Malaysia Airlines orders Boeing 737 MAX jets in $5.5 billion deal

Malaysia Airlines said on Wednesday it had ordered 50 Boeing (BA.N) 737 MAX jets, with firm orders for 25 and rights to purchase 25 more.

Deliveries will begin in 2019 and the deal is worth $5.5 billion at list prices, the full-service carrier said in a statement.

Airlines typically receive a discount off the list prices.

The 737 Max is the re-engined and upgraded variant of Boeing’s popular narrowbody model.

The new planes will cut operating costs and their longer range will allow the airline to fly to more destinations, Chief Executive Peter Bellew said in a statement.

This is the first major decision by the ailing carrier since Bellew took over from former chief executive Christoph Mueller on July 1.

The new planes will replace some of the airline’s 56 Boeing 737-800s, which have an average age of 4.1 years according to airfleets.net. Malaysia Airlines has been struggling since the disappearance of flight MH370 and shooting down of flight MH17 over eastern Ukraine, both in 2014.

The national carrier was taken private by state-fund Khazanah Nasional Bhd [KHAZA.UL] following the twin disasters as part of a restructuring plan, which included a shrinking of its network. Since then, the airline has canceled all non-stop flights to Europe except those to London and ended several low-yield Asia-Pacific services.

Bellew told reporters the airline was aiming to tap capital markets by March 2019, adding that he was confident it would break even in 2018.

He said with the new planes, costs would go down by 40 percent and operating expenses would drop by 15 percent.

MAS has retired its long-haul Boeing 777s and signed an agreement to lease four Airbus A350s, which have lower operating costs, from 2018.

Its focus, however, is on the Asian market and narrowbody planes like the 737, which are used on short-haul routes of up to five hours, will help with that.

“Malaysia Airlines is now on a path to growth across the ASEAN region,” Bellew said, referring to the 10-member Association of South East Asian Nations.

“This new aircraft order will set the stage for our continued recovery and success into the next decade.”

Source: Reuters