Business: Boeing Signs Largest Deal for $21.7bn



Indonesian carrier Lion Air looks for fuel-efficient 737s

Indonesian carrier Lion Air looks for fuel-efficient 737s

Indonesian airline Lion Air has just signed an order from Boeing worth $21.7 billion (£14 billion). The deal marks the biggest commercial order in Boeing’s history.

Demand grows

Lion Air, Indonesia’s largest private airline, has ordered 230 short-haul Boeing 737 planes. Included in the deal is an option for a further 150 aircraft, which would net Boeing another $14 billion.

The planemaking firm said that its Lion Air order would become Boeing’s largest ever order, both in terms of money paid and total number of planes built. The news comes on the back of another good news announcement from Boeing, which announced a deal with Emirates Airlines earlier this week.

Emirates Airlines, based out of Dubai, will receive 50 Boeing 777 jets for an estimated $18 billion.

Analysts explain the huge Lion Air order with projections that booming Asian economies have seen a more affluent middle class rise in the region. Higher disposable incomes and the ability to spend more on luxuries has meant that demand for air travel in the region continues to grow.

The Lion Air order is a sign that the Asia Pacific region will continue to be the main drivers of global economic growth in the years to come.

Randy Tinseth, Boeing’s vice president of marketing, said that the shift towards Asian-dominated demand has happened gradually within the last 20 years. In 1990, Europe and the Americas accounted for 72% of the demand for planes and air travel. Now, the “west” makes up only 50% of the demand, with Tinseth predicting that it will shrink to 40% by 2030.

The importance of oil

In addition to Lion Air, Indonesia’s other leading carrier Garuda Airlines has signed with Gerneral Electric Co to buy 50 engines for $1.3 billion. Boeing will also be netting another $2.4 billion by selling eight aircraft to Singapore Airlines.

The order from Lion Air, however, is for an improved version of what Boeing called the 737MAX. The new jets will be more fuel-efficient in order to compete with rival plane manufacturers Airbus.

Analysts predict further demand for fuel-efficient planes, with companies willing to shell out the billions required, because of the volatility in global oil markets. With more fuel efficient planes, firms can minimise the impact of fuel spikes on their profits.

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