AC discusses their future plane purchases among other things

Discussion in 'Air Canada | Aeroplan' started by guinnessxyz, Dec 28, 2012.  |  Print Topic

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  2. tcook052
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    tcook052 Silver Member

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  3. Stephan

    Stephan Silver Member

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    It is nice to see them being optimistic about future purchases, but let's throw in a good measure of reality:

    - Any new single-aisle deliveries probably wouldn’t come until the end of this decade, Smith said.
    - It’s going to elevate the capital expenditures and further increase the debt... There will be some time before they see the benefits of these aircraft.
    - Costs for each seat flown a mile, an industry benchmark, have been North America’s highest, ...
    - Analysts project a 2012 adjusted loss of 20 Canadian cents a share, the average of 11 estimates in a Bloomberg survey.
    - Liabilities totaled $13.3-billion as of Sept. 30. The amount includes current liabilities of $3.4-billion, long-term debt and finance leases of $3.6-billion, and $5.3-billion in pension liabilities.
     
  4. Focus on the negative as you will but, in a good stock market the pension deficit could disappear and that number will be cut in half w/o any contribution by AC because of acturial appraisals that are forthcoming. Accounting rules force the full disclosure of debt at a given point and does not reflect any future changes that are due.

    The article also went on to state that 2013 will see them profitable but for the last two years they have been cash flow positive and have significantly grown their cash reserves. Of course you don't dig that deeply into stuff you obviously don't understand since it would reduce your ability to be as falsely negative as you are.

    Its obvious you speak out of both sides of your mouth when it comes to AC. One post you say there is not enough competition and in others you speculate that AC should or may not survive.
     
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  5. tomh009
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    tomh009 Gold Member

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    There are few delivery slots available from either Airbus (A320 neo) or Boeing (737 MAX) until near the end of the decade, so I agree with that prediction. Current A320 or 737 versions make no sense for AC, so the only option for AC to get aircraft significantly sooner would be the CSeries from Bombardier, and even there we'd probably be looking at 2017 deliveries.
     
  6. Stephan

    Stephan Silver Member

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    Is the C series really in the running? Well, I guess by the time they are actually buying it will be and they have JT to sell it;) . I suspect there will be government incentives to buy local? Seems like the neo would be a good fit with respect to the compatibility or is it a total redesign?
     
  7. AC will most likely start to retrofit the cabins of existing one aisle planes in the next year or so that will carry them until the new planes arrive. Their curent long haul 763's are on their 3rd retrofit if I recall correctly.
     
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  8. tomh009
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    tomh009 Gold Member

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    Like the name says, the neo is basically a "new engine option"; from a compatibility point of view it would be a win. The big question is what size planes AC will buy/lease: the CSeries is the most effective option for the 100-150 seat range, the neo and the MAX come into their own around 200 seats.

    All countries (US, Canada, Brazil, EU) will offer (export) financing within the WTO rules, I don't think Bombardier will have a big advantage in that regard.
     
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  9. Stephan

    Stephan Silver Member

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    Given the recent shift by AC back to widebody Boeing products it will be interesting to see if this continues with single aisle aircraft purchases if/when they happen.
     
  10. AC has, historically, bought from US plane makers except for the Airbus adventure forced on them by the crooked Tories of the Mulroney era. The AB300 series mostly replaced DC9's, LH 1011's, B707's,B747's and B737's if I recall correctly. Having bought both 787's and 777's and sticking with Boeing will make it easier to switch pilots around. I would think the remaining 6 333's are a PITA pilot wise.
     
  11. tomh009
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    tomh009 Gold Member

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    Before the A320 was introduced, there really were no credible narrow-body options from non-US aircraft manufacturers.

    787 and 777 do have cockpit commonality, but that doesn't extend to the 737 (whether NG or MAX). So the wide-body and narrow-body decisions really are quite separate.
     
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  12. The Boeing decision will be made on the basis of fleet size from a given manufacturer, Boeing in this case, and the volume discounts AC can wrench out of them. I am unsure of your comment about non commonality between the 777/787 and new generation 737's. I think I heard something different but I'm not 100% positive.
     
