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AirCanada Delays delivery of 11 737 Max Aircraft.

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Air Canada delays delivery of 11 737 Max aircraft

  • 30 April, 2018
  • SOURCE: Flight Dashboard
  • BY: Jon Hemmerdinger
  • Boston

Air Canada has shifted its Boeing 737 Max delivery schedule, delaying some deliveries up to three years as it evaluates other aspects of its fleet, including performance of the Bombardier CSeries.

But while it will delay 11 737 deliveries, the Montreal-based carrier has shifted five 737 Max deliveries forward one year, to 2020, executives said during Air Canada's earnings call on 30 April.

"We concluded an amendment to [our] Boeing 737 purchase agreement where certain aircraft are accelerated and other are deferred," Air Canada chief financial officer Michael Rousseau says during the call.changed an expectation for the airline to have 36 737 Max in the fleet by the end of 2019.

Asked about why Air Canada made the shift, chief executive Calin Rovinescu says it ensures the company brings 737s on board when it needs the capacity.

But he cites other "moving parts", including Air Canada's fleet of 25 Embraer 190s and an order for 45 CS300s.

Air Canada will begin divesting E190s this year, and it intends to receive CS300s between late 2019 and 2022.

"When we made the 737 order we didn't know exactly what we were doing with exiting the 190s… We didn't have, at that stage, the CSeries orders," he says.

"We will also wait and see how the CSeries performs," Rovinescu adds.

He also hints at possible further orders, noting that Air Canada holds options on both 737s and CS300s.

"These changes give us maximum flexibility to bring the 737s Max in a time when we can use them most effectively," he says. "We don’t want to be inundated with aircraft at times when we can't use them, and we don't want to be short of aircraft."

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Well done.  Delay taking that old technology, get confirmation the "C" is better and get more of them!

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Lots of Mom and Apple Pie statements from Calin.

The journalists will just eat that up.

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Unless the contract changes, it’s 100% the C-series gets operated by AC. (There is flexibility where some could be Rouge)

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The c-series will be a game changer. It is that simple.

I wonder what will happen if AC wants to eventually shrink the actual 737 MAX firm order commitment? Cancellation penalties? The MAX is certainly in demand at existing 737 operators. Boeing may even be able to sell those slots for more that the AC contracted price.

And AC can always bundle up MAX cancellations with incremental 787 orders.

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14 hours ago, seeker said:

Well done.  Delay taking that old technology, get confirmation the "C" is better and get more of them!

I don't think you can consider these interchangeable narrow-body aircraft.  I think the C-Series will be a great aircraft and there are many routes it will do well on, but that 'old technology' will hold a seat cost advantage the C-Series will not be able to match making it the superior aircraft on many routes.

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The most compelling argument for the CSeries generally is fuel efficiency. In the recent era of very low fuel prices, that advantage was largely negated. Now, with crude prices rising and the potential for some sort of confrontation between the US and Iran rising which would take crude up even higher, that advantage is being magnified. I've even seen a forecast (admittedly from a hedge fund that would benefit) of crude rising to $300 a barrel. Almost everyone finds that absurd, but not a price like $100. The higher crude rises, the more expensive jet fuel becomes, the better for the CSeries. The greater percentage of block hour cost fuel becomes, and the more it pushes up block hour costs, the better for the CSeries, and if it rises enough, it could even make a CS300 a better option than a 737 max on some routes, and certainly better than any older technology aircraft. It might also tempt Airbus to launch a CS500 derivative, even with the overlap with the A32x-NEO family. 

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AC firm orders for CS300 far exceed E190 replacement numbers. AC got the CS300’s for a song. Every one will likely be delivered even if it comes at the expense of the MAX firm orders.

Long term future of the MAX might be Rouge with AC adding NEO’s at the mainline to replace them.

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These oil prices aren't going to stick, this is just Saudi Arabia pulling a pump and dump for the Aramco IPO. Infrastructure bottlenecks that limit the movement of oil from West Texas are also going to ease beginning in about a year when Kinder Morgan completes their new Corpus Christi pipeline.

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The data I have shows the fuel burn per seat on a MAX 8 is lower than on a CS300, so an increase in fuel will actually help a MAX 8, let alone a -9 or -10, unless again the aircraft is being used for lower demand route and a MAX is not the right aircraft for the mission in the first place. Agree though, vs. older equipment it will provide an advantage.

I saw a guy speak back in the summer of  2014 that predicted the drop in oil when it was sitting at around $100.  Saw him again this past summer and he thinks we'll hit $90-$100 again due to the shortage of investment in oil overall, but long term we'll settle in around $60 with the US (and Middle East) ability to turn on the taps and then increase advancements in battery technology potentially tampering demand.  Won't claim to be an expert in any of these areas, but it seemed quite reasonable to me. 

