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December 06, 2013

Sources: Air Canada Appears Close to Buying up to 60 Jets

by Reuters

Air Canada appears close to deciding whether to buy up to 60 new narrowbody jets from Airbus or Boeing Co., a decision that could settle which of the giant plane makers wins their annual order race, industry sources said.

The Canadian flag carrier has said it is looking to renew its fleet of single-aisle aircraft, which currently includes more than 50 Airbus A320 and A321 jets, as well as 45 Embraer 190 planes.

Chief Executive Calin Rovinescu had previously said he hopes a decision will be made by the end of the year, noting the decision would involve more than 100 airplanes.

A spokesman for Air Canada said no decision had been made, but two people familiar with the matter said a decision could come as early as next week when the airline's board meets.

The airline spokesman declined to comment on the timing of any board discussions.

“We typically don't talk about board meetings,” said Air Canada spokesman Peter Fitzpatrick, who also declined to comment on the board's agenda. “I can tell you on the record that no decision has been made.”

Industry sources said Air Canada was expected to address its fleet renewal needs in two phases, starting with a decision on whether to stick with Airbus for medium-haul jets, and pick its revamped A320neo version, or switch to the Boeing 737 MAX.

Both plane makers claim their latest medium-haul offerings provide better fuel savings and easier maintenance.

The airline is expected to opt for 30 or more jets immediately by placing firm orders and place options for up to another 30 as insurance against a faster than expected upturn in the economy, the sources said, asking not to be identified.

Such a deal would be worth up to $6 billion if all the options were exercised.

Airbus and Boeing both declined to comment.

The decision is subject to delay or changes in volume but if approved, would mark the climax to a bruising and widely watched campaign between the world's dominant plane makers.

Airbus was ahead of its U.S. rival in the number of orders in the first 11 months of the year, but the race for the 2013 order crown looks finely balanced once recent deals that have yet to make it into the order books are added to the tally.

The sources denied an industry report that Airbus had already been selected for the deal.

Boeing, which dominates Air Canada's fleet of wide-body jets, is trying to overturn Airbus as incumbent operator for medium-haul planes at Air Canada.

A win for Boeing in its home region would mark a rebound in the region after Airbus displaced it at Mexican low-cost airline VivaAerobus in a fierce contest earlier this year.

However, analysts say airlines do not frequently make the switch between different jets because of the costs of re-training and accommodating new spare parts.

Air Canada could place additional orders for the slightly smaller Embraer jets at a later date and is expected to compare the new, domestically produced Bombardier CSeries with the Embraer E2 family.

RBC analyst Walter Spracklin said in a client note on Friday that Air Canada could potentially put in an order for 30 CSeries planes.

Prospective airlines have been holding off making firm order decisions on the CSeries, which started flight tests in September, until Bombardier releases flight data.

“A full performance data set could be two to three months away,” said Spracklin.