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  13. tomh009
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    tomh009 Gold Member

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    As there is little commercial value in an all-Boeing fleet (assuming the retirement of the remaining E-jets) I fully expect the AC decision will come down to cold, hard math: acquisition cost (or more likely leasing cost -- and all manufacturers will discount heavily for a substantial order), fuel consumption and operation costs (CSeries will have the advantage here as an all-new design, but by how much), projected fuel costs, and availability (2019-2020 at the earliest for the 737 MAX and A320 neo, given their order backlogs). I really don't think brand loyalty will come into play here.

    The 737 MAX will have (and needs to have!) cockpit commonality with the 737 NG, thus it can't have the 777/787 cockpit.
     
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  14. canucklehead
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    canucklehead Gold Member

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    To add to the discussion of future plane purchases, AC has been using Airbii (and some Embraers) in their narrowbody fleet, with the A321s joining in 2001, so they are relatively young still. No Boeings (or even BBD's CS) amongst the lot, so if they do pick some up, it will be a mixed fleet.

    The rouge-ificaiton of A319s and 767s would suggest that AC may not be heading towards a one-airliner company, rather what fits their needs best.
     
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  15. tomh009
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    tomh009 Gold Member

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    Agree on that conclusion. And one key question is the size of aircraft they want to purchase: look at these (approximate!) seat counts in two-class configuration:
    • CS100: 100
    • CS300: 120
    • 737-8: 162
    • 737-9: 180
    • A320: 150
    • A321: 185
    (Not including 737-7 MAX and A319 neo as those are no competitive from an operation cost point of view, as is borne out by the fact that not a single airline has placed an order for either aircraft so far.)

    If AC does go with either Airbus or Boeing, the current A320s/A321s will be about 20 years old when replaced, as the deliveries surely would not be completed before 2021. And the question will still be how to replace the remaining E90s and A319s.

    The only thing I know for certain about the future AC aircraft is that nothing is for certain!
     
  16. E series and AB319's are all going to rouge or regional. Ac has always been of the mindset that a one of fleet would better serve their needs. Deliveries and political decisions have impaired that in the past but I see a single mindednest with this management that might actually bring this along.
     
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  17. tomh009
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    tomh009 Gold Member

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    I think the A319s will be sold when the time comes: they are the least efficient aircraft in the fleet. The E-jets may continue to serve AC Express and/or Rouge for a while longer yet, though.

    There is really no concrete benefit as such from having Boeing wide-body and Boeing narrow-body (or both Airbus, for that matter); the two choices can be made independently. I'm sure a savings of $100M per year (just to pull a number out of the hat) will beat any opportunity to be a poster boy with an all-Boeing fleet: the AC management team will choose the aircraft with the greatest financial benefit.

    The one place where commonality can benefit is engines. See the current fleet:
    • AC 777: GE90
    • AC 787: GEnx
    • AC A320: CFM56 (CFM is a GE-SNECMA joint venture)
    • AC E-Jets:GE CF-34
    And the choices for new narrow-body engines:
    • A320neo: CFM Leap-1A or PW1000G
    • 737 MAX: CFM Leap-1B
    • CSeries: PW1000G
    So from that point of view, either A320neo or 737 MAX would allow AC to continue with GE/CFM engines. Although the P&W geared turbofan engine is reputed to be the most efficient option ...

    In the end, it's no simple decision. And as you refer to deliveries, that will be a big constraint for both Airbus and Boeing, as they have 1600+ and 1000+ firm orders already, with entry into service dates in 2015 and 2017, respectively.
     
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  18. One might look at the LH fleet to see where their mainline has been heading. With the exception of their apparent love of 747's and a few 737's left over from the early 90's they have focused on AB for the most part.
    http://konzern.lufthansa.com/en/fleet.html
    Of course having around 40 747's gives them the efficiency of scale needed to keep those beasts flying..They have a few newer 737's used by one of their subsidiaries.

