Air Canada Defers Bombardier CSeries Purchase

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By Esther Tanquintic-Misa | May 16, 2014 3:15 PM EST

Air Canada has suspended a planned purchase of Bombardier's CSeries and announced it will keep its 25 Embraer SA planes instead of replacing them with the new narrow-body aircraft.

The company said on Thursday the deferment is generally to avoid more capital expenditures and debt, noting the 90-seat Embraer aircraft are still relatively young anyway.

REUTERS
Air Canada aircraft pictured at Toronto Pearson International Airport. The airline's flight attendants have threatened to walk out, although Canada's Labour Minister said the government will block the strike.

"Given other priorities, we did not want to further increase capital expenditures nor debt levels," Mike Rousseau, Air Canada's chief financial officer, told analysts and investors on a conference call on Thursday, adding the Embraer E190 planes are well accepted by travellers on existing routes.

In December 2013, Air Canada placed an order for narrow-bodied 737s. This weekend it expects to start receiving the deliveries of wide-bodied Boeing 787 planes ordered nine years ago. Combined, the purchase acquisition totaled more than $10 billion.

"We are ready to move from a period of survival and transformation to a period of investment, profitable growth, and opportunity," Calin Rovinescu, chief executive officer, said on Thursday.

Air Canada, on the same day, disclosed a first-quarter net loss of $341 million, or $1.20 per diluted share, affected by a lower Canadian dollar.

Bombardier class B shares immediately fell 30 cents or 7 per cent to $3.90 on Thursday.

"It is disappointing as it could have been a good order and it would have been from a brand name airline," analyst David Tyerman told Globe and Mail. "Air Canada's decision is not a negative comment about the C Series aircraft, but it is disappointing from the order-book standpoint."

But Rovinescu hasn't exactly ruled out pushing through the purchase of Bombardier's CSeries.

"These 25 airplanes still have life to them, and we have determined to stay with that for the foreseeable future," he said. "Obviously, when they are closer to end of life . . . we can consider more our narrow body position, just not in the short term."

"The CSeries is a great airplane. It's a question of cost and benefit. It's as simple as that."

Marianella de la Barrera, a spokeswoman for Montreal-based Bombardier, said they would just wait when Air Canada will push its acquisition.

"We're just going to wait, and when they are ready to move forward, we will be there. The plane is well suited for the North American landscape. We are fairly optimistic that when the time is right, we will restart discussions."

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(Photo: REUTERS / Mark Blinch)
Air Canada aircraft pictured at Toronto Pearson International Airport. The airline's flight attendants have threatened to walk out, although Canada's Labour Minister said the government will block the strike.
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