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WestJet to buy 65 Boeing 737 MAX aircraft

Aug. 29, 2013, Calgary - WestJet Airlines announced plans Thursday to further expand its
fleet with the purchase 65 Boeing 737 MAX aircraft, worth US$6.3 billion at current list prices.


August 29, 2013
By The Canadian Press

The airline said it has signed a letter of intent for 40 737 MAX 8s and 25 of the smaller 737 MAX 7s with an ability to upgrade the order to the larger 737 MAX 9 aircraft.

Deliveries of the new MAX aircraft are expected to start in September 2017 and continue for a decade.

"We are proud to continue our long-standing relationship with Boeing and are thrilled that we will be among the first North American airlines to fly the new 737 MAX in its first year of
commercial operation,'' stated CEO Gregg Saretsky.

The planes will have more fuel-efficient engines and a new interior design, including larger overhead bins.

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As part of the deal, WestJet plans to cancel the purchase of 15 737 aircraft it already has on order from Boeing that were to be delivered between December 2014 and 2018.

The purchase, once finalized, will bring the total number of planes the Calgary-based airline has on order from Boeing to 92.

Canada's second-largest domestic carrier said its fleet of 103 Boeing aircraft could ultimately range between 120 and 162 as older models come off lease and some planes are sold.

"This pending order reinforces our strategy of maintaining the flexibility in our fleet plan while enabling us to introduce new fuel-efficient technology and enhance our inflight guest
experience,'' Saretsky added.

The company expects the order will double its capital expenditures to between $210 million and $220 million in the third quarter, and raise full-year spending to between $690 million and $710 million. However, the planned substitution of the 15 planes would reduce capital spending between 2014 and 2017.

Boeing has about 1,500 firm orders for the new 737 MAX planes, including five North American airlines.

Analyst Walter Spracklin of RBC Capital Markets said the order gives WestJet some breathing room to develop its Encore regional service by deferring the delivery of 15 planes while still allowing it to increase its fleet size as conditions warrant.

He said flexibility is the main driver behind the order, not capacity growth. While the order is large, the airline will not receive its first 737 MAX until 2017 and the delivery schedule is
spread over a decade.

Spracklin noted WestJet has more than 30 older aircraft coming off lease and it plans to sell 10 planes in 2014 and 2015. Capacity growth is also expected to be lower between 2014 and 2017 than previously anticipated.

"Accordingly, we view this order as agnostic on demand, and instead allows the company flexibility across a more efficient fleet,'' he wrote in a report.