April 10, 2012 / 6:00 PM / 6 years ago

Airbus closes in on $2.5 billion Indonesian deal

JAKARTA/PARIS (Reuters) - Indonesia’s Garuda (GIAA.JK) is close to buying A330 jets worth about $2.5 billion from Europe’s Airbus, two people familiar with the deal said, strengthening a bonanza for Western planemakers as the archipelago nation latches on to a boom in air travel.

A company logo of Garuda Indonesia airline is displayed during a news conference in Hong Kong September 16, 2011. REUTERS/Bobby Yip

The deal is set to be unveiled by British Prime Minister David Cameron in Indonesia on Wednesday on the second stage of an Asia tour aimed at boosting trade ties with the region.

“Garuda is buying 11 units of the A330-300 that will be delivered in a timeframe between 2013 and 2017,” said one source close to the deal on Tuesday, asking not to be identified.

Cameron is the latest Western leader to arrive touting business deals with Southeast Asia’s largest economy, which is also fast becoming one of the most promising aviation markets.

Indonesia was slow to join a dramatic expansion in air travel in the Asia-Pacific region, which has underpinned the aerospace sector worldwide.

As a sign of its untapped potential, industry leaders say the world’s fourth most populous nation has eight times the population of Malaysia yet barely half the domestic traffic.

But with 17,000 islands spread across three time zones, Indonesia has finally emerged as a key battleground for dominant jetmakers Airbus EAD.PA and Boeing, while Garuda has also bought regional jets from Canada’s Bombardier (BBDb.TO) and Lion Air has ordered European ATR turbo-props to operate short links.

Indonesian passenger numbers are growing on average by 21 percent each year, according to Lion Air.

If confirmed, the new Airbus deal would increase the number of long-haul A330s already delivered to Garuda or on order from 16 to 27. None of the companies involved agreed to comment.

The A330-300 sells for $231 million at catalogue prices, but airlines typically pay less than the official price.

The expected deal comes as Lion Air also negotiates to buy 10 Airbus A330s or next-generation Boeing 787 Dreamliners. Those talks have been overshadowed by a European Union safety ban on Indonesian airlines that includes Lion Air but not Garuda.

Airline founder Rusdi Kirana has called the treatment unfair but told Reuters in February that EADS subsidiary Airbus was still in the race for a deal potentially worth $2 billion.


Accompanied by about 35 executives from defense, energy, construction and other sectors, Cameron will arrive in Indonesia from Tokyo on Wednesday and visit Malaysia the following day.

On Friday, Cameron is due in Myanmar where he will meet pro-democracy leader Aung San Suu Kyi as the first major Western leader to visit the long-isolated country since a 1962 coup began a half century of military rule.

Cameron’s two-year-old coalition government is trying to boost British manufacturing to lessen reliance on a financial services sector roiled by the 2008-2009 global financial crisis.

Although Airbus is headquartered in France, the company has important links with Britain where the wings of all Airbus jets and many of the engines are made.

Garuda’s A330s will be powered by Trent 700 engines supplied by Britain’s Rolls-Royce (RR.L).

Rolls-Royce does not publish engine prices, but based on implied catalogue values derived from its recent order announcements, a deal with Garuda for 11 twin-engined A330s would be worth around $770 million to the Derby-based firm.

Overall, Airbus predicts Asia-Pacific nations will take delivery of 9,370 passenger jets over the next 20 years, valued at $1.3 trillion.

Its sales chief says the rapid urbanization of Asia’s population and sharp growth in emerging economies compared with the industrialized nations will soon make Asia the busiest market for air travel, displacing the United States.

Writing by Tim Hepher; Editing by Erica Billingham

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