Singapore. Indonesian carrier Lion Air and Boeing on Tuesday inked a deal that not only set a new record for the Singapore Airshow, but will go down as one of the largest contracts in commercial aviation history.
The Indonesian carrier yesterday signed for 230 single-aisle aircraft worth $22.4 billion (S$28.4 billion) at catalogue prices. The deal, inked on the first day of the Singapore Airshow 2012, was itself more than double the US$10 billion in deals sealed in the 2010 edition of the biennial trade show.
The Lion Air purchase is a big win for Boeing, which has topped a recent deal in the single-aisle jet market set by European rival Airbus in June last year, when it sealed a deal with Malaysia’s AirAsia for 200 aircraft at US$18 billion.
The initial announcement of the Lion Air’s interest was made in November last year during U.S. President Barack Obama’s visit to Asia Pacific. The European based Airbus had then alleged that United States was applying political pressure to secure the deal on behalf of Boeing.
With its latest buy, Lion Air now has 408 planes in its order book and big plans to expand its reach domestically and internationally, said its founder and president director Rusdi Kirana.
In the last decade, the airline has grown its passenger numbers by more than 20 per cent a year, he told reporters after the signing ceremony.
Last year, Lion Air, which controls half of Indonesia’s domestic air travel market, carried a total of 27 million passengers. Today, it flies about 85,000 passengers a day and has set its sights on increasing this to 100,000 by the end of the year, Kirana said.
Lion Air’s ambitious plans signal a turnaround for the carrier, which was previously dogged by bad publicity, including that arising out of its being barred by the European Union from flying into Europe and, more recently, the arrests of several of its pilots for using illicit drugs.
Going forward, Kirana said he is also banking on further liberalization within South-east Asia to boost the airline’s international presence.
Singapore is a key market, he said.
Lion Air now operates six flights a day between Jakarta and Singapore, competing with the likes of Singapore Airlines and Indonesian national carrier Garuda.
Kirana wants more flights into Singapore but has been told no more air rights, negotiated between governments, are available.
“I have heard from my government there is going to be an increase in capacity, by as much as 50 per cent, between Singapore and Jakarta.’
The Singapore-Jakarta route is already the busiest out of Changi Airport. Any further liberalization will give travellers even more flight options and competitive fares, industry watchers said.
Indonesian Transport Ministry’s aviation head Herry Bakti, who was also at the signing event, later told The Straits Times that his country was keen to expand air ties with Singapore.
Apart from more flights between the two countries, Indonesia is also interested in what is called “fifth freedom rights” out of Singapore, he said.
What this means is that Indonesian carriers will be able to fly from Indonesia to Singapore, and from here, to other international destinations. Bakti did not name specific points, but said Indonesian carriers may be interested in flights out of Singapore to other parts of Asia, as well as India and the Middle East.
When contacted, a spokesman for the Civil Aviation Authority of Singapore (CAAS) would say only that air talks are ongoing between the two countries.
Apart from more flights between Singapore and Indonesia, Bakti and Kirana are also hopeful that plans for open skies between the 10 member countries of Asean will materialise. This will remove restrictions on carriers and allow them to operate more freely within the bloc.
Kirana said: “We really hope open skies will happen, and we hope that the countries can work together so we can fly beyond Singapore or Malaysia and make these countries our transit points.”
Giving an update on the progress of Asean’s move towards liberalization, Bakti noted some delays, but that Indonesia remained committed to the goal. By 2015, carriers of Asean countries will have full freedom to operate to its five key airports in Jakarta, Medan, Surabaya, Denpasar and Makassar.
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