Canadian Manufacturing

Air Canada inks deal with Boeing for 109 passenger jets worth $6.5B

Deal for Boeing 737 MAX aircraft will replace aging fleet of existing Airbus narrowbody passenger jets



MONTREAL—Air Canada announced it has placed an order with Boeing Co. for as many as 109 of the airplane maker’s 737 MAX aircraft worth as much as a reported US$6.5-billion.

The Canadian airline said it will phase in the new aircraft over four years as it looks to replace its existing narrowbody fleet of Airbus passenger jets.

“Renewal of our North American narrowbody fleet with more fuel efficient aircraft is a key element of our ongoing cost transformation program and the enhanced passenger cabin comfort provided by the Boeing MAX will help us to retain Air Canada’s competitive position,” Air Canada president and CEO Calin Rovinescu said in a statement.

According to Air Canada, the deal with Boeing includes firm orders for 61 aircraft—33 737 MAX 8 and 28 737 MAX 9 aircraft—and options for 18 more and rights to purchase an additional 30.

The deal also includes substitution rights between them for Boeing’s 737 MAX 7 aircraft.

“Our narrowbody fleet renewal program is expected to yield significant cost savings,” Rovinescu said. “We have estimated that the projected fuel burn and maintenance cost savings on a per seat basis of greater than 20 per cent will generate an estimated CASM (cost per available seat miles) reduction of approximately 10 per cent as compared to our existing narrowbody fleet.”

Deliveries are scheduled to begin with two aircraft in 2017, 16 aircraft in 2018, 18 aircraft in 2019, 16 aircraft in 2020 and 9 aircraft in 2021.

Air Canada said it is also looking at the potential replacement of its Embraer E190 fleet with larger, more cost efficient narrowbody aircraft, and the agreement with Boeing allows the Chicago-based aircraft manufacturer to purchase up to 20 of the 45 Embraer E190 aircraft currently in Air Canada’s fleet.

The E190 aircraft exiting the fleet would initially be replaced with leased aircraft until the airline takes delivery of the Boeing 737 MAX aircraft.

The company will be reviewing various options over the next six months for the remaining 25 Embraer E190 aircraft including continuing to operate them or replacing them with a yet to be determined number of aircraft in the 100 to 150 seat range.

The purchase order with Boeing is part of Air Canada’s larger plan for its total fleet, including the new Air Canada rouge, to grow from 192 aircraft as at Sept. 30, 2013, to approximately 214 by the end of 2019.

Air Canada also has 13 options and rights to purchase 10 Boeing 787 aircraft, and rights to purchase 13 Boeing 777 aircraft.

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