May 26 (Bloomberg) -- PT Lion Mentari Airline, Indonesia's biggest budget carrier, said it will spend $3.9 billion to purchase 60 new aircraft from Boeing Co. to fly to new destinations in Thailand and India.

Lion Air said it will buy Boeing's 737-800 and 737-900 aircraft, according to Spokesman Hasyim Arsal Alhabsyi. The airline will sign today the purchase agreement with Boeing, the Chicago-based company said in a statement. Indonesian President Susilo Bambang Yudhoyono will participate in the announcement in Washington.

The Jakarta-based airline is expanding to compete with PT Garuda Indonesia in a nation of 238 million people served by about 10 domestic carriers. Lion Air, which competes with nine other low-fare carriers in Southeast Asia, is taking advantage of an expanding economy and an Indonesian government's edict to limit overseas budget carriers from flying in four major cities.

Indonesia's $258 billion economy, Southeast Asia's largest, is forecast to expand as much as 6.2 percent this year, the fastest pace in nine years. Lion Air will have a total of about 85 planes after the purchase allowing it to start regional routes to Bangkok, cities in India and Australia.

``Economic growth and airline deregulation in Asia translate directly to richer people and easy access to flying,'' said Richard Aboulafia, an analyst at the Teal Group, a Fairfax- Virginia-based consulting company.

The carrier flies to 50 cities in Indonesia and three overseas, it said on its Web site. The company plans to replace some of its 38 aircraft. Most of the planes are MD-80s. Lion Air has focused on the region's growing number of first-time travelers since it began flying in June 2000, it said.

The Indonesian transport ministry said in March that new landing right applications by overseas budget carriers for Jakarta, Medan, Surabaya and Denpasar will be rejected to protect its airlines.

Airbus Offer
The list price of a 737, depending on which of four models, ranges from $44 million to $74 million. The price range doesn't include discounts usually given to airline customers for large orders. Boeing's 737-900, the most expensive version, seats 177 passengers in two classes. The aircraft is the world's most widely flown commercial airplane.

Amanda Landers, a spokeswoman for Boeing, declined to comment about details of the order.

Lion Air was expected to decide on as many as 60 Boeing 737s or Airbus SAS A320s planes as a replacement for its fleet of MD- 80 aircraft, Joseph Nadol, an analyst at J.P. Morgan Securities Inc., wrote in a May 23 report.

The airline opened competition for the orders after Airbus SAS submitted a counteroffer to an agreement reached earlier this year with Boeing, J.P. Morgan's Nodal said. He has an ``underweight'' rating on Boeing.

Trade Deficit
Shares of Boeing, which was surpassed by Airbus in 2003 as the top commercial plane maker, fell 80 cents to $61.45 in New York Stock Exchange composite trading yesterday. The stock has risen 37 percent in the past year.

Indonesian economic ministers plan to sign a memorandum of understanding between Boeing and the airline at U.S. Chamber of Commerce, the department said in statement.

``The trade deficit issue with the U.S. is a political hot potato,'' said Aboulafia, ``A lot of the countries involved are doing a big part to make sure they show that they are buying U.S. goods.''

To contact the reporters on this story:
James Gunsalus in Princeton at jgunsalus@bloomberg.net
Last Updated: May 26, 2005 00:03 EDT