SilkAir Makes Historic Purchase From The Boeing Co Totalling $8.3 billion

DiMarkco Chandler, Contributed to this article:

Earlier today, AP reported that the Boeing Co., a Chicago based aerospace and defense firm, announced 2 deals worth a combined total of $8.3 billion.

Specifically, Singapore Airlines Ltd., agreed to purchase 54 737s, includeing 31 Max 8 planes and 54 Boeing 737 family aircraft. The price tag total is $4.9 billion.

The second order came from China Southern Airlines Co., for 40 737s, also family aircraft. The purchase price for this order is, $3.36 billion; thus the combined purchases totaled $8.3 billion.

Separately, China Southern Airlines Co. (ZNH) said its 51%-owned unit Xiamen Airlines Co. has agreed to buy 40 B737 jets from Boeing at a combined list price of US$3.36 billion.

The new planes will enlarge and update SilkAir’s fleet, which currently comprises 21 A320 family aircraft made by Airbus, a unit of European Aeronautic Defence & Space Co. (EAD.FR).

Singapore Airlines is hoping regional carrier SilkAir and low-fare unit Scoot will help drive earnings growth as Singapore’s flagship carrier faces stiff competition in its own premium market. Singapore Airlines last month reported a net profit of 78 million Singapore dollars (US$63 million) for the April-to-June quarter, recovering from a net loss in the previous quarter.

The company’s Boeing order is its biggest single order since 2006, when it ordered 20 Airbus A350s and nine A380 superjumbos valued at US$7.5 billion. Also that year, the company ordered 20 Boeing 787 jets valued at US$4.5 billion. Its last major order was last year, when it announced a deal to buy eight Boeing 777-300 ER jets valued at US$2.3 billion.

All prices are based on manufacturers’ published list prices, but airlines typically get large discounts and actual prices paid are rarely disclosed.

SilkAir will begin receiving the 737-800 single-aisle jets in 2014, with deliveries continuing into 2021, the statement said.

“We continue to see very strong growth within the region and these new aircraft will position SilkAir well. They will enable us to spread our wings to even more destinations and increase capacity on existing routes,” said Mervin Tan, the chief executive of SilkAir.

Mr. Tan said the decision to buy Boeing jets followed detailed evaluations and extensive negotiations with both Boeing and Airbus.

Boeing welcomed the announcement. Airbus declined to comment on the decision.

Shukor Yusof, an analyst at Standard & Poor’s Equity Research, said the 737 is an efficient aircraft, and having such planes in its fleet will help SilkAir compete against its main rivals, Indonesian carriers Garuda Indonesia (GIAA.JK) and Lion Air, which also use 737s.

According to SilkAir, the order is the largest in its history and remains subject to the negotiation of a final purchase agreement.

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