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Air Canada places 6 5bn Boeing order

Article By: ,  Financial Analyst
December 12, 2013 4:15 PM

Air Canada has confirmed it has placed an order for dozens of new Boeing aircraft in a deal worth billions of pounds.

The airline has ordered 61 of the manufacturer's MAX planes in a sale worth $6.5 billion (£4.2 billion) at list prices.

Stocks in Boeing rose in after-hours trading on the Nasdaq today (December 12th) after news of the massive order of planes from Air Canada broke.

Air Canada explained that it will use the new planes to replace its current fleet of Airbus narrow-body aircraft, with fuel and maintenance costs expected to be cut by 20 per cent on a per-seat basis as a result of the investment in the new aircraft.

"Renewal of our North American narrow-body fleet with more fuel efficient aircraft is a key element of our ongoing cost transformation programme," Calin Rovinescu, chief executive of Air Canada, said in a statement.

Airbus and Boeing rivalry

Airbus's A320 and Boeing's 737 aircraft are the clear market leaders in the field at the present time, so losing out on the order to Boeing is sure to be a blow for the former company.

As well as the initial order of 61 737 MAX planes, Air Canada has the options and rights to purchase 48 additional Boeing planes should it desire to.

In after-hours trading today, the share price of Boeing is up by 0.14 per cent, while stocks in Airbus owner EADS were up by even more at 13:59 GMT on the Paris Stock Exchange, rising by 0.81 per cent.

The International Air Transport Association has announced today that it has made an upward revision to its industry financial outlook. The body is now expecting airlines to return a global net profit of $12.9 billion, which is expected to improve to a net profit of $19.7 billion in 2014.

Tony Tyler, the organisation's director-general and chief executive, said: "We must temper our optimism with an appropriate dose of caution. It’s a tough environment in which to run an airline. Competition is intense and yields are deteriorating."

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