Malaysian low-cost
carrier AirAsia is expected to sign a major deal for the purchase of about 60
engines worth over US$1bil at the Paris Air Show next week, sources said.
AirAsia will sign the deal with CFM International,
which is a 50:50 joint venture between General Electric Co (GE) and Snecma.
The engine supplier is the same party for 80 engines
the airline had bought last year for its A320 aircraft in a deal which was
worth US$1.6bil.
A maintenance, overhaul and repair contract is also
likely to be signed for the 60-odd aircraft, according to the sources.
These 60 are part of the 100 additional A320 aircraft
the low cost airline had ordered last December, but then it did not pick an
engine supplier.
The ordering of the 100 Airbus A320s was part of the
airline's strategy to add routes and increase flight frequencies to maintain
profitability against intense competition.
With that order AirAsia has a record 475 narrow body
aircraft on its order list with Airbus.
The airline earlier said the extra aircraft will give
it ample capacity to build on its market leadership and dominance especially in
Malaysian and Thai markets.
AirAsia has operations in Malaysia, Thailand,
Indonesia, the Philippines and Japan.
However, its joint venture in Japan is facing problems
where management tension is threatening to derail the JV. AirAsia has a JV with
Japan's All Nippon Airways and the venture has been unprofitable since it
started flying in August.
Both parties are going to explore if they can still
work together or else dissolve the JV.
Japan aside, AirAsia is awaiting for the air operator’s
licence to begin operations in India. There it has a joint venture with one of
India's biggest conglomerates, Tata Sons and property tycoon, Arun Bhatia.
AirAsia has a 49:30:21 equity in the joint venture
with Tata Sons and Arun holding the balance respectively.
If all goes as planned, AirAsia India should take to
the skies sometime in September from its headquarters in Chennai and for that
it would need aircraft.
Since AirAsia has ordered many aircraft it can easily
take deliveries and allocate them for the Indian operations.
AirAsia is also hoping to set up a low cost airline in
Myanmar, a market which is warming up to foreign investors.
B.K. Sidhu
The Star
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