Air Canada Fleet: Extending the A330’s life as MAX 8 performance delivers

Summary

• Air Canada is using cash to purchase some of its Boeing 737 MAX 8 deliveries scheduled for 2018.
• The airline is opting to hang onto unencumbered Airbus A330s and refurbish those jets for trans-Atlantic service from Montreal.
• Air Canada has been satisfied with the 737 MAX 8 in the early days of the aircraft's operations.

Air Canada says it could purchase additional aircraft with cash in the future
From a fleet perspective, Air Canada's focus for the next couple of years is a restructuring of its narrowbody fleet as the 737 MAX 8 jets replace older Airbus narrowbodies.
The narrowbody fleet restructuring follows a years-long widebody fleet revamp that has centred on Boeing 777 and 787 twin aisle jets.
Air Canada recently altered its 737 MAX purchase agreement to accelerate deliveries of five aircraft by one year, to 2020, and the deferral of 11 jets by up to 36 months.
During 2Q2018 Air Canada expects to take delivery of six 737 MAX narrowbodies and two 787s. The two widebodies and three of the six narrowbodies have been financed under private offerings of Enhanced Equipment Trust Certificates (EETC). "And given the high level of cash on our books, we plan to purchase the other three remaining 737s with cash in the second quarter, and may purchase additional aircraft with cash in 2018", Air Canada CFO Michael Rousseau recently stated. As of 31-Mar-2018, Air Canada's cash and short term investments totalled approximately CAD4.5 billion (USD3.4 billion).

Air Canada Group Fleet Summary*

Source: CAPA Fleet Database

Air Canada opts to refurbish A330s instead of ordering additional 787s
As it works to add younger and more fuel efficient narrowbody jets to its fleet, Air Canada has decided to invest CAD275 million (USD209 million) in its A330s, eight of which are owned and fully unencumbered. The airline also plans to lease an additional four A330s, with delivery scheduled in 2019. Those final four A330s are slated to replace the capacity of older Boeing 767s exiting the airline's fleet.
Air Canada has decided to invest in reconfiguring its A330s to align the interiors with its 777s and 787s. The company selected ST Aerospace to perform the interior reconfigurations of the A330s, which are scheduled to begin in late 2019, with completions targeted for 1H2020.
Executives from the airline recently explained that the company had evaluated exercising options for additional 787s versus an investment in A330 refurbishment, and refurbishing the older aircraft proved to be the better business case. "We are not always going to lean towards spending the capital on brand new airplanes", Air Canada CEO Calin Rovinescu recently stated. "We'll have a business analysis to sort of say what the best approach is to it."

Air Canada Group Fleet Summary*

Source: CAPA Fleet Database

The average age of Air Canada's A330s is 17.8 years, versus 22.8 for its 767s. Additionally, the eight A330s currently in Air Canada's fleet are fully owned and unencumbered, which was obviously factored into the business case for holding on to the aircraft and spending close to the equivalent cost of one widebody to refurbish eight jets.
Air Canada's total number of unencumbered aircraft is jumping from 56 at YE2017 to 89 at YE2018.
The airline has outlined the mission for its reconfigured A330s, stating that the aircraft will be based in Montreal, "where we have a shorter stage length across the Atlantic and a performance and cost profile [that] fit [the A330s] perfectly", said Air Canada president passenger airlines Benjamin Smith. He remarked that is the reason Air Canada has decided to keep its A330s, and why it has opted to lease additional widebodies of the type.

The Boeing 737 MAX 8 appears to meet Air Canada's expectations
Obviously Air Canada's major fleet focus at the moment is the incorporation of the Boeing 737 MAX 8. As of late May-2018, the airline has 13 of the jets in service.
The aircraft's entry into service at Air Canada appears to have progressed reasonably well. "There have been some delays around engines, which always complicates matters, whenever you bring in a new fleet...so that slowed us a little bit", Mr Rovinescu stated. Air Canada's 737 MAX 8s are powered by CFM56 LEAP 1B engines.
Air Canada has previously calculated that the 737 MAX 8 would represent an 11% CASM improvement over its existing current generation Airbus A320s, and Mr Smith said that the new narrowbody's CASM was "in line or better to what we are expecting".

Air Canada's latest moves show fleet science is constantly evolving
Similarly to so many large global full service airlines, Air Canada is making small adjustments to its fleet even as its fleet composition is largely settled for the foreseeable future. Air Canada's decision to use the A330s on specific missions rather than place an order for new widebodies reflects its position that placing orders for new aircraft is not always the best decision for producing certain returns.
Air Canada also probably did not want to alter its cash position drastically with the purchase of new widebodies while it works to fund the acquisition of narrowbodies with its cash balances. The rejigging of its 737 MAX 8 deliveries also reflects the constant analysis of fleets that larger airlines conduct in order to deploy new aircraft in the most efficient manner to generate the best returns.
Fleet management is a science that is constantly evolving!