Wednesday, September 13, 2017

Malaysia Airlines Agrees to $3 Billion Boeing Plane Deal

Malaysia Airlines agreed to buy Boeing Co.’s 787-9 Dreamliners and 737 Max jets as the Southeast Asian nation’s flag carrier looks to boost services on its busiest routes.

The airline signed a memorandum of understanding for eight of the carbon-composite Dreamliners, and eight 737 Max 8s, Boeing said in an e-mailed statement late Tuesday. The planes are worth $3.06 billion at list prices that exclude customary discounts.

The agreement marks a victory for Boeing in a competition that had been viewed as favoring rival Airbus. Malaysia had been in talks for the European planemaker’s A330neo wide-body jets but had been unable to reach a deal on price, Chief Executive Officer Peter Bellew said in an interview in June.

Malaysia Airlines may double an order of 25 of the single-aisle 737 Max 10 over the next five years, Malaysian Prime Minister Najib Razak Najib said at a meeting with U.S. President Donald Trump at the White House on Tuesday before the announcement.

“We’re talking about trade -- very large trade deals,” Trump said. “We’re working on one deal where between $10 and $20 billion dollars’ worth of Boeing jets are going to be purchased, General Electric engines will be purchased, and many other things.”
Boosting Order

Najib said there is a “strong probability -- not possibility -- probability that we will add 25 more 737 Max 10 in the near future. So within five years, the deal will be worth beyond $10 billion.” His government will “also try to persuade AirAsia to purchase GE engines,” the prime minister said.

The Malaysian prime minister also pledged that a national pension fund would invest $3 billion to $4 billion to support “infrastructure redevelopment” in the U.S.

The two leaders publicly glossed over their differences: Malaysia exports more than it imports from the U.S., is bolstering investment ties with China, and is a member of a trans-Pacific pact that the U.S. exited under Trump. Another sore spot is a U.S. Department of Justice criminal probe into alleged money laundering and embezzlement at an investment fund linked to Najib.

Malaysia Airlines, taken private by the nation’s sovereign wealth fund Khazanah Nasional Bhd., has been trying to win back customers following two fatal air crashes in 2014. The carrier, on track to become profitable next year, has been adding more services in Asia after cutting jobs and unprofitable long-haul routes to keep the business afloat.

The airline leased six Airbus A350s from Air Lease Corp. to offer flights to London next year. It has also ordered 737 Max 9 and Max 10 aircraft from Boeing last year with deliveries expected in 2019 and 2021, respectively.

The company should be cash-positive in the second half of 2018, Bellew said in July. China, India, Japan and Taiwan are its growth markets, and the airline will add more routes to these destinations over the next few years, he said.

(Julie Johnsson, Kyunghee Park, and Jennifer Jacobs - Bloomberg News)

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