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Boeing Wins Big Jet Deal With Indonesia

Posted by EAA 211 Webmaster on November 17, 2011 at 6:20 PM

 

From the Wall Street Journal, November 17, 2011


By DAVID KESMODEL in Chicago and LAURA MECKLER in Nusa Dua, Indonesia


Boeing Co. won its biggest-ever commercial-jet order in a deal with Indonesia's Lion Air, even as a U.S. airline group stepped up a campaign to end the kind of U.S. loan backing that often supports such overseas sales.


Jakarta-based Lion Air, a private airline and major Boeing customer, signed a commitment to order 201 of Boeing's 737 MAX single-aisle jets and 29 extended-range 737s. The 230 planes have a list price of $21.7 billion, though carriers typically negotiate discounts when placing large airplane orders.


The deal, disclosed Thursday by the White House as part of a visit to Indonesia by President Barack Obama, marks Boeing's largest in terms of dollar volume and the number of aircraft.


The announcement came on the heels of a lawsuit filed Wednesday by a group of U.S. airlines against the Export-Import Bank of the U.S., which has regularly backed funding for orders of Boeing jets by Lion Air and other overseas carriers.


In its lawsuit, the Air Transport Association of America, or ATA, seeks to block a multibillion-dollar support package for Boeing jets ordered by Air India. The case escalates the trade group's contention that Ex-Im Bank has distorted global competition and failed to meet its statutory obligations.


The ATA argues that loan guarantees provided by Ex-Im Bank to overseas rivals put U.S. carriers at a commercial disadvantage. The ATA said the guarantees enable foreign airlines to obtain financing for jets at considerably lower rates—in some cases, up to 50% lower—than what U.S. airlines must pay on the commercial market.


Some big U.S. members of the ATA aren't part of the lawsuit, including United Continental Holdings Inc. and AMR Corp.'s American Airlines. The ATA's current chairman is Richard Anderson, chief executive of Delta Air Lines Inc., which backs the suit along with such carriers as US Airways Group Inc.


"We believe this litigation is without merit," Ex-Im Bank spokeswoman Maura Policelli said in an emailed statement.


It wasn't immediately clear whether Ex-Im Bank is playing a role in the new Lion Air orders.


Chicago-based Boeing said it had no comment on the ATA's suit against Ex-Im Bank.


The White House disclosed the Lion Air order Thursday while announcing that U.S. companies had reached trade deals valued at more than $25 billion with East Asian nations. President Obama is expected to help announce the Boeing deals—including a separate order by Singapore Airlines—Friday on the sidelines of a meeting with East Asian leaders in Indonesia as he emphasized his efforts to boost exports in support of U.S. jobs.


U.S. officials say the Lion Air deal in Indonesia was sealed in the past few days in part because the Indonesians wanted President Obama to announce it here.


The deal breaks Boeing's previous order record in terms of dollars set Sunday, when Dubai-based Emirates Airline said it ordered 50 Boeing 777 wide-body jets with a value of $18 billion. The Lion Air agreement also includes options for another 150 aircraft valued at $14 billion.


Boeing said Lion Air's commitments to order the 737 MAX, a planned version of its workhorse jet that will carry new, advanced engines, are part of the 700 commitments to the plane that the jet maker previously disclosed. Only some of the airlines that have ordered the jet have been revealed, including American Airlines.


Boeing plans to deliver the first 737 MAX in 2017—two years behind a competing model from rival Airbus called the A320neo that has garnered more than 1,200 firm orders or commitments.


The Lion Air order "is a big deal," Robert Stallard, an analyst with RBC Capital Markets, said in a note Thursday. "It gives a meaningful boost to Boeing's backlog and MAX order book."


Also Thursday, the White House said Singapore Airlines would buy eight Boeing 777-300ER wide-body aircraft, with a total list-price value of $2.4 billion. And it said General Electric Co. is signing a contract to sell 50 CFM56 engines to the airline Garuda Indonesia for $1.3 billion.


In addition, the White House said that Sikorsky, a subsidiary of United Technologies Corp., has been selected by the Brunei Ministry of Defense to supply 12 Blackhawk S-70i helicopters for the Royal Brunei Armed Forces Support Helicopter Project. That agreement was valued at $325 million, with an option for a second phase that would double the project's size. Brunei and Sikorsky are expected to work to finalize the terms of the agreement.


The announcements come near the end of a week-long trip to Asia Pacific in which Mr. Obama emphasized the importance of boosting trade to the fast-growing region.


"The Asia-Pacific region—with its tremendous economic growth and its large and growing middle class—is a key market for U.S. exports," the White House said in a fact sheet about the agreements. "Those exports are generating jobs in every corner of the United States."


The White House said it would announce or "showcase" trade transactions totaling more than $25 billion, supporting an estimated 127,000 jobs.


—Doug Cameron contributed to this article. Write to David Kesmodel at david.kesmodel@wsj.com and Laura Meckler at laura.meckler@wsj.com

 


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