AirAsia cuts Airbus A330neo order plans, shifts to A321XLR

August 30, 2019 4:55 AM

By Liz Lee

KUALA LUMPUR (Reuters) - Malaysian budget carrier AirAsia Group Bhd scaled back plans to order the Airbus (NYSE: AIR) A330neo wide-body passenger jet by nearly two thirds on Friday, switching its focus instead to a long-range new version of the popular A321 series.

The long-haul arm of Asia's largest budget airline group, AirAsia X Bhd , had left its fleet expansion in suspense since initially unveiling plans to order 34 more of the 250-300-seat A330neo jets, on top of 66 already on order.

The deal was later thrown into doubt as AirAsia reviewed its needs and on Friday the group said it was confirming 12 of the 34 extra A330neo planes while adopting 30 of the smaller, long-range A321XLRs.

The move came days after AirAsia X reported its biggest quarterly loss since 2015 and said it expected the operational environment to remain challenging.

Late on Friday, AirAsiaX said in a stock exchange filing that chief financial officer Wong Mee Yen had resigned to "pursue personal interests," giving no further detail. She had served in the post since December 2017.

Airbus said the latest jet deal would have been worth more than $5 billion at catalogue prices, which it no longer publishes. After typical discounts, the deal would be worth about half this, aircraft traders say. AirAsia Group CEO Tony Fernandes said the recently launched A321XLR, which seats up to 240 passengers and can fly for up to 9 hours without refuelling, would allow the group to open longer niche routes without the risk of trying to fill the A330neo.

"There are many routes from Malaysia, Thailand and some other countries that we really want to fly that (take) more than four hours, so don't fit the AirAsia model but have too (few passengers) for the A330," he said, citing destinations in India, China, Russia and Turkey.

"We can use this smaller plane to develop new routes and then transfer it to the bigger aircraft."

TOUGH NEGOTIATIONS

The downsized order for A330neos - offset by an investment in the A321XLR - follows more than a year of tough negotiations.

In July 2018, Fernandes had tweeted that conditions for a new order included price, performance, engines and advance payments, before adding "or else" in a remark designed to draw in rival Boeing (NYSE: BA)..

Airbus, under pressure to catch Boeing which was leading the order race before the grounding of its 737 MAX, and facing questions over the future of the A330neo, announced at the 2018 Farnborough Airshow it had a "firm" AirAsiaX order for 34 jets.

But negotiations took a further twist as the deal failed to materialise in Airbus's books and the arrival of the new A321XLR added a new option for the two sides to play with this year.

Industry sources have said AirAsia was in talks to become a launch customer for the A321XLR at the Paris Airshow in June this year but an agreement was not reached in time.

The rejigged contract increases the number of A330neos on order by AirAsiaX to 78, leaving it as the largest global customer, though some analysts question how quickly the loss-making airline can take delivery of the planes.

None of the planes from its prior firm order for 66 A330neos has yet been delivered to the airline, although Thai AirAsia X took a leased A330neo from leasing company Avalon this month after the plane was freed up by the demise of Iceland's WOW Air.

AirAsia did not announce delivery dates for most of the extra A330neos or the A321XLRs, but Fernandes said they were "perfect partners" for AirAsiaX's long-haul low-cost operations

The airline group is Airbus's largest Asian customer. As part of the deal, Airbus said it had signed a provisional agreement to expand its industrial initiatives in Malaysia.

(Reporting by Liz Lee in Kuala Lumpur, additional reporting by Tim Hepher in Paris; Writing by Jamie Freed, Tim Hepher; Editing by Himani Sarkar and Jane Merriman)

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