AC Chooses Boeing

[Kip Powick]

ACE Aviation Holdings Inc., the parent company of Air Canada, and Boeing today announced a wide-body fleet renewal plan for the airline that includes up to 36 Boeing 777s and up to 60 Boeing 787 Dreamliners. Air Canada will use the airplanes to modernize its existing fleet and improve operating efficiencies, creating one of the world’s youngest and most simplified airline fleets.

The wide-body renewal plan includes firm orders for 18 Boeing 777s, plus purchase rights for 18 more, in a yet-to-be-determined mix of the 777 family’s newest models: the 777-300ER, the 777-200LR Worldliner (the longest range airplane in the world), and the newly announced 777 Freighter. Air Canada’s 777 deliveries are scheduled to begin next year with the arrival of three 777-300ERs in 2006. The carrier’s first 777-300ERs will operate its Vancouver-Tokyo service.

The renewal plan also includes firm orders for 14 ultra-efficient new Boeing 787 Dreamliners, plus options and purchase rights for an additional 46 airplanes. Air Canada’s first 787 is scheduled for delivery in 2010.

“Our decision to modernize our fleet with the 777 and 787 Dreamliner will move Air Canada into a clear leadership position among North American international carriers with the world’s two newest and most efficient twin-engine, long-haul airplanes,” said Robert Milton, Chairman, President and CEO of ACE Aviation Holdings. “No other carrier in North America is in a position to order the latest and most capable variants of the 777, the 200LR, and the 300ER and also the 787. The superior customer comfort and operating economics of these aircraft will put us in the company of the leading European, Middle East and Asia Pacific carriers.

“Our analysis of these aircraft pointed to overwhelmingly attractive economics. We have estimated the fuel burn and maintenance cost savings alone on the 787 to be approximately 30 per cent versus the 767s they will replace. Particularly important in the current high fuel price environment is that the savings on these two line items alone will be more than twice the incremental ownership costs in acquiring these aircraft. Our only disappointment is that Boeing will not be able to deliver us our first 787 aircraft until 2010.

“The agreement with Boeing is very attractive financially as the operating cost of the 777 and 787 will be significantly less than our current airplanes they will replace, the acquisition costs will be spread over several years, and the asset values of the aircraft we will replace and sell are significant. As we are planning to dispose of more than 60 wide-bodies over the next decade, the net cash outlay for acquisition of these new aircraft is expected to be greatly reduced. The average age of the Boeing 767s to be replaced will be approximately 22 years.”

The order is subject to several conditions including final documentation. The companies expect to finalize the agreement by mid-year.

Boeing Commercial Airplanes President and CEO, Alan Mulally, noted the significance of the timing of the Air Canada order. “The timing of Air Canada’s decision is critical for locking in rapidly disappearing early delivery positions for the 787, which is essentially sold out through 2010,” said Mulally. “Air Canada also has secured three of the very few remaining near-term delivery slots for the 777.”

The 777 and 787 are uniquely suited to meet Air Canada’s current route structure and growth plans, which include long-range, non-stop routes for both passengers and cargo, with an increasing emphasis on growing markets in Latin America and China. Operating in the same fleet, the 777 and 787 will allow Air Canada to tailor capacity to seasonal demand with two aircraft types that fly the same speed and range yet offer different seating capacities.

“The new aircraft improves Air Canada’s ability to manage its capacity more in line with the dynamic marketplace by giving it a constant stream of efficient aircraft guaranteeing its ability to take advantage of growth opportunities, such as China, or through retirement of older aircraft, shrink its capacity while improving the mix of extremely fuel efficient aircraft,” said Montie Brewer, President and CEO of Air Canada.

“The success of the new Asia and Latin America routes introduced over the past year point to further international expansion as key to increasing shareholder value,” said Brewer. “This new equipment will permit us to lock in and expand our market penetration in an area which is already yielding very positive economic returns. This, coupled with the flexibility negotiated both in terms of delivery and financial options, should assure that we are at the forefront of North American carriers in terms of the profitability of international operations.”

