AirAsia X Bhd has signed a landmark agreement to purchase 150 Canadian-made Airbus SE A220 aircraft, providing a significant boost for the European planemaker's manufacturing site in Quebec. The deal was announced at the Airbus Canada factory in Mirabel, Quebec, by AirAsia co-founder Tony Fernandes.
Details of the Agreement
The order is for the A220-300 model, which can seat up to 160 passengers. While airlines typically receive substantial discounts for large transactions, the exact financial terms were not disclosed. This deal increases Airbus's A220 backlog by approximately 33%, as the company still had 458 planes to deliver out of roughly 1,000 orders as of April 9.
Strategic Importance
The A220 is smaller than the aircraft AirAsia usually operates, but it allows the budget carrier to serve smaller airports and markets with lower demand for traditional narrowbody planes. AirAsia currently operates a fleet of about 250 mostly single-aisle Airbus aircraft, with a backlog of nearly 400 orders primarily for the A320 family.
Canadian Prime Minister Mark Carney and Lars Wagner, Airbus’s commercial aircraft CEO, attended the public announcement, underscoring the deal's significance for the A220 program, which has faced production challenges since its inception as the Bombardier Inc. CSeries. The program was later rescued by Airbus with financial support from the Quebec government.
Market Context
Airbus beat Brazilian planemaker Embraer SA for the AirAsia contract, winning a large-volume deal after losing to Embraer on recent orders from Finnair, Avelo Airlines, and SAS Scandinavian Airlines. AirAsia, operating from Malaysia, Thailand, the Philippines, and Cambodia, is particularly vulnerable to rising fuel costs due to its lack of fuel hedges and limited ability to pass on higher expenses to cost-conscious travelers.
The A220 order is seen as a major lift for the flagging program, which has struggled with production and sales challenges. With this deal, Airbus aims to strengthen its position in the single-aisle market and expand the A220's footprint in Asia.
