Bloomberg News

Lion Air Plans China, Korea Flights After Record Aircraft Order

November 20, 2011

Nov. 19 (Bloomberg) -- PT Lion Mentari Airlines, Indonesia’s biggest budget carrier, plans to add flights to cities in China, South Korea and Taiwan after signing a record preliminary order for 230 Boeing Co. 737 aircraft.

Lion Air will get the planes from 2017 to 2025, President Director Rusdi Kirana said by phone. The Jakarta-based carrier yesterday signed an agreement covering commitments to order 201 Boeing 737 MAX planes and 29 extended-range 737-900s.

The closely held airline expects to carry 27 million passengers this year, an increase of 30 percent, and growth may continue at about 15 percent a year as the fleet expands, Kirana said. State-run PT Garuda Indonesia’s budget arm Citilink aims to boost passenger numbers 50 percent next year to 3 million as economic growth spurs travel in the world’s largest archipelago.

“It’s an aggressive fleet expansion,” said Ahmad Maghfur Usman, an analyst at OSK Research Sdn. in Kuala Lumpur. Still, “the economy is pretty much domestic-driven, so passenger growth will continue to be resilient.”

Indonesia’s economy, Southeast Asia’s biggest, will likely expand 6.5 percent this year, the fastest pace since 1996, President Susilo Bambang Yudhoyono said Aug. 16. The government plans to boost capital spending 19 percent next year to build infrastructure including 14 new airports, he said.

Order Financing

Lion Air will mostly use loans, including ones from the U.S. Export-Import Bank, to pay for the new aircraft, Kirana said. The order, worth $21.7 billion at list prices, is Chicago- based Boeing’s biggest by value and in terms of plane numbers. The deal also contains options for another 150 aircraft.

The carrier is “profitable” and will likely post revenue of $1 billion this year, which may rise 15 percent next year, Kirana said. Its fleet may expand to 470 planes by 2025 from 90, he said.

The final agreement with Boeing will be signed after the completion of some “formalities,” Kirana said, without providing details. He didn’t give a timeframe. Lion Air last ordered planes in 2008, when it signed for 56 737-900ERs, according to Boeing’s website.

The airline, founded in 2000, operates 226 flights daily to more than 36 cities including overseas services to Singapore, Kuala Lumpur, Penang and Ho Chi Minh City, according to its website. It operates Boeing 737s and MD-90s.

Boeing expects to begin delivering the 737 MAX to customers in 2017. It decided in July to offer new the model, an upgrade with more fuel-efficient engines, to fend off competition from Airbus SAS’s A320neo.

--With assistance from Widya Utami in Jakarta. Editors: Neil Denslow, Vipin V. Nair

To contact the reporter on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net

To contact the editor responsible for this story: Greg Ahlstrand at gahlstrand@bloomberng.net


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