Boeing wins $21.7 billion airplane order

NUSA DUA, Indonesia Thu Nov 17, 2011 5:40pm EST

NUSA DUA, Indonesia (Reuters) - The United States announced a massive order for Boeing jets from Indonesia's largest domestic airline, Lion Air, to be showcased as U.S. President Barack Obama winds up an Asia-Pacific tour.

The sale of 230 short-haul 737 jets, worth $21.7 billion at list prices, is the largest commercial order in Boeing's history, toppling a previous record set just days ago as the industry taps in to relentless demand in emerging economies.

The order is also a boost for Boeing's efforts to develop a revamped version of its best-selling 737 to compete with a model produced by its European rival Airbus.

The deal from Lion Air, Indonesia's largest private carrier, included orders for 29 Next-Generation 737-900 extended range planes and 201 of Boeing's new 737 MAX, an updated version of its best-selling model.

The company said the 201 orders for the 737 MAX were included in previously announced commitments for 700 of the planes, which are due to enter service in 2017 equipped with fuel-efficient engines.

OBAMA TOUTS JOBS

Obama, under pressure to bring down a 9 percent U.S. unemployment rate, will attend a signing ceremony on Friday for the order, which the White House said would support more than 110,000 jobs at Boeing and U.S. suppliers.

The U.S. president, who hopes to convince voters before the November 2012 presidential election that his administration can revive the economy, is seeking to increase American exports to Asia-Pacific to offset weakness in Europe.

The Lion Air deal includes options for another 150 aircraft valued at $14 billion, bringing the potential total value to $35 billion, although big plane orders tend to come with significant discounts.

Boeing said the Lion Air order, when finalized, would be its largest ever "by both dollar volume and total number of airplanes."

The plane maker said strong customer demand was driving its plans to raise production over the next three years. "As a result of that increase, we will definitely be adding many more jobs," Boeing spokesman Doug Alder Jr. said without giving a specific figure.

STRONG ORDERS IN UNCERTAIN ECONOMY

High oil prices are spurring orders worth billions for airplanes with improved fuel savings, re-energizing the rivalry between Boeing and Airbus.

Alex Hamilton, managing director with EarlyBirdCapital in New York, said the strong order confirmed that the commercial aerospace sector was bouncing back despite a skittish global economy. He said he expected more airplane orders as oil prices reach $100 a barrel.

The challenge for Boeing now is to execute its production schedules to turn the orders into revenue, Hamilton said.

Boeing has "a backlog that most people wouldn't know what to do with," he said. "The faster they get (planes) out, the less risk there is to the backlog being canceled and the faster they convert those orders into cash."

Boeing shares closed down 0.4 percent at $66.09 on the New York Stock Exchange, compared with a 1.1 percent fall in the Dow Jones Industrial Average, of which the plane maker is a component.

ASIA IS DEMAND DRIVER

The revamped 737 MAX is designed to compete with the Airbus A320neo in the narrow-body aircraft segment, which is expected to produce $2 trillion in sales over 20 years.

Demand from Asia and the Middle East has powered an increasing proportion of orders for Boeing and Airbus passenger jets in recent years as the growing ranks of the middle class acquire wealth and opportunities to travel.

With traffic strongly tied to gross domestic product, the trend is likely to continue as Asia's share of the world economy moves from 27 percent now to 35 percent in 2030, according to Boeing.

"Something has changed in the past 20 years," Randy Tinseth, vice president of marketing for Boeing commercial airplanes, told Reuters. "In 1990, 72 percent of demand was from Europe and the Americas. Now it is closer to 50 percent. In 2030 it will be only 40 percent."

The Lion Air deal marks the second time in a week that Boeing has broken its company record for commercial airplane deals after bagging an $18 billion order for 50 wide-body 777 jets from Emirates airline at the Dubai Air Show [ID:nL5E7MF04C].

In other deals to be announced on the sidelines of an East Asia Summit on the Indonesian island of Bali, the White House announced Boeing reached a $2.4 billion deal for Singapore Airlines to buy eight 777-300ER aircraft.

General Electric Co will sell 50 engines to Indonesia's Garuda Airlines in an agreement worth $1.3 billion.

In a $325 million deal presented as one of the largest defense procurements in Brunei's history, United Technologies Corp unit Sikorsky will supply 12 Black Hawk helicopters to the Royal Brunei Armed Forces Support Helicopter Project.

(Additional reporting by Karen Jacobs in Atlanta and Tim Hepher in Dubai; Editing by Gerald E. McCormick, Lisa Von Ahn and Matthew Lewis)