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The $24 billion order from Lion Air is one of the largest of all time.
Chalk one up for Airbus in its fierce and long-running battle with Boeing. The European plane maker has landed the largest order of the year, and one of the largest of all-time, with a book value of almost $24 billion. Airbus will sell 234 of its A320 planes to Lion Air out of Indonesia.
The order is significant not only because of its size but also because it is the first order Airbus has secured from Lion Air, a longtime customer of Boeing.
The CEO of Lion Air announced the order at a ceremony in France with French President Francois Hollande and head of Airbus both in attendance. With the French economy struggling, the order is welcome news for the EADS subsidiary based in Toulouse, France.
The order is also good news for the economy in Mobile, Ala. where Airbus is working on a new final assembly plant that will eventually build the A320 and A320neo. That plant is expected to be up and running by late 2015, which is also when Airbus expects the first A320neo planes to go into service. The Mobile plant is expected to employ more than a 1,000 workers.
A320neo vs. Boeing 737MAX
Since announcing it would build its next-generation A320, Airbus has been racking up orders for the fuel-efficient narrow body at a steady pace. Airbus now has 2,052 booked orders for the A320neo compared with 1,185 firm orders for its competitor, the Boeing 737MAX.
The rapid growth in orders for the next-generation of narrow body planes is being driven by airlines looking for more fuel efficient models. Both the A320neo and the 737MAX are expected to cut fuel consumption by at least 15 percent compared to existing narrow body planes. While jet fuel prices have moderated in recent months, most expect jet fuel to continue rising in years to come.
The Lion Air order comes less than a year and a half after the Indonesian airline committed to buy 230 Boeing 737 planes, with more than 200 being the new 737MAX. At the time, the list price of $22.4 billion made it the largest order ever for Boeing. It was such a huge deal, President Barack Obama announced the order while visiting Indonesia.
So why is Lion Air now ordering so many Airbus A320 planes? The Indonesian carrier is looking to start a low-cost airline in Malaysia and will need the new planes to keep up with surging demand. It also helps that Airbus is likely selling the A320 planes at a steep discount. New planes rarely sell for their list price and Airbus likely made further concessions in order to win a huge commitment from a longtime Boeing customer.
Spring Surge in Plane Orders
The Lion Air deal comes as airlines around the world have placed orders that have totaled more than $30 billion.
Last week, both Lufthansa and Turkish Airlines announced major orders with both Airbus and Boeing. The spring surge in business is expected to continue this week with Irish low-cost carrier Ryanair expected to announce an order with Boeing for new 737's with a list price of almost $15 billion.
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