Boeing locks in biggest order ever: $22.4B, up to 380 737s

  • Associated Press
  • Tuesday, February 14, 2012 7:10am
  • Business

Boeing has locked in its biggest order ever with a little-known airline halfway around the world.

The Chicago airplane manufacturer said Tuesday that it has finalized an order from Indonesian carrier Lion Air for 230 planes — worth a combined $22.4 billion. The deal is the largest commercial airplane order ever for Boeing Co. by both dollar value and number of airplanes. Lion Air also has the rights to buy 150 more.

The order includes 201 of Boeing’s redesigned 737, which it calls the Max, and 29 extended range 737-900s. Lion Air plans to pay for the planes over 12 years with bank financing. A Boeing spokeswoman did not immediately return an email seeking more details.

Until the deal was confirmed, Boeing’s biggest firm order was from Southwest Airlines Co. for 208 planes valued at $19 billion at list prices. Airlines commonly get discounts. Southwest will be the first customer to get the 737 Max, which is still in testing. It’s scheduled for delivery in 2017.

Securing the Lion Air order is a big win for Boeing because it was considered something of a long shot when it was first announced in November. The order will more than quadruple the current fleet at Lion Air, who has had a long history of safety concerns.

In 2004, a Lion Air MD-82 crash-landed, killing 25 people. There have also been a number of other incidents, including hard landings and overshooting runways, some causing injuries and damage to planes. In 2007 the European Union banned all of Indonesia’s 50 airlines from landing on its runways for two years. And since September, three Lion Air pilots have been arrested after testing positive for illegal drugs. The arrests raised fresh concerns over the safety of aviation in Indonesia, where it is a main mode of travel across the nation of 17,000 islands.

Dozens of airlines have emerged in Indonesia since it deregulated its aviation industry in the 1990s, and the market is growing rapidly. Boeing thinks that demand in the Asia-Pacific region will grow more than in any other part of the world over the next two decades.

Lion Air was started by a travel agent and his brother, who pooled $850,000 to launch the carrier in 1999.

It is Indonesia’s largest private airline but is small compared to most U.S. carriers. With a fleet of 76 planes, it’s about double the size of Spirit Airlines or Allegiant Travel Co., according to Airfleets.net. But it’s just one-tenth the size of United Continental, the world’s largest airline company. Lion Air is also relatively small compared with other Asian carriers. Singapore Airlines has a fleet of about 120 planes, while Japan’s All Nippon Airways, the first customer for Boeing’s 787 Dreamliner, has a fleet of 174.

Tuesday’s order also adds to Boeing’s recent momentum in its competition against European rival Airbus. Lion already operates an all-Boeing fleet.

Middle East carrier Emirates ordered $18 billion worth of long-range Boeing 777s in November. Southwest’s order for 737s was placed in December.

Those orders followed a significant win for Airbus. In July American Airlines said it will order 200 planes from Boeing, including 100 of the Max model. But for the first time American also ordered planes from Airbus — 260 A320s, the Airbus rival to the 737. Because American and parent AMR Corp. are operating under bankruptcy protection, a judge will decide whether the airline can go ahead with that large order.

The 737 Max is Boeing’s answer to the Airbus 320neo, another plane with new engines that are designed to boost fuel efficiency. That plane is due in service by late 2015.

Boeing has been building versions of the short- and medium-range 737 since the late 1960s. It has sold about 7,000 of them, making it the company’s most popular plane ever. Workers on Boeing’s assembly line in Renton, Wash., make about one every day. The company plans to boost production by roughly one-third in 2014 to meet new orders.

Boeing shares rose 17 cents to $75.02 in morning trading.

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