Quantcast
Transport Airlines

AirAsia and Lion Air’s rivalry intensifies with Lion’s $24 billion Airbus order

Mar 23, 2013 12:01 am

Skift Take

Although Asian low-cost carriers are quickly expanding their fleets, there is more than enough demand to keep the supply satiated for now.

— Samantha Shankman

Free Report: The State of Chinese Outbound Market Travel

Free Report: Social Media Trends for Tourism Boards

Bazuki Muhammad  / Reuters

Indonesia's Lion Air President Rusdi Kirana delivers his speech during a signing ceremony with Malaysia's National Aerospace and Defence Industries in Kuala Lumpur September 11, 2012. Bazuki Muhammad / Reuters


AirAsia boss Tony Fernandes questioned his rival’s growth plans after Lion Air struck a $24 billion Airbus order, while pledging to preserve his own ties with the European jetmaker.

As competition intensifies between Southeast Asia’s largest budget carriers, Lion Air co-founder Rusdi Kirana shot back by targeting sharp growth in AirAsia’s domestic Malaysian market.

In a realignment of industry loyalties, Indonesia’s Lion Air loosened exclusive ties with Boeing this week to place a 234-plane order with Airbus, which is also sole supplier to AirAsia.

Asked if he was upset about the blockbuster deal between his top supplier and his closest rival, Fernandes said, “Why should I be? I think Lion has probably bitten off more than they can chew. We are focused on ourselves”.

Lion Air co-founder Rusdi Kirana mocked any suggestion that the airline had over-extended itself.

“Is he an angel? Does he know the future?” Kirana said when asked about Fernandes’s comments.

The two airline chiefs discussed the deal in separate interviews with Reuters.

Lion Air is preparing to launch services in Malaysia on Friday through a partially owned venture, Malindo Air, while AirAsia says it is filling planes successfully in Indonesia.

Kirana said Malindo hoped to operate 100 Boeing aircraft within 10 years.

The rapid rise of both airline groups has been channeled through exclusive partnerships with jetmakers Airbus and Boeing — making the two airline bosses star players in a broader power struggle in the $100 billion jet industry.

Those battle lines were abruptly redrawn when Lion Air announced the Airbus order in Paris on Monday, doubling up on a similar order placed with Boeing just over a year ago.

AirAsia has taken delivery of over 100 Airbus A320 aircraft out of a total of 475 it has ordered.

Airlines can save money by running one type of fleet but can also obtain good pricing by forcing suppliers to compete.

Single Type

Fernandes, who bought AirAsia together with its fleet of two Boeing 737s in 2001 and then built it into the largest operator of Airbus A320s, pledged to stick with the European planemaker.

Asked whether he might consider Boeing for future orders, he reiterated he wanted to stick with one type of aircraft. The Malaysian entrepreneur studied new jets from Canada’s Bombardier before striking his most recent Airbus deal, however.

“I run a proper business not an emotional business,” Fernandes told Reuters in an electronic interview.

“They have to sell planes. How can I stop them?,” he said of Airbus’s three-year courtship of Lion Air.

Low-cost airlines prefer operating one type of aircraft to reduce the cost of parts and separate crews. But the sheer size of some of the world’s largest fleets has raised questions over whether one supplier can meet the needs of the largest airlines.

Air Berlin and Norwegian Air have a mixed portfolio of jets.

Bankers and lessors have expressed concerns that a series of record-breaking orders risks flooding Southeast Asia with too many narrowbody planes, despite projections of sharp growth.

“The world is big. There is a lot of space for everybody. We should accept that competition is normal,” Kirana said.

Asia is expected to double its fleet in the next 20 years.

Additional reporting by Anshuman Daga. Editing by David Cowell.

Copyright (2013) Thomson Reuters. Click for restrictions

Tags: ,

Next Up

More on Skift

Las Vegas Broke Its Tourism Record With 40 Million Visitors in 2014
Tourism to Cuba Will Grow But How Fast Remains to be Seen
New Event: Skift 2015 Trends Forecast and Magazine Launch on January 13, 2015
From Campaigns to Content: The Evolution of Hotel Marketing