WestJet entered (26-Sep-2013) into a definitive purchase agreement with Boeing for 25 737 MAX 7 and 40 737 MAX 8 aircraft, valued at USD6.3 billion at list prices. The aircraft will be powered by CFM International LEAP-1B engines, with delivery scheduled to commence in 2017. The order was previously announced on 29-Aug-2013 as a letter of intent to purchase, and includes substitution rights to the 737 MAX 9. The carrier will substitute 15 existing 737 orders scheduled for delivery between Dec-2014 and Dec-2018. WestJet will receive four 737 MAX aircraft in 2017, eight in 2018, 12 in 2019, six in 2020 and the remainder between 2021 and 2027. WestJet president and CEO Gregg Saretsky said: "We are pleased to announce the finalisation of the MAX purchase agreement and look forward to being among the first North American airlines to fly the 737 MAX in 2017. The increased fuel efficiency and enhanced in-cabin amenities provided by the Boeing 737 MAX will contribute to both lower operating costs and a remarkable inflight guest experience which is supportive of our low-cost business model and combined with our lease renewal options, maintains our fleet plan flexibility going forward." Boeing Commercial Airplanes VP of North American sales Brad McMullen said: "The 737 MAX is an excellent complement to the WestJet fleet and its low-cost business model. The airplane's efficiency, reliability and passenger amenities will enable WestJet to continue to provide its customers high-quality service at a low cost." [more - original PR - WestJet] [more - original PR - Boeing]
WestJet announces definitive purchase agreement for 65 737 MAX aircraft
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Canada’s government paves the way for ULCCs Enerjet and Jetlines to jump into the marketplace
Two of Canada’s aspiring ultra-low cost airlines made a major breakthrough in Nov-2016 after they were granted exemptions from foreign ownerships restrictions, which allow foreign entities to hold up to 49% of Enerjet and Jetlines. Now Enerjet has taken on some heft by partnering with the global ultra-low cost airline investor Indigo Partners, which was instrumental in Spirit Airlines’ ULCC transition and now owns the ULCC Frontier Airlines. Another new Canadian ULCC, NewLeaf Travel, boasts former Spirit Airlines CEO as chairman of the board.
It is tough to predict how those influential backers will affect the outcome of efforts by the new crop of ULCCs to successfully execute the model in Canada. Although Canada is one of the few mature aviation markets without a true ultra-low cost competitor, the nuances of the Canadian domestic market could create challenges for the long-term viability of NewLeaf, Enerjet and Jetlines in the marketplace.
Jetlines and Enerjet, operating as FlyToo, aim to debut in Canada’s market during 2017. Unsurprisingly the country’s two airlines Air Canada and WestJet plan to compete vigorously with the start-ups, with WestJet vowing to defend its franchise and match the fares of its new competitors.
Air Canada Part 2: Financial progress makes investment grade metrics more tangible
A decade ago it would have been unheard of for Air Canada to contemplate reaching an investment grade credit rating. The airline had emerged from bankruptcy protection, but was still struggling financially. It would teeter on the verge of another formal restructuring before setting out on a course to restructure its financial foundation – a process that has allowed the airline to improve its balance sheet and leverage.
Air Canada’s leverage targets for YE2018 will not meet the general proxy for an investment grade rating; however, its lower capital commitments and debt refinancing could create an opportunity for achieving that status beyond 2018.
Attaining an investment grade credit rating likely remains a longer term goal for Air Canada as its major financial goals in the short term remain paying down debt that is creeping up due to a fleet renewal, as well as funding growth to drive long-term shareholder value. More meaningful shareholder returns will likely occur once the company reaches what it deems as acceptable progress in debt management, and reaches a certain maturity level in growing its international network.
This is Part 2 in a two part series on Air Canada. Part 1 dealt with long haul LCC subsidiary, rouge.