Lion Air orders CFM Int'l engines worth $1.2 bln at list prices

Reuters

By Siva Govindasamy

BATAM, Indonesia, Jan 27 (Reuters) - Indonesia's Lion Air said on Monday it had purchased CFM International engines worth $1.2 billion for 60 new Airbus A320s on order as the budget carrier goes on a shopping spree to boost capacity in Southeast Asia.

The privately owned airline said it would start taking delivery of its new A320 aircraft, with CFM 56-5B engines, in the middle of this year, with a total of six planes due to be delivered this year.

CFM is a joint venture between General Electric and Safran.

It also said in a statement that it had yet to decide on the engines for its 174-strong fleet of upgraded A-320 aircraft it has on order.

Lion Air wants to capitalise on Indonesia's rising consumer class who are increasingly hopping between the myriad islands of the world's fourth-most populous country, whilst it competes internationally with the likes of AirAsia.

Faced with strong demand on its domestic routes, the airline said was considering widebody aircraft from both Boeing and Airbus for an for an order it plans to make in the first quarter of 2015.

Lion Air said it planned to cancel an existing order for five Boeing 787-8 aircraft, which can carry up to 350 passengers, as it wanted even bigger planes. In addition to the order for larger aircraft, Lion Air plans to purchase smaller Boeing 737 models to join a fleet that already includes a large number of that model.

BATAM HUB

The announcement was made on the sidelines of Lion Air's launch of its new maintenance, repair and overhaul hangar on the Indonesia island of Batam near Singapore. This is the first of four hangars that Lion plans to open on the island with the others due to be completed by June.

"There are relatively few heavy maintenance facilities in Indonesia, despite the fact that Indonesia is one of the largest domestic aviation markets in the world," said Romdani Adali Adang, the president director of Batam Aero Technic, which is part of the Lion Group.

"Some airlines are sending their aircraft overseas for heavy maintenance checks. But it costs money to ferry empty aircraft overseas and doing heavy checks is very labour intensive work. Therefore, it makes more sense for this work to be done in Indonesia."

Lion also plans to make Batam an international transit hub for passengers flying in and out of Indonesia and its second major Indonesia hub after Jakarta. The airline plans to increase the number of domestic destinations it serves from Batam to 20 from the current 15 and increase the frequency of these services.

It then plans to launch services to points in southern China like Guangzhou and Hong Kong, as well as Bangkok, Jeddah and the Indian cities of New Delhi and Mumbai.

This will help passengers bypass the congested airport in Jakarta, which is Indonesia's main international hub, said Rusdi Kirana, the president director of Lion Group.

Indonesian airlines have been looking for alternatives to Jakarta's Soekarno-Hatta Airport for several years due to the congestion and delays that the airport faces.

"The distance is actually shorter if you transit in Batam rather than flying south to Jakarta to transit," said Kirana. "The shorter flying time makes flying more convenient for passengers and it means aircraft burn less fuel, leading to significant cost savings."

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