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Airline Insider-Sept/Oct 03

Hot Competition for Air Canada Jets


October 1, 2007
By Brian Dunn

Topics


HOT COMPETITION FOR AIR CANADA JETS

Representatives
from Boeing, Bombardier, Airbus Industrie and Brazil's Embraer were
each in Montreal mid-September to pitch versions of their 70- to
110-seat jet aircraft to Air Canada. The airline estimates it will need
85 regional jets as part of a joint order for up to 200 aircraft with
STAR Alliance partners Lufthansa, SAS and Austrian Airlines. The
multibillion-dollar order is expected to be split between two
manufacturers, resulting in both Bombardier — a cab ride away from Air
Canada's Montreal headquarters — and Airbus putting pressure on
Canadian and European governments to make certain that homegrown
airlines do the right thing.

At first blush, that would put
Embraer and Boeing out of the running. But Boeing has a trump card of
its own as far as the Air Canada order is concerned, given that the
wings for the Boeing 717 are manufactured at the old McDonnell Douglas
plant in Toronto.

Air Canada will not be buying new airplanes
until it is lifted out of bankruptcy protection, although financing for
the next generation of regional jets is already in place. Boeing was
virtually left out of Air Canada's last fleet renewal when the airline
went almost exclusively with Airbus (at least 40 of those aircraft now
grounded and being returned to lessors). Given the size of the Air
Canada order compared with its European partners, the North American
airline is expected to carry the most influential stick, although not
big enough to counter the governments of the three European airlines
involved. This may be enough to scupper the idea of a costcutting,
leveraged buy, or splitting the order between a North American and
European manufacturer. Air Canada already operates a fleet of 50-seat
Bombardier RJs, and the 717's heritage can be traced back to the DC-9,
a recently retired but reliable workhorse of the Air Canada fleet since
the 1960s.

HOLE IN THE FAMILY
Is the 717 and proposed
200-seat 7E7 enough to keep Boeing competitive in the growing market
for regional and pointto- point jet aircraft, or is an acquisition in
the cards? "I don't know the answer to that," Al De Quetteville, Boeing
vice-president for Canada, told The Insider. "We are involved in an
arrangement with the Russian aerospace industry to develop a Russian
Regional Jet, but where that goes, I don't know."

Understandably,
De Quetteville was more forthcoming about the versatile 737. "It has
been a tremendous model," he said. "They are paving the way for the
point-to-point low-cost environment. Ask WestJet, they can't say enough
about their [series] 700 aircraft."

WestJet Airlines expects to
lower its operating costs even further later this year with the
addition of four more B737-700s, which use 30% less fuel than the B737-
200s they are replacing. During the second quarter, WestJet trimmed its
costs by 18% or 11 cents per available seat mile (ASM).

EXPANDED FOCUS FOR ZOOM
Ottawa-based
Zoom Airlines will team with Go Travel for direct-sell vacations from
Halifax and Ottawa to the Caribbean, Florida and Mexico to fill part of
the void still felt after the collapse of Canada 3000.

This past
summer the airline has concentrated largely on services to the UK from
Vancouver, Edmonton, Calgary, Toronto and Halifax, using a leased
ex-Air France B767-300ER. "It was a challenge at first because of SARS,
but the West was always strong," said Zoom CEO Chris Dolinki. "We're
looking to bring in additional aircraft next summer."


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