Thursday, November 17, 2011

Boeing and Lion Air announce massive 737 order

The United States announced a massive order for Boeing jets from Indonesia's largest domestic airline, Lion Air, to be showcased as US President Barack Obama winds up an Asia-Pacific tour.

The sale of 230 short-haul 737 jets, worth USD$21.7 billion, is the largest commercial order in Boeing's history, toppling a previous record set just days ago as the industry taps in to relentless demand in emerging economies.

Obama will attend a signing ceremony on Friday for the order, which the White House said would support more than 110,000 jobs at Boeing and suppliers across the United States.

The deal includes options for another 150 aircraft valued at USD$14 billion, bringing its potential total value to USD$35 billion.

"This represents one of the largest trade deals between the United States and Indonesia in history," the White House said.

The White House is seeking to underline the US jobs potential from Obama's efforts to increase engagement in the Asia-Pacific region, including trade with emerging powers in Southeast Asia.

Deals announced during the president's trip are expected to total more than USD$25 billion and could support 127,000 jobs.


The order is a boost for Boeing's efforts to develop a revamped version of its best-selling 737 as it tries to narrow a gap with a model produced by its European rival Airbus.

The deal includes 201 revamped 737 MAX aircraft, due to enter service in 2017, and 29 Next-Generation 737-900 extended range planes.

Boeing said the Lion Air order, when finalized, would be its largest ever "by both dollar volume and total number of airplanes."

Alex Hamilton, managing director with EarlyBirdCapital in New York, said the strong order confirmed that the commercial aerospace sector was bouncing back despite a skittish global economy. He said he expected more aircraft orders as oil prices top USD$100 a barrel.

"The pace of the recovery is probably better than most would have expected," Hamilton said. "The reason (airlines) are ordering these new aircraft is because of the technology and the need for fuel efficiency."

High oil prices are spurring orders worth billions for fuel-efficient aircraft, re-energizing the rivalry between Boeing and Airbus, the two biggest plane makers.

Oil prices fell on Thursday on worries about the European debt crisis. Brent crude was down USD$3.50 at USD$108.38 a barrel, while US crude was USD$3.06 lower at USD$99.53.


The 737 MAX is an upgraded version of Boeing's best-selling 737 that will include new fuel-efficient engines and begin delivering in 2017. It is designed to compete with the Airbus A320neo in the narrow-body aircraft segment, which is expected to produce USD$2 trillion in sales over 20 years.

Boeing said this week that it had 700 provisional orders for the 737 MAX.

The deal marks the second time in a week that Boeing has broken its company record for commercial plane deals after bagging an USD$18 billion order for 50 wide-body 777 jets from Emirates at the Dubai Air Show.

The Boeing 737 is the backbone of many airline fleets and helped drive the growth of the low-cost travel industry.

Airbus has been outselling Boeing this year after promising to upgrade its competing A320 family of aircraft, but is lagging behind Boeing in the market for bigger jets such as the 777.

Middle East and Asian travel demand is helping to prop up demand for aircraft despite concerns over the Western economy, helping to generate well over USD$30 billion of deals for Boeing and Airbus in the past week.


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