Mexico budget airline orders 52 Airbus A320s worth $5.1 bln

By Tomas Sarmiento and Tim Hepher

MEXICO CITY/PARIS, Oct (KOSDAQ: 039200.KQ - news) 21 (Reuters) - Mexican budget airline VivaAerobus has ordered 52 Airbus A320-family jets from Airbus (Paris: NL0000235190 - news) , the European planemaker said on Monday, in a record-breaking deal worth $5.1 billion.

The order includes 40 A320neo jets, said Rafael Alonso, Airbus executive vice president for Latin America and the Caribbean. The 40 A320neo planes have a combined list price of $4 billion.

Airbus said the deal was the biggest ever order for its aircraft by a single airline in Latin America. News that VivaAerobus would place a large order with Airbus was reported first by Reuters in June.

Airbus said VivaAerobus, which has been using Boeing aircraft, has also ordered 12 A320ceo, with a combined catalog price of $1.1 billion.

The defection of VivaAerobus to a new supplier follows a bitter struggle between Airbus and Boeing (NYSE: BA - news) as the Mexican low-cost airline becomes the latest to compare the newest fuel-saving models offered by both planemakers.

The first plane will be delivered in April 2014 and the last in 2021, VivaAerobus Chief Executive Juan Carlos Zuazua told a news conference. The airline said it has an option to buy another 40 Airbus A320neo planes in the future.

Zuazua said the "optimum mix" would be to split the total order between 60 percent purchased planes and 40 percent leased. He said the financing has not yet been finalized.

Many airlines reduce the cost burden of new aircraft on their balance sheets by selling newly purchased planes to third parties and then renting them back, an operation known as a sale-and-leaseback.

Shares in Airbus parent EADS closed down nearly 2 percent on Monday.

VIVAAEROBUS SEES GROWING MARKET SHARE

Monterrey-based VivaAerobus launched in 2006 and is a venture of Mexican transport company Grupo IAMSA and the family behind the Irish low-cost airline Ryanair.

Zuazua said he hoped VivaAerobus could command between 20 and 25 percent of Mexican passenger traffic by 2021, up from around 13 percent at present.

"We are competing mainly with the road transport industry; we are migrating passengers who today travel by bus" onto planes, Zuazua said.

Roberto Alcantara, chairman of VivaAerobus, declined to comment when asked about reports that the airline is considering an initial public offering.

VivaAerobus said a decision on the engines that will power its A320s would be made within a month. Industry sources have said the engine deal could go to United Technologies (NYSE: UTX - news) ' Pratt & Whitney unit, which competes with the CFM International joint venture of General Electric (Other OTC: GEAPP - news) and France's Safran .

The arrival of a new generation of jet engines boasting double-digit percentage gains in fuel efficiency prompted both Airbus and Boeing to revamp their medium-haul, narrow-body models and triggered a worldwide battle for market share.

Airbus also signed deals with local airlines Interjet and Volaris over the past couple of years, and now has orders to deliver 145 aircraft to Mexican carriers, Airbus' Alonso said.

VivaAerobus, whose existing fleet comprises 19 Boeing 737-300 aircraft, operates 51 routes in Mexico and two to the United States, according to the company.

VivaAerobus currently has just 1 percent of the market for international flights.