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A unit of Singapore Airlines Ltd. on Friday announced an order for 54 Boeing Co. aircraft valued at US$4.9 billion. The deal marks the biggest single purchase in six years for regional unit SilkAir, which operates jets from Boeing rival Airbus.
The commitment includes 23 single-aisle 737-800 planes and 31 737 Max-8s, but the carrier has the option of switching to other variants of the aircraft if needed, Singapore Airlines said in a statement to the Singapore Exchange. The unit also has the option of increasing the order by 14 jets.
The capture of a long-time Airbus customer is a win for Boeing, which has spent the past years establishing its new 737 Max in the market.
Much of the strategy behind Boeing's and Airbus's efforts to put new fuel-efficient engines on existing aircraft is driven by securing a customer base. By changing only select parts on the aircraft, Airbus and Boeing are banking on the high costs of airlines switching between manufacturers delivering a secure market-share position.
But the battle to secure orders for the updated Boeing single-aisle 737 Max and the Airbus A320neo—a new engine option—has grown fierce. Allegations of "predatory" and "aggressive" pricing are flying between the plane makers, as the rivals fight to hold onto existing customers and try to steal clients from each other.
In the 18 months since the A320neo launch, Airbus has won more than 1,700 firm orders for it. In response to increasing sales, Boeing said it was pursuing a 737 with new engines in July 2011, launching the 737 Max officially in December with an order from Southwest Airlines Co. LUV +0.93%
Boeing has since secured 694 firm orders and commitments for more than 500 aircraft from airlines for the 737 Max. Boeing aims to convert many of those commitments to firm orders this year, including the SilkAir commitment announced earlier Friday.
Ray Conner, Boeing Commercial Airplanes chief executive, declined to reiterate a goal by his predecessor to win 50% of the single-aisle jet market against Airbus. Instead, Mr. Conner, the company's former sales chief, ratcheted up the rhetoric with a renewed push by the plane maker.
"I feel pressure all the time, we want to win," said Mr. Conner, during a roundtable last month in London. "Every order is a precious thing, and we want to win as many as we possibly can."
The new planes will enlarge and update SilkAir's fleet of 21 A320-family aircraft made by Airbus, a unit of European Aeronautic Defence & Space Co. EAD.FR -1.04%
Singapore Airlines is hoping regional carrier SilkAir and low-fare unit Scoot will help drive earnings growth, as Singapore's flagship carrier faces stiff competition in its own premium market. Singapore Airlines last month reported a net profit of 78 million Singapore dollars (US$63 million) for the April-to-June quarter, from a net loss in the previous quarter.
The company's Boeing order is its biggest single order since 2006, when it ordered 20 Airbus A350s and nine A380 superjumbos valued at US$7.5 billion. That year, the company also ordered 20 Boeing 787 jets valued at US$4.5 billion. Its last major order was last year, when it reported a deal to buy eight Boeing 777-300 ER jets valued at US$2.3 billion.
All prices are based on manufacturers' published list prices, but airlines typically get large discounts, and actual prices paid are rarely disclosed.
SilkAir will begin receiving the 737-800 single-aisle jets in 2014, with deliveries continuing into 2021, the statement said.
"We continue to see very strong growth within the region and these new aircraft will position SilkAir well. They will enable us to spread our wings to even more destinations and increase capacity on existing routes," said Mervin Tan, chief executive of SilkAir.
Mr. Tan said the decision to buy Boeing jets followed extensive negotiations with both Boeing and Airbus.
Shukor Yusof, an analyst at Standard & Poor's Equity Research, said the 737 is an efficient aircraft, and having such planes in its fleet will help SilkAir compete against Indonesian carriers Garuda Indonesia GIAA.JK 0.00% and Lion Air, which also use 737s in the region.
Separately, China Southern Airlines Co. ZNH -0.57% said its 51%-owned unit Xiamen Airlines Co. has agreed to buy 40 737 jets from Boeing at a combined list price of US$3.36 billion.