FARNBOROUGH, England (Reuters) – AirAsia is discussing the possible purchase of another 100 Airbus A321neo aircraft, as the company's chief executive, Malaysian businessman Tony Fernandes and Airbus prepare for parallel negotiations for an extended order of bigger size A330neo aircraft, industry sources said.
Fernandes can attend the Farnborough Airshow This week, the two sides will try to finish a rough patch in their relations and agree on all or part of a complex package of orders for narrow and wide-body aircraft, two sources said.
However, it was not clear how much fresh money the agreement would obtain, if completed, in the Airbus coffers, since the low-cost airline juggles existing orders and drives a difficult deal with prices and size of the deposits, one of the sources said.
Another said that any agreement could involve a significant number of conversions or "abandonment" among existing orders. AirAsia has ordered 600 jets, two thirds of which must still be delivered.
Airbus declined to comment. AirAsia could not be contacted.
Two sources said that AirAsia could place an order for up to 100 single aisle A321neo aircraft worth $ 13 billion at list prices, as reported by Bloomberg News.
A third source suggested that it could involve an update to smaller models, which may trigger other orders. None of the sources, who are familiar with the matter, agreed to be cited in confidential conversations.
The range of options underscores the complexity of AirAsia's portfolio as it expands. But despite the appeal of an order of 100 aircraft, all eyes are on whether AirAsia will confirm the A330neo, since there is no problem in selling the smaller individual aisles.
AirAsia, Asia's biggest budget airline, has been sending mixed signals for months on whether it will confirm its previous agreement for 66 of the updated A330neo, seen from afar by Boeing Co, which hopes to replace the order with its 787 Dreamliner.
Delegates say that Airbus needs a marketing elevator for its A330neo and that it would be happy to take Fernandes to the widely publicized Farnborough Airshow to reconfirm and expand its order.
That's because losing the largest buyer of the A330neo could make bankers tighten their terms to finance the same plane for other airlines and, therefore, further hurt sales.
However, sources have said that relations between companies have cooled after recent changes in Airbus management.
An AirAsia order would indicate that the ties between Airbus and its largest Asian customer have improved, although Airbus has signaled an impulse to protect profit margins.
Financiers speculate that AirAsia will drive discounts of up to 60 percent for the A321neo and two-thirds for the A330neo. The industry standard discounts are closer to 50 percent.
Depending on the negotiations, the amount of money delivered on the first day along with any new orders from AirAsia may be small.
"This agreement is worthless in terms of financial commitment (in advance)," the first source told Reuters.
Additional reporting by Victoria Bryan, Anshuman Dagger, Jamie Freed; Edited by Leslie Adler