AirAsia signs $19bn deal for 150 Airbus A220 jets

Southeast Asia's AirAsia signed a $19 billion deal to buy 150 Canadian-made Airbus A220-300 jets, the two companies said, with the low-cost carrier adding Thursday that it could double the order to meet future demand.

The deal, announced at the plane-maker's facility in Mirabel, Canada, represents the biggest order in that country's history, with AirAsia co-founder Tony Fernandes calling it "the perfect tool for our next phase of growth".

"This order reflects our long-term discipline and the scale of our ambitions," he said in a statement.

Southeast Asia's largest low-cost carrier said the agreement had "the strategic flexibility to upsize the commitment to 300 of the A220 Aircraft Family to meet future demand".

Airbus Commercial Aircraft CEO Lars Wagner said the A220 planes will "open up new routes across Asia that were not feasible before".

The deal comes as the aviation industry grapples with soaring jet fuel prices driven by the US-Israeli war with Iran that has raised the spectre of shortages that could force airlines to cancel flights.

Air Asia announced last month it was cutting more flights and even some connections without providing an overall figure.

The Malaysia-based no-frills airline said it was also raising fares by up to 40 percent and about 10 percent of its overall flights had been cut so far at the time.

- 'Never waste a crisis' -

Wagner said it was hoped once the new fleet is delivered in 2028, larger AirAsia aircrafts will be freed up to focus on long-haul routes to North America, Australia and Europe.

Fernandes, meanwhile, told the Financial Times in an article published on Thursday that the jet fuel shock triggered by the war is a bigger crisis for global aviation than the Covid-19 pandemic.

"I thought I'd seen it all with Covid . . .  but having seen jet fuel go up almost three times -- this is much worse," Fernandes told the newspaper.

In a LinkedIn post, Fernandes said the decision to move on the Airbus deal now is because "we never waste a crisis. AirAsia grew by making bold decisions at the right moment, not the easiest moment".

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The airline industry has been particularly susceptible to the supply shortages resulting from the closure of the key Middle East waterway since the start of March because many of the sector's costs are tied to jet fuel.

Speaking to Bloomberg, Fernandes remained defiant on hedging fuel costs, saying he thinks they'll eventually calm down. 

"Obviously people who hedge now are in the money, but over a longer period, hedging never really works," Fernandes said, though the decision has led to the company's shares tumbling 35 percent according to the publication.

In the same interview Fernandes announced he is also preparing to launch a new airline in coming months.

AFP has contacted AirAsia for comment.

Shukor Yusof, founder of Singapore-based aviation advisory Endau Analytics, said the move is "very bullish on the marketplace".

"(Fernandes is) betting that this aircraft is going to be useful for AirAsia for when 2030 and onwards arrive," Shukor said.

With the latest order, AirAsia becomes the "global launch customer" for the A220's new 160-seat configuration, Wagner said.

Canadian Prime Minister Mark Carney, who was also at the ceremony, said "the 150 aircraft will be built by Canadian workers on Canadian factory floors".

The Mirabel headquarters and manufacturing facilities employs approximately 4,000 people, while another facility in Mobile, Alabama, is home to the second A220 manufacturing facility.

Canada is the only country outside of Europe to host a major Airbus programme, with the building of the A220 family.

llk/ane/fox