The delivery of three 777s in 2006 will allow Air Canada to implement its recently announced expansion of services to China using existing wide-body aircraft. Air Canada will introduce daily Toronto-Shanghai non-stop service in summer 2006 and will increase flights to daily service between Toronto and Beijing. Daily Vancouver-Guangzhou non-stop service is planned to begin summer 2007. From its main Toronto hub, Air Canada also expects to start Toronto-Guangzhou cargo service in 2007 and plans to eventually add Tianjin to its freight operations. The expansion of passenger and freight services to China has been made possible by the new bilateral air agreement between Canada and China.

From its main hub in Toronto, Air Canada currently operates non-stop flights to Hong Kong, Tokyo, Seoul and Delhi. From its Asia Pacific gateway in Vancouver, Canada’s flag carrier serves Hong Kong, Shanghai, Beijing, Tokyo, Osaka, Nagoya and Seoul with daily non-stop flights.

“We are proud to be a part of Air Canada’s plans for future growth and look forward to supporting the airline fully as it begins to incorporate our 777s and 787s into its fleet,” said Boeing Commercial Airplanes President and CEO, Alan Mulally.

The Boeing 777 family of airplanes is the world's most advanced, and continues to evolve with the recent addition of the world's longest range airliner, the 777-200LR Worldliner, and the Boeing 777 Freighter.

The Boeing 787 Dreamliner is being designed with airlines, passengers, investors and the environment in mind. The technologically advanced airplane will use 20 per cent less fuel than today’s airplanes of comparable size, provide customers with up to 45 per cent more cargo revenue capacity, and present passengers with innovations including a new interior environment with higher humidity, wider seats and aisles, larger windows, and other conveniences.

The 787 is a family of airplanes in the 200- to 300-seat class that will carry passengers on routes between 3,500 and 8,500 nautical miles (6,500 to 16,000 kilometers). The 787 will fly at Mach 0.85, as fast as today’s fastest commercial airplanes, while using much less fuel. Production of the Dreamliner will begin in 2006. First flight is expected in 2007, with certification, delivery and entry into service in 2008.

Montreal-based Air Canada provides scheduled and charter air transportation for passengers and cargo to more than 150 destinations on five continents. Canada's flag carrier is the 14th largest commercial airline in the world and serves more than 29 million customers annually. Air Canada is a founding member of Star Alliance providing the world's most comprehensive air transportation network.

[Kip Powick]

Must be a couple of ex Mil drivers in this pic...still they are a little loose !!!!

787 / 777

VERY short video here787 video

[Lazionic]

Woohoo good news!!! I cant wait to see them here. Anyone know how much the deal is worth?

[Cargo Agent]

and the newly announced 777 Freighter

WOOOOHOOOOOOO !!!!!!!!!!

Sorry, couldn't resist. I think this order is great news for all of us.

[Lazionic]

Anyone know how much the deal is worth?

http://www.boeing.com/news/releases/2005/q2/nr_050425h.html

I ve found my answer to my question...

The firm orders are valued at approximately $6 billion at list prices. The order is subject to several conditions including final documentation. The companies expect to finalize the agreement by mid year.

[Dropzone]

And for my next prediction......

[exGXer]

I see ACPA has not given their approval for this order, so I would not put too much faith in the press release as they are too busy disputing the 8 RJ's that Milton wants to place in the Jazz fleet.

[Dropzone]

I see ACPA has not given their approval for this order, so I would not put too much faith in the press release as they are too busy disputing the 8 RJ's that Milton wants to place in the Jazz fleet.

Irrelevant.

[Guest]

I hope I do not wake up to find out this is all a dream!

In the mean time, Bring on the Boeings.

I have worked the 777 on contract carriers, great aircraft!

[Guest rattler]

I see ACPA has not given their approval for this order, so I would not put too much faith in the press release as they are too busy disputing the 8 RJ's that Milton wants to place in the Jazz fleet.

Why should ACPA have any say re the purchase of aircraft other than pay scale or duty time?

[Lazionic]

Robert Miltons message....

Hello, it’s Monday, April 25th and this is Robert.

