Southeast Asia’s middle class is booming, and Airbus is cashing in with its biggest-ever deal

March 18, 2013
March 18, 2013

Airbus just closed its biggest deal ever: 234 A320 jets for a whopping $24 billion. Its customer is Lion Air, one of Indonesia’s popular budget airlines.

The Lion deal is a big coup for Airbus. The Indonesian carrier has been expanding fast. But until recently, that growth has favored Boeing—for instance, in 2011, it ordered 230 Boeing 737 planes for $22.4 billion.

The archipelago nation—Indonesia is made up of some 17,000 islands—has been relatively insulated from the global economic crisis. With domestic consumption and increased comfort with flying on the rise, the nation expects 21% annual growth in its aviation market. But some of that expansion has been crimped by Indonesia’s safety problems. In 2007, crashes by Garuda, one of Indonesia’s national carriers, prompted both the US and Europe to ban Indonesian airlines from landing in their airports. At present, most of Lion Air’s destinations are domestic. The Indonesian government has been pushing hard to turn that record around, including by partnering with Boeing and Airbus on enhancing its safety regimes.

But it’s not just Indonesian air travel that’s booming. Malaysia’s AirAsia vies with Lion Air for regional supremacy, having built out routes throughout Southeast Asia, Japan and Korea. That airline’s rapid growth has proven a boon for Airbus, as it exclusively buys the company’s planes. Airbus wrapped up a deal with AirAsia last December for 100 A320s, worth $9.4 billion, adding to the 375 planes the Malaysian carrier had already ordered.

Steady demand from Southeast Asia is providing some a welcome bright spot for French industry these days: in January, Airbus said it would hire an additional 3,000 people worldwide in 2013. At the French presidential palace, where the Lion Air deal was signed, Airbus said the contract would call for an additional 5,000 jobs.

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