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Lion Air CEO eyes new Bombardier jets, says airline could launch largest model

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(Globalpost/GlobalPost)

MONTREAL - The head of one of Asia's fastest growing airlines says it could place the largest order to date for Bombardier's CSeries and become the launch customer for the larger of the two fuel-efficient airplanes being developed by the Canadian aircraft manufacturer.

"I think, when I order, we are going to be the biggest at that time," Lion Air CEO Rusdi Kirana said Thursday during a news conference, a day after visiting the first CSeries test plane in Mirabel, Que., and meeting with senior Bombardier (TSX:BBD.B) executives.

The businessman, who owns the private company with his brother, said he could place a firm order with options at the Farnborough Air Show in England next summer. It would be for five years of deliveries beginning in 2015 or, ideally, in 2016.

The CS300, which can be configured for between 135 and 160 seats, would fill a void between its 72-seat ATR turboprops and larger, 189-seat Boeings, Kirana said.

Kirana said he was pleasantly "surprised" by the aircraft which he described as being "beyond my expectations."

"This is making a big quantum leap for Bombardier, which normally makes quite normal aircraft, but this one was very special," he told reporters at an event with Indonesia's transport minister.

Bombardier spokesman Marc Duchesne confirmed the meeting but wouldn't say if Lion Air could become the aircraft's launch customer.

"We don't disclose the production output or the delivery schedule publicly," he said in an interview.

Duchesne said the general assembly of the International Civil Aviation Organization taking place in Montreal is presenting Bombardier a golden opportunity to show the CSeries to potential customers. More than 20 visits to Mirabel as scheduled through next week.

"Selling an aircraft is a very long process so, hopefully, by visiting they will be convinced that we are offering them the best aircraft you can buy."

The manufacturer expects to have 300 firm orders by the time the first aircraft is delivered, but orders have been slow of late. It currently has 177, including 114 for the CS300. The largest customers are Republic Airlines, with 40 firm orders, and Russian leasing company Ilyushin, with 32.

Backed by a growing middle class and plans to operate various airlines in Indonesia, Malaysia and Thailand, Lion Air has more than 700 Boeing and Airbus aircraft on order valued at US$46.4 billion to join its fleet of more than 120 planes by 2027. Lion Air is already the global launch customer for Boeing's 737-900 ER and 737-900 Max. It also has 234 Airbus A320 and A320neo planes on order.

Kirana said the low operating costs, long range and short runway capabilities of the CSeries make it ideal to service Indonesia, a vast and disparate island archipelago, as well as neighbouring countries. Launched in 2000, PT Lion Mentari Airlines has 45 per cent of the domestic market share, beating rival Indonesian carrier Garuda International. It operates scheduled service to Singapore, Vietnam, Malaysia and Saudi Arabia.

Lion Air said the CSeries order would be partially funded with the support of Export Development Canada, which also helped with its purchase of several simulators from CAE (TSX:CAE).

Walter Spracklin of RBC Capital Markets said he expects interest in the CSeries to ramp up as the test flight program continues.

"Farnborough next year should certainly be interesting," he wrote in an email.

Indonesia, with 237 million people, is the world's fourth most populous country with an airline sector growing by 10 to 15 per cent annually. The number of passengers reached 70 million last year, up from five million in 2000.

Only 15 per cent of Indonesians currently use airlines, leaving a dramatic opportunity for growth as millions of people are added to the middle class each year. An open skies agreement slated to take effect by 2015 would increase the potential market to one billion, Kirana added.

Kirana didn't want to directly criticize Bombardier but suggested that the company missed an opportunity to sell the Q400 before it chose to buy 60 ATR turbos and more recently to push the CSeries.

http://www.globalpost.com/dispatch/news/the-canadian-press/130926/lion-air-ceo-eyes-new-bombardier-jets-says-airline-could-lau