traffic expanded at double-digit rates in 2015, according to data provided by the International Air Transport Association.

Cutting costs

Malaysia Air chief executive officer Peter Bellew told reporters Wednesday that he sees new growth markets in China, India and Pakistan as he seeks to steer the airline toward profitability amid a 6 billion-ringgit ($1.5 billion) turnaround plan.

The new planes may help cut Malaysia Air’s operating expenditure by about 15 per cent, Bellew said. After passenger confidence took a dive two years ago after Flight MH370 vanished on March 8, 2014 and another was shot down over Ukraine four months later, the carrier is battling a slew of regional discount airlines to win back business.

The carrier has options to buy a mix of 737 Max 8 and 9 models, which, according to Boeing, have a list price of $110 million and $116.6 million each. Discounts are customary for large purchases.

Long-term forecast

This month, Boeing raised its long-term forecast for aircraft orders, saying the rise of discount carriers and growth in developing countries will fuel purchases despite recent economic turmoil from Brexit and a commodities slump. Airlines worldwide will order new planes valued at $5.9 trillion over the next two decades, it said July 11, up 4.1 per cent from a year earlier. That would represent a total of 39,620 jetliners across the industry.

Farnborough deals

At the Farnborough show, deals for about 400 jets were worth $50 billion, less than half the value of the contracts unveiled at last year’s marquee event in Paris. The orders were propped up by Asian operators, while major American, European and Gulf carriers were mostly absent.

Xiamen Air’s latest deal comes after it agreed to buy 30 737 Max 200s worth $3.39 billion at list price during the Farnborough Air Show.