Early this morning, ACE took a huge step into the future with the announcement of our selection of the Boeing 777 and Boeing 787 to renew and modernize our widebody fleet

This aircraft order fulfills a key element of our business plan to ensure the right aircraft in every market that we serve and is important not only for the employees of Air Canada but for the employees of all the companies that make up the ACE Group.

This aircraft order places our company at the forefront of the industry creating one of the youngest and most simplified airline fleets in the world and puts us in the clear lead among North American airlines where no other carrier is currently in a position to acquire the latest and most capable variants of the 777 – the 200LR, the 300ER – or also the 200 LRF, the new triple seven freighter. And also, we’re in a position to acquire the new, revolutionary 787 Dreamliner. With the superior comfort and operating economics of these aircraft, Air Canada will be in a class unto itself, in the company of the leading airlines of Europe, the Middle East and Asia.

This order also comes at a time of a major new development in our international route plans.

Just last week, we announced our intention to significantly grow our services to China as a result of the recently negotiated bilateral Air Services Agreement which will permit a major increase in air services between both countries.

These plans will require an additional three aircraft by the summer of 2006. The delivery of the first Boeing 777 next summer, which we will deploy on our Vancouver-Narita route, will allow us to reallocate aircraft to launch our new daily Toronto-Shanghai non-stop service in 2006.

During a period of near record high fuel prices, the new Boeing aircraft will also deliver significant cost savings and operational efficiencies. The fuel burn and maintenance costs of the 787 Dreamliner, for example, are approximately 30% lower than the 767s that they will replace -- twice the incremental ownership costs of acquiring these new aircraft.

These are indeed exciting times to be part of the ACE Group of Companies. With these new aircraft as well as the new Embraer and Bombardier small jets which start to arrive in just a few weeks, we are building an airline which will offer customers an unparalleled level of comfort and service and our company new tools to compete in the marketplace.

This is not just a significant investment in new aircraft, it is also a significant investment in your future and the future of our company.

Thank you for calling and I’ll talk to you again soon.

[Mitch Cronin]

I see ACPA has not given their approval for this order, so I would not put too much faith in the press release

eh..hem.... Yes, I see the IAM has not given their approval for this order either...

LIKE THAT MEANS SQUAT! ...Shall we carry this line of thought on into the beyond the-looking-glass level of absurdity?

The airline decided it's going to get some new airplanes. You don't really think they need the pilots "approval" to do that, do you?

....which one of you would say, "Nope, I'm not flying that brand new airplane."?

Bring on the Boeings! YeeeeHaaaw!!!!

[Homerun]

It may just happen Mitch. It depends on what pay rate AC wants for them. You can bet that management will be offering a lowball rate.

[Dropzone]

It may just happen Mitch.  It depends on what pay rate AC wants for them.  You can bet that management will be offering a lowball rate.

You are probably right. Recent history suggests they'll charge us at least $59.50 for each hour of solo.

[AME]

This is great news for ACTS YVR as they were recently named as the heavy "Boeing Base" (except the 37s which as being sent to YWG)

[Mitch Cronin]

"Offering"?? I thought you folks had a contract that spelled out wages based on weight of the beast, no?

So you keep mum and when the birds show up you get what your deal says... and there'd be no "or else", 'cause with that contract, and the birds sitting on the ground waiting to fly, the company will have no choice but to swallow it. ...which they already know. So sure, maybe they'll "offer" some chicken feed... try to lowball you, but if the formula already exists, they knew what they'd have to pay when they agreed to get the machines, which means they're prepared to pay it.

[Vsplat]

Mitch, I love your sense of humour.

My bet is that the Board was told the pilot rates before they approved the purchase. My next bet is that the rate they were told was the B767 rate.

Unless Monte is capable of a fundamental cultural shift, this will go exactly the opposite of how you describe. The company will set up for the aircraft, put out the bids, etc, etc and then play bait-and-switch with the pay rates and let the union consume itself.

In any pilot group there are those who will take pennies to fly the new machine, even pushing to make the machine less attractive to senior pilots, so they can improve their own lot. So it is in Canada. And the track record shows that Milton knows it and has used this knowledge very effectively to date.