    Then look at UA and their fleet. The only AB's are some now older 319's and 320's and newer purchases have seen the 737 get much more prominent.
    https://sites.google.com/site/unitedfleetsite/home
     
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  19. PhotoJim

    PhotoJim Silver Member

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    I would tend to expect Lufthansa to favour Airbus and United to favour Boeing, given where the aircraft manufacturers are based compared to the airlines. If I recall, some of Airbus' assembly is done in Germany (final assembly is in France).

    As for Air Canada, neither Boeing nor Airbus has a real advantage over one another, but Bombardier sure has an inherent advantage over Embraer in the regional jet category. That having been said, Air Canada obviously bought some Embraers when the product was clearly better than what Bombardier was selling. The C jets will shake things up a bit more.
     
  20. canucklehead
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    canucklehead Gold Member

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    United has an order for 25 A350-900s. There was some scuttle a few months back that they may upgrade the order to A350-1000s to replace their 747s.
     
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  21. tomh009
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    UA desperately needs a 747-400 replacement -- those babies are old and tired, and use fuel like there is no tomorrow. The A350-1000 is a bit smaller, but close, and would keep commonality with the A350-900 rather than introducing the 747-8I into the mix. (And the A380 is probably just too much plane for UA.)

    LH still flies lots of 737s and is really the only major airline to order the 747-8I. UA also has more than 150 A319s and A320s in the fleet. And AA split their 2011 mega-order between Airbus and Boeing, probably to secure earlier deliveries than if the had given the entire order to a single manufacturer.
     
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  22. LETTERBOY
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    The only way I can see UA ordering the A380 is if they're desperate to get more pax into a slot-controlled airport like LHR, but even then it would still be a stretch. An airline like UA, with several different hubs, is different from BA or AF, with one. UA isn't feeding all of it's pax through, or to, one airport. You can make a better case for UA ordering the 747-8, since they're already familiar with 747 operations, but if they haven't ordered it by now, I don't know that we should hold our breath waiting for it. OTOH, Boeing could offer them a deal that's too good to turn down.

    KE and CA have each ordered 5, according to Wikipedia.
     
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  23. tomh009
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    tomh009 Gold Member

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    This kind of thing does happen in the aircraft business from time to time!

    Yes, they have. I did count them as "second tier" as they are substantially smaller: KE has ~150 aircraft and CA about 290, compared to LH group's ~600 and UA's ~700. Anyway, 747-8 orders consist of 19 for LH, 5 for KE, 5 for CA and 2 for W3. That's a total of only 31 excluding VIPs and cargo versions, making future resale potential somewhat iffy.
     
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  24. The Lev
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    The Lev Silver Member

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    Many of the A320's are already 20 years old (average age of AC's 320 fleet is currently 19.6 years), so they'll be up to 30 years old by 2021. Mind you AC flew DC9's that were 30 years old.
    http://www.airfleets.net/ageflotte/Air Canada.htm
     
  25. The Lev
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    The Lev Silver Member

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    • Air Canada never flew B707's - they flew DC8's.
    • AC wasn't ever really a B737 airline - they inherited a bunch from Canadian but AC flew DC9's and B727's for short hauls.
    • AC's fleet currently includes 8 A330's not 6. I'd suggest to you they are not "PITAS" - they fill the very large gap between the ~210 passengers of the 763 and the ~350 passengers on the 77W. The A333 has much lower operating costs than a 772 (although it lacks range for longer routes) - that's why Airbus is sellnig tons of these while Boeing sells almost none..
    • Notwithstanding the possible corruption and political interference, AC made the right decision in buying the A320. Keep in mind that the choice at the time was between the 737-300 and the A320. The NG was not available at the time. The 320 was a far more efficient aircraft than the 737-300 (as is pretty obvious if you look at how most mainline airlines are retiring older generation 737's or keeping them on very short haul routes only - LH comes to mind). In addition, as the "launch" North American major, AC received a sweetheart deal from Airbus on the purchase.
    • While the decision to buy A320's can maybe be pinned on Mulroney and the "crooked Tories", that does not explain the purchase of the A321, A330 and A340 which were all purchased by a privatized AC.
     
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