Airbus Makes Historic Deal with Lion Air

The “contract of the century” has been made, Productive Recovery Minister Arnaud Montebourg proclaimed on Monday, March 18. Airbus signed an unprecedented contract with Indonesian Lion Air. President Hollande noted, “The contract is historic in its breadth — 234 planes and 18 billions of euros — and notable also for the relationship between a large European enterprise and an Asian enterprise that’s implicit in the contract. The agreement opens up possibilities for aeronautics and industry between our two continents.”

Europeans have now acquired a huge client. Lion Air, a private company created in 1999, has until now been almost exclusively equipped by American Airlines’ giant, Boeing. While Lion Air does serve its home country, it also has many flights through Singapore, Malaysia, Vietnam, and Saudi Arabia. They hope these new European produced planes will give them a competitive edge to undercut their largest regional competitor—Air Asia.

All ordered planes are within the A320 family—Airbus’s largest seller to date, according to Bourget 2011. Elysée states that the contract breaks down more specifically to be composed of 109 A320 Neo planes, 65 A321 Neo plans, and 60 of the current model A320 classic planes. The A320 Neo planes are due to launch in 2016 with an updated wing and engine design. These technical innovations will, according to Airbus authorities, provide up to 15% fuel savings. Airbus will have to provide the classic models by 2014.

There are hopes that this contract will provide a much-desired boost to the economy. In the middle of a Monday morning Elysée meeting, president Hollande and Airbus CEO Fabrice Brégier stated that the contract “represents 5,000 jobs in France over the next six years.” With widespread unemployment concerns in France, this deal will ease recent economic grief by adding needed jobs to the market.

Based on the market price of Airbus’s A320 Neo, the total net-worth of this transaction is more than 24 billion US dollars — a sum never before surpassed. Quite simply, the contract is the largest in civil aeronautic history. Elysée commented that it is a phenomenal example of the “success of the aeronautics sector.” The deal easily replaces the old record, made in November 2011 by American rival Boeing and Indonesian Lion Air for 230 Boeing 737 planes and a total value of 22.4 billion dollars.

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