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The current message from our advisors is growing US production through 2022 is going to make it very difficult for WTI to hold ground above $60 even if OPEC and Russia can maintain their discipline.

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The problem isn't only in crude, it's refining capacity, which nobody is adding. Higher prices have tempered demand for gasoline, even with crude rising. Hidden in the rising US crude production numbers is an increase in liquids like propane. Gasoline is averaging about $2.80 a gallon in the US, up from a bottom last year of $2.20.

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1 hour ago, spreadsheet said:

The data I have shows the fuel burn per seat on a MAX 8 is lower than on a CS300, so an increase in fuel will actually help a MAX 8, let alone a -9 or -10, unless again the aircraft is being used for lower demand route and a MAX is not the right aircraft for the mission in the first place. Agree though, vs. older equipment it will provide an advantage.

I saw a guy speak back in the summer of  2014 that predicted the drop in oil when it was sitting at around $100.  Saw him again this past summer and he thinks we'll hit $90-$100 again due to the shortage of investment in oil overall, but long term we'll settle in around $60 with the US (and Middle East) ability to turn on the taps and then increase advancements in battery technology potentially tampering demand.  Won't claim to be an expert in any of these areas, but it seemed quite reasonable to me. 

The question is whether higher fuel prices push up air fares, in which case demand is impacted, and in some cases, the CS300 is more likely to be the plane that is full.

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17 minutes ago, dagger said:

The problem isn't only in crude, it's refining capacity, which nobody is adding. Higher prices have tempered demand for gasoline, even with crude rising. Hidden in the rising US crude production numbers is an increase in liquids like propane. Gasoline is averaging about $2.80 a gallon in the US, up from a bottom last year of $2.20.

Half a dozen refineries have opened in the US in just the last couple of years and two new enormous ones are planned for Texas.

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Two New Oil Refineries Planned for Texas: The Biggest in 40 Years

 May 10 2017
 Daniel Debelius

For the first time in 40 years, major oil refineries are being planned for construction in the United States.  MMEX Resources and Raven Petroleumboth have plans for new refineries to go online in 2019 in Texas, near the Permian Basin and Eagle Ford Shale, respectively.  Oil refinery construction in the United States is a rare occurrence; only 14 smaller facilities were built in the past 40 years, so this construction indicates significant growth in the US oil and gas economy.

Texas Rebound

While many of the oilfields in the US are still feeling the effects of the crude oil price collapse that began in 2014, Texas has weathered the storm, particularly the Permian Basin.  Touted for its geology and plentiful reserves, the Permian Basin has garnered tens of billions dollars in land investments since the summer of 2016.   According to Jason Carnovale, an oil and gas analyst with the Freedonia Group, “The Permian Basin is occupying the most oil rigs and drilling the most wells in the United States.  Activity has been surprisingly robust even with oil prices hovering around $50 per barrel.”  The products from these wells need massive amounts of infrastructure, both midstream and downstream, to transport and refine them prior to their end-use.  The new refineries are a clear sign that companies are investing long term in Texas oil and gas.

Increased Demand from Mexico

Beyond the incentive of proximity to supply -- the refineries are being planned near two of the most active plays in the US -- there is new demand for gasoline from Texas’s neighbor to the south, Mexico.  Mexico’s automotive market has experienced strong growth in recent years and that trend is expected to continue going forward, increasing the need for more gasoline and refined products.  However, earlier this year, the Mexican government began rolling back regulations that subsidize gasoline and diesel sold to Mexican consumers, causing a 20% increase in prices.  While this may have a limiting effect on demand, the new refineries in Texas are being constructed with the intention of exporting the refined products they produce to Mexico.

Environmentally Friendly Refinery

While an oil refinery is not usually associated with being green, Raven Petroleum’s facility is being touted for its environmentally friendly footprint.  The company is taking a multifaceted approach, ensuring it will cause little effect to the surrounding community and decreasing its overall environmental impact.  The facility will use geothermal power to provide energy, carbon capture technology to clean its exhaust, and a desalination plant to process water.  Additionally, the company boasts that it has purchased an excessively large acreage of land to buffer it from the environment and surrounding community.

For More Information

Although these refineries will not be completed until 2019, Texas has already experienced a great deal of significant activity in recent months, and it is unlikely to slow anytime soon.  For more information on drilling in the state of Texas and the Permian Basin, check out The Freedonia Group’s industry study Texas Oil & Gas Drilling Outlook, which offers https://www.freedoniagroup.com/Content/Blog/2017/05/10/Two-New-Oil-Refineries-Planned-for-Texas-The-Biggest-in-40-Years

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20 hours ago, Super 80 said:

Half a dozen refineries have opened in the US in just the last couple of years and two new enormous ones are planned for Texas.

Those new Texas refineries won't be open for many years yet. And demand growth since 2009 is beginning to outstrip the availability of refined products. Also, US Gulf refineries are shipping some refined product offshore because prices overseas are even higher.

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