FireFox Posted November 18, 2020 Share Posted November 18, 2020 https://seekingalpha.com/article/4389893-air-canada-shrinks-30 Air Canada Shrinks 30% Nov. 18, 2020 9:30 AM ET About: Air Canada (ACDVF), Includes: BA, BDRAF, BDRBF, BDRPF, BDRXF, BOMBF, EADSF, EADSY, ERJ Dhierin Bechai The Aerospace Forum In-depth insights from an expert on the aerospace and airline industries (12,097 followers) Summary Air Canada will shrink by as much as 30%. The net change excluding future deliveries is -26%. Airline gets rid of older less efficient aircraft previously used as the backbone of low-cost carrier Air Canada Rouge. Cutting the fleet for a new future does make sense, but retirements and deliveries need to be timed well. I do much more than just articles at The Aerospace Forum: Members get access to model portfolios, regular updates, a chat room, and more. Get started today » Update 11/18/2020: A previous version of this report incorrectly tabulated Embraer 170 aircraft instead of Embraer 175 aircraft. This has been fixed and net change percentages have been added to Figure 1 and Figure 2. A year ago, I was working with some subscribers on improving the data driven side of The Aerospace Forum. Next to readers being interested in strong analysis, we have a strong core of readers that say "Well, I believe your analysis but show me the numbers" and that is exactly what we do at The Aerospace Forum where we have developed almost 20 models that give you detailed insights into a variety of aspects of the industry and as more suggestions come in, we develop new models on top of our continued commitment to expand our high-in-demand features. The requests I started getting roughly a year ago, after successfully launching and developing interