AirAsia is considering the double Airbus jet order, but how much will it pay?

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FARNBOROUGH, England (Reuters) – AirAsia (AIRA.KL) discusses the potential acquisition of another 100 Airbus A321neo jets as the company's chief executive officer, Malaysian entrepreneur Tony Fernandes and Airbus negotiate in parallel negotiations for an expanded order for larger A330neo jets.

FILE PHOTO: Tony Fernandes, CEO of AirAsia, holds a media event in Bangkok, Thailand May 15, 2018. REUTERS / Soe Zeya Tun / File Photo

Fernandes could visit this year's Farnborough Airshow, where the two sides will try to end a difficult period in their relationship and agree on a whole or a complex package of widebody and narrow body jets, two sources said.

However, it remained unclear how much fresh money the transaction would bring to the Airbus coffers once it was completed, as the low-cost carrier juggles existing orders and makes a tough deal about the prices and levels of deposits.

Another said that every deal could involve a significant number of conversions or "churns" between existing orders. AirAsia has ordered 600 nozzles, of which two thirds still have to be delivered.

Airbus declined to comment. AirAsia could not be reached.

Two sources said that AirAsia could place orders for up to 100 $ 13 billion single-aisle A321neo jets at list prices, Bloomberg News reported.

A third source indicated that it could be an upgrade from smaller models, which could trigger further orders. None of the sources familiar with the matter agreed to be quoted in confidential discussions.

The range of options underscores the complexity of the AirAsia portfolio as it expands. But despite the lure of an order from 100 aircraft, all eyes are on the question of whether AirAsia will confirm the A330neo, as there is no problem selling smaller smaller vessels.

AirAsia, Asia's largest budget carrier, has been sending mixed signals for months on whether it will confirm its earlier deal for 66 of the upgraded A330neo – remotely from Boeing CoBAN), who wants to replace the order with the 787 Dreamliner.

Delegates say Airbus needs a marketing lift for its A330neo and would enjoy bringing Fernandes to the well-known Farnborough Airshow to confirm and expand its order.

The loss of the largest buyer of the A330neo could lead to bankers tightening their terms for financing the same aircraft for other airlines and thereby burdening sales even more.

However, sources have said that corporate relations have cooled off following recent changes in Airbus management.

An AirAsia contract would signal that relations between Airbus and its largest Asian customer have improved, despite Airbus announcing a profit margin protection initiative.

Financiers speculate AirAsia will push for discounts of up to 60 percent for the A321neo and two-thirds for the A330neo. Standard discounts are closer to 50 percent.

Depending on the negotiations, the amount of money that will be transferred on the first day alongside a new AirAsia contract may be small.

"This deal is worthless in terms of (in advance) financial exposure," said Reuters first source.

Additional coverage by Victoria Bryan, Anshuman Daga, Jamie Freed; Edited by Leslie Adler

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