UPDATE 2-Air Canada to buy up to 109 Boeing 737 MAX planes

Wed Dec 11, 2013 6:28pm EST

By Tim Hepher and Susan Taylor

Dec 11 (Reuters) - Air Canada said on Wednesday it will purchase up to 109 of Boeing Co's 737 MAX under its narrow-body fleet renewal plan, a major win for the aircraft maker and significant shift in supplier for Canada's largest carrier.

The agreement, which includes 61 firm orders, will replace Air Canada's existing mainline fleet of Airbus narrow-body aircraft, the carrier said, confirming an earlier Reuters report.

The deal marks a substantial competitive victory for Boeing over Airbus and a rebound on its home turf after Airbus displaced it at low-cost Mexican airline VivaAerobus in a fierce contest earlier this year.

Boeing said once finalized, the firm order for the 61 737 MAX aircraft is expected to be worth $6.5 billion at list prices.

Aircraft are typically sold below the list price, especially when manufacturers are trying to persuade an airline to switch suppliers. But major plane makers also have the firepower to cut attractive deals when necessary on their best-selling aircraft and still make money.

The deal includes commitments, options and rights on another 48 planes as well as an agreement for Boeing to purchase up to 20 of Air Canada's fleet of 45 Embraer E190 aircraft.

Montreal-based Air Canada's mainline fleet of single-aisle aircraft includes 41 Airbus A320, 35 A319 and 10 A321 jets, according to its website, leaving only a handful of Airbus planes once completed.

"This is a generational decision. This is the plane that your grandchildren will be flying on," said Chris Murray, analyst at AltaCorp Capital. "It's a strong vote of confidence in the 737 MAX."

Airlines rarely switch between different aircraft suppliers due to the high costs associated with training, maintenance and parts.

The decision marks the climax to a bruising and widely watched campaign between the world's dominant plane makers.

Airbus had more orders than its U.S. rival for the first 11 months of the year, but it is difficult to say who will dominate the 2013 order book as recent deals could sway the balance.

Air Canada said it will be reviewing its options for the next six months for the remaining 25 Embraer E190 planes. Industry analysts have said those could be replaced by the brand-new, domestically produced Bombardier CSeries or Embraer E2 family.

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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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