Boeing's Big Deal Anticipates Southeast Asian Travel Boom

Aerospace manufacturer Boeing Co. (BA) announced its biggest commercial order ever last week, a deal so big that President Barack Obama turned up in Bali to watch the formal signing ceremony. It’s all good news for the US: Indonesia’s Lion Air is buying 201 Boeing 737 MAX jets and 29 of its 737-900ERs. List price is $21.7 billion, though the airline might have gotten a volume discount. It means 110,000 new jobs for Americans. And Lion Air has an option to buy 150 more jets for $14 billion more.

The deal dwarfed a simultaneous announcement by General Electric (GE) of a $1.3 billion sale of CFM56 jet engines to Garuda Airlines of Indonesia. Manufacture of the fuel-efficient engines, made by a joint venture of GE and French manufacturer Snecma, will employ about 5,000 people in Ohio and North Carolina.

Which raises the question: Where are all these Indonesians going? Well, there are 240 million of them, spread across more than 900 inhabited islands. Air travel is one of Indonesia's many rapidly growing industries. The number of air travelers jumped 22% in 2010, to 53 million, and this year’s number is expected to continue that trajectory.

But Lion Air, one of a couple dozen airlines in Indonesia, is looking further ahead, to 2015, to a policy change that is known in Southeast Asia as “open skies.”

The change was decided by the Association of South East Asian Nations, or ASEAN, which since its 2003 creation has mostly smoothed over political quarrels among its 10 member nations. Unofficially, it also is “The Coalition Against Chinese Hegemony,” as The Wall Street Journal put it in an editorial.

But now the association is turning increasingly toward economic cooperation. A key piece is its creation of the “open skies” policy, due to take effect in 2015. The change will lift regional flying restrictions on passenger and cargo flights, now a tangled mass of agreements between each nation.

The intention is to boost travel, trade, and tourism throughout the region. And Tiger Air’s intention is to capture 30% of the business that Indonesia gets out of it, an executive told The Jakarta Globe.

American companies like Boeing want a piece of that pie, too. The company expects demand for 11,450 planes in the Asia-Pacific region over the next 20 years, more than any other region in the world. At least in Indonesia, it just won a big one over its rival, European manufacturer Airbus.

Source - minyanville