Air Canada appears close to buying up to 60 jets: sources

Fri Dec 6, 2013 5:48pm EST

Air Canada aircraft are seen at Toronto Pearson International Airport, September 20, 2011. REUTERS/Mark Blinch

Air Canada aircraft are seen at Toronto Pearson International Airport, September 20, 2011.

Credit: Reuters/Mark Blinch

(Reuters) - Air Canada (ACb.TO) appears close to deciding whether to buy up to 60 new narrowbody jets from Airbus EAD.PA or Boeing Co (BA.N), 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 includes more than 50 Airbus A320 and A321 jets, as well as 45 Embraer 190 planes.

Chief Executive Calin Rovinescu had previously said he hoped 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 say 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.

Boeing shares closed up 1.8 percent at $135.18, while shares of the European planemaker finished marginally higher at 50.08 euros.

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 (BA.N), which dominates Air Canada's fleet of wide-body jets, is trying to overturn Airbus EAD.PA 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 category of jets at a later date and is expected to compare the brand-new, domestically produced Bombardier (BBDb.TO) CSeries with the Embraer (EMBR3.SA) 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 on its first plane in September, until Bombardier releases flight data.

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

A Bombardier spokesman confirmed the second test plane, the FTV2, is expected to begin flying within a couple of weeks, and the FTV3 expected to follow a few weeks after.

The schedule for entry-into-service, currently planned for an ambitious 12-months from first flight, will be revisited once Bombardier has gathered enough data from the first three test planes, the company said.

Bombardier shares closed up nearly 2 percent at C$4.69, while Embraer shares ended 1.1 percent higher, at 17.40 Brazilian reais.

(Editing by Bob Burgdorfer and Tim Dobbyn)

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