We'll see

Vs

[MCDU]

Previous discussion suggested that this order would completely replace the widebody Airbus fleet, but I don't see that here.... If that premise holds true, are we looking at the end of 4-engine aircraft at AC?

[Dropzone]

And the track record shows that Milton knows it and has used this knowledge very effectively to date.

I would dispute that "effectively". If he considers himself a winner when it comes to relations with employees and just how much he can exploit them, then he is in denial of the consequences of that tact.

[dagger]

Previous discussion suggested that this order would completely replace the widebody Airbus fleet, but I don't see that here.... If that premise holds true, are we looking at the end of 4-engine aircraft at AC?

The number of orders and options make that likely. Only the timing is an issue. There are 18 firm 777s coming - roughly the number of Airbus widebodies. There are options for another 18 777s. As things stand, the 333s will be last to go, giving AC the possibility of operating 26 large widebodies just with the 18 firm 777s. But ultimately, the 333s will go.

[Super 80]

I don't know if you can really make that prediction before we see an actual breakdown of the 777 models being ordered. Although the lessors might be pretty keen on getting them back on the market.

...but someone is sure getting fired in Toulouse.

[Homerun]

Mitch, if only it was that simple. For new equipment, the contract says the 2 sides will meet to determine a pay rate, etc. That in isolation might not be so bad. However, with the primary determinate of pay rate being weight, and several variants of 777, all with different MTOW, not to mention the release says the 787 will be flown as a common type with it's own MTOW, it gets complicated pretty quick. With the 340's, we fly the -500 at the -300 rate despite it being about 40% heavier. That was one of the concessions given up in order to introduce the airplane into the fleet.

We know that AC will propose that the lowest 777 weight be used, perhaps even 767 rates, as they will argue it's a replacement. The 767-300's were introduced before a rate was established, and it was years until a proper pay rate was agreed to. That mistake will not be repeated, the aircraft won't move until there is a pay rate. The time for concessions is long gone, and if management expects that the pilot group will subsidize the purchase of these aircraft with a reduced rate of pay, they are sadly mistaken.

Standby for the fireworks.

[Jumpy]

The time for concessions is long gone, and if management expects that the pilot group will subsidize the purchase of these aircraft with a reduced rate of pay, they are sadly mistaken.

Standby for the fireworks.

So Dagger, do you still stand by the argument that Air Canada's costs won't escelate in the coming years. All you have to do is to look at a comment like that and realize that not much has changed through CCAA, new paint and Celine Dion.

[moeman]

I love that mentality. Something like:

"Despite the fact that this purchase will do much to ensure that I have a lengthy career with the company making tremendous amounts of money and will give myself and my family (not to mention the thousands of others who count on ACE for their livelihood) a secure and wealthy lifestyle, I will put a gun to the company's head until I either kill it quickly or get my way and kill it slowly because I'm a pilot and I'm bigger and more important than any of that."

Sounds like some hockey players we've all read about of late.

[Guest Skirt]

Hey Moeman,

It's no worse then your mentality:

"These pilots make too damn much, so even though the new planes will fly heavier, farther, faster and carry more people than the ones they are replacing, the pilots should fly them for less money, because they don't deserve it. They are just overpaid, whining cry babies anyway. Why can't thay take another pay cut on top of the already 20-30% they took last year. I mean come on, it's not like what they do is work anyway..." blah, blah, blah.

I have the utmost respect for what other people do for a living, and except for the CEO's who take home an obscene amount of money, I don't begrudge anyone else for doing well for themselves. I say, good for them. The question is, why can't you?

John.

Oh and BTW you stated "a secure and wealthy lifestyle". Listen chico, I have to put my job on the line every 6 months (sim) and again every year (medical) until I retire. Nice and secure! And wealthy lifestyle. I've been at this flying thing since I was 17 (18 years ago) and I'm making the same now compared to what I was making almost 10 years ago (if you factor in inflation, it is actually less), and I now have a family to look after. Sorry, your argument doesn't wash here buddy!!!