Singapore Airlines in $7.5 billion Airbus deal

SINGAPORE (Reuters) - Singapore Airlines SIAL.SI will order five Airbus A380 aircraft and 20 more A350 planes in a deal valued at $7.5 billion, looking beyond a business slowdown that has led the carrier to stop hiring cadet pilots for now.

“This major order will provide us with additional growth opportunities and is consistent with our longstanding policy of maintaining a young and modern fleet,” SIA’s chief executive, Goh Choon Phong, said in a statement on Wednesday.

The order also reflected the Singapore flag carrier’s confidence in the strength of the market for premium full-service travel, he added.

International Air Transport Association (IATA) said last week that the number of passengers flying on first and business class rose 8.5 percent in August from a year ago.

SIA is facing increased competition from Middle Eastern carriers such as Emirates EMIRA.UL on longer routes at a time when passengers in the West have become more cost-conscious.

The Singapore carrier has frozen cadet-pilot recruitment and cut flying hours for junior pilots, the Straits Times newspaper reported earlier this week.

SIA operates 19 A380-800 superjumbos and already has firm orders in place for 20 A350s. Deliveries of the new Airbus EAD.PA planes, which have a list price of $7.5 billion, are due to begin in 2017.

Hints of the SIA-Airbus deal emerged on Tuesday when French Prime Minister Jean-Marc Ayrault, who has just returned from a business trip to Singapore and the Philippines, told Airbus workers their company had signed an order for 15 aircraft and taken options for the A350 and possibly the A380.

SIA said that as part of its deal with Airbus, the European aircraft maker will buy back five A340-500s, which will be removed from service in the fourth quarter of 2013.

The withdrawal of the A340-500s will result in the end of non-stop flights between Singapore and Los Angeles and between Singapore and Newark. The Newark service, which connects Singapore to New York in 19 hours, is an all business-class flight and one of the world’s longest scheduled service.

In a separate statement on Wednesday, SIA’s long-haul low-cost unit Scoot said it agreed to acquire 20 Boeing 787 aircraft for delivery starting in 2014. The 787s were originally ordered by SIA, Scoot said.

The B787 aircraft will replace Scoot’s Boeing 777-200 fleet and help its ongoing expansion, the low-cost carrier said.

Reporting by Kevin Lim and Charmian Kok; Editing by Erica Billingham