Long before AirAsia made a record-breaking $23.1 billion purchase of engines and services from CFM International, the owners of the once-struggling airline had big plans to develop a low-cost carrier.
After acquiring the Malaysian government-backed airline for one ringgit (about 25 U.S. cents), co-founder Tony Fernandes sought the help of aircraft leasing company GE Capital Aviation Services (GECAS) to refinance debt on its planes and engines. He and his team had to convince GE to take the risk. “One day if I’m bad, you just repossess two airplanes. If I make this model work … one day we may buy 1,000 engines off you,” said Fernandes, who is now the CEO of AirAsia Group, as he retold the story.
Nearly 20 years later, the airline achieved more than he or any analyst expected. AirAsia has now purchased over 1,000 CFM56 and LEAP engines, becoming the largest LEAP-1A customer of CFM, a 50-50 joint venture between GE and France’s Safran Aircraft Engines. “GE has been a very big part of our success,” Fernandes said.
With the tagline “Now Everyone Can Fly,” AirAsia offers fares to more than 140 destinations across the Asia Pacific region and is Airbus’ largest customer and one of the world’s largest operators of the Airbus A320.
Turning around a struggling airline wouldn’t be the only challenge Fernandes and team would overcome. AirAsia started serving passengers in 2001 following the Sept. 11 terrorist attacks in the United States that saw global air travel decline. SARS would make people afraid to travel again after it was first reported in 2003. “When we’re doing great, it’s easy to be a partner. When we’re not doing so great, that’s when you can tell the difference between a good partner and a partner that just likes you when things are going well. GE has been there through the good and the bad,” Fernandes said.
It was AirAsia’s turn to take a bet on CFM when the LEAP engine was introduced. LEAP engine sales were struggling until AirAsia placed an initial order of 400 LEAP-1A engines to power the A320neo aircraft in June 2011. As one of the LEAP engine’s first customers, the vote of confidence spurred more airlines to confirm orders.
The newest $23.1 billion deal celebrated at June’s Paris Air Show is the industry’s single largest deal-by-value ever. It includes 200 new LEAP-1A engines and an expanded 20-year rate-per-flight-hour (RPFH) agreement to encompass AirAsia’s entire fleet of 808 LEAP-1A engines.
GE Aviation has focused on nurturing the partnership over the years. “Even when there were no commercial deals, we were with the AirAsia team brainstorming on how we can help them, showcasing the reliability of our engines, solving technical and operational issues as a true partner,” said Vijay Singh, former regional general manager for Southeast Asia and now business process owner for effective customer service for GE Aviation.
“AirAsia always thought of us as part of their team and that helped us understand their needs better, partnering in solving their challenges and developing creative solutions to meet their needs. Both the AirAsia team and the CFM customer team: Supporting them has been a big part of this success,” Singh said.