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Malaysia Airlines to sign $1.8b Boeing deal

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Malaysia Airlines has been transforming its operations as it recovers from two tragedies in 2014. Reuters

KUALA LUMPUR (Reuters) – Malaysia Airlines will announce a deal to buy eight wide-body Boeing 787 jets during the visit of Prime Minister Najib Razak to the United States, two industry sources said yesterday.

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The deal, worth more than $1.8 billion at list prices, is expected to be one of the announcements that will be made after Mr Najib meets with US President Donald Trump today, the sources said.

The United States was Malaysia’s third-largest trading partner in 2016. The meeting with Mr Trump is critical for Mr Najib, who is looking to raise his standing globally, and in Malaysia, where he is expected to call general elections in the coming months.

An international graft probe by the United States and several other nations into state fund 1Malaysia Development Berhad (1MDB) has hurt Mr Najib’s popularity. With the US visit, Mr Najib is hoping to put the 1MDB scandal behind him.

Mr Najib is scheduled to witness a memorandum of understanding signing ceremony between Malaysia Airlines and Boeing, according to a schedule of the prime minister’s events in Washington reported by Malaysian media outlets.

The two sources said Malaysia Airlines considered buying Airbus A330neos before settling on the 787 order. Aircraft manufacturers typically give discounts to list prices.

Malaysia Airlines said it would not comment on reports that are speculative in nature. Boeing and Airbus declined to comment. The sources did not want to be named because the discussions were private.

Brendan Sobie, chief analyst at independent aviation research firm CAPA Centre for Aviation, said the timing of the order alongside Mr Najib’s visit raised concerns of potential political influence over the purchase.

“This has happened before with Malaysia Airlines – and other airlines in this region for that matter –where the government has decided to buy an airplane that wasn’t really required,” Singapore-based Mr Sobie said. “I think in this case the 787 is required anyway. But now that it is a political thing there are questions.”

Malaysia Airlines has been transforming its operations under two consecutive non-Malaysian bosses as it recovers from two tragedies in 2014, when flight MH370 disappeared in what remains a mystery and flight MH17 was shot down over eastern Ukraine. The carrier is targeting a return to profit next year.

Malaysia Airlines chief executive Peter Bellew said in June the carrier was in early negotiations with Airbus and Boeing for the purchase of 35 to 40 new long-range jets.

CAPA analyst Mr Sobie said the airline needed wide-bodies for growth, as well as to replace ageing A330 aircraft over the next several years, making eight aircraft a smaller than expected order.

In the eight months ended August 31, Boeing announced 426 net orders compared to 215 at Airbus.

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