Malaysia Airlines indicates interest in 20-30 widebody jets from Airbus or Boeing: source

FILE PHOTO: Men watch Malaysia Airlines aircraft at Kuala Lumpur International Airport in Sepang, Malaysia, in this picture taken March 2, 2016. REUTERS/Olivia Harris/File Photo

SINGAPORE (Reuters) - Malaysia Airlines has indicated that it may be interested in buying 20-30 widebody jets from either Boeing Co BA.N or Airbus SE AIR.PA, a source with knowledge of the matter said.

Such a deal could either expand or replace a previous non-binding agreement with Boeing that was reached during a high-profile U.S. visit by the country’s prime minister last year, the source told Reuters.

Its memorandum of understanding (MoU) with Boeing to buy eight long-range 787 jets, valued at $2.25 billion at list prices, had come as a surprise given that the national carrier already had an all-Airbus widebody fleet.

For a carrier of Malaysia Airlines’ modest size to operate similar-sized planes from both manufacturers would tend to reduce efficiency and add to costs. While the Boeing 787 is included in the airline’s latest request for information for the 20-30 jets, it has also listed the Airbus A330neo and A350 for consideration, the source with knowledge of the request for information told Reuters on condition of anonymity. In a statement after the initial version of this story – which referred to a tender process - was published, Malaysia Airlines described it as “speculative and erroneous.” It said there is “no such tender process as alleged” and the MoU with Boeing remains in place. It said the airline will not be commenting on the matter further.

In the airline industry a request for information is sometimes regarded as the beginning of a tender process. A Malaysia Airlines spokeswoman had earlier said in answer to questions from Reuters about whether it was reconsidering the Boeing MoU and if it was in talks with Airbus about fleet plans that it was “too premature” to comment. “As an airline, we constantly engage with our partners to review scenarios and options with respect to our network and fleet as a matter of course,” she said. “Malaysia Airlines will update once something material develops.” The carrier’s new CEO, Izham Ismail, last month told Malyasian media the company had issued a request for information for new generation widebody planes, without specifying the number or model type, or indicating that a purchase of Airbus planes was possible.

Boeing Senior Vice President Asia-Pacific and India Sales Dinesh Keskar last month told media it was up to the government and the airline to take the lead on firming up the 787 deal.

A Boeing spokeswoman declined to comment further.

The provisional Boeing deal was announced during Malaysian Prime Minister Najib Razak’s U.S. visit in September. The visit was important for Najib as a way to show he was welcome at the White House despite a criminal probe by the U.S. Justice Department into a fund called 1Malaysia Development Berhad that he founded. U.S. President Donald Trump had praised Malaysia’s Boeing deal but steered clear of publicly commenting on the 1MDB probe. Malaysia’s election commission on Tuesday set May 9 as the date for a general election. Najib announced the dissolution of parliament on Friday, paving the way for a tough campaign where he faces off against rival Mahathir Mohamad, who last year questioned the merits of the Boeing deal in a blog post. Malaysia Airlines has been trying to transform its operations and return to profitability as it recovers from two tragedies in 2014, when flight MH370 disappeared in what remains a mystery and flight MH17 was shot down over eastern Ukraine. The 787 MoU was signed by the previous Malaysia Airlines CEO Peter Bellew. “They have flexibility to not convert the 787 MoU to a firm order if they decide it makes sense to go with Airbus for the full requirement,” CAPA Centre for Aviation Chief Analyst Brendan Sobie said. “It’s best if they limit their number of widebody types as their fleet is not that big to begin with and having just six or eight aircraft of a particular type is subscale.” The carrier already has A330s and A350s in its fleet. An Airbus spokesman declined to comment.

Reporting by Jamie Freed in SINGAPORE; additional reporting by Liz Lee and Praveen Menon in KUALA LUMPUR and Aradhana Aravindan in SINGAPORE; Editing by Himani Sarkar and Martin Howell