AirAsia inks US$8.6 billion engine deal

AirAsia Bhd, the biggest budget carrier in South East Asia, has agreed to spend US$8.6 billion (RM27.51 billion) to buy over 100 sets of airplane engines mainly for the 100 Airbus A320 aircrafts it purchased last year.

The purchase involves LEAP-1A engines for its 64 A320 NEO aircrafts as well as CFM5605B engines for its 36 A320 CEO aircrafts.

The deal also includes 5 CFM56-5B spare engines and 9 LEAP-1A spare engines.

"The engines purchase is expected to contribute positively for the financial year immediately following the first year of its delivery and to the future earnings of the AirAsia Group," the company said in its filing to Bursa Malaysia on Thursday evening.

The deal with CFM International Inc also includes of a 20-year RPFH (Rate per flight hour) agreement under the terms of which CFM will guarantee maintenance costs on a dollar per engine flight hour basis for the engines ordered.

"The engines will be installed to power the company’s Airbus A320 aircraft order made on December 13, 2012. This will meet the company’s rapid expansion plan and fleet requirements," it said in the statement.

The engines purchase will be funded partly via a combination of borrowings, its internal reserves and cash generated by its operations.

"The external sources of funding include but not limited to export credit guaranteed borrowings, conventional and Islamic commercial loans and sale and leaseback transactions," said AirAsia.

The delivery of the engines is expected to be over the next 13 years.

AirAsia shares on Bursa Malaysia fell 5 sen to RM3.17 with more than 3.2 million shares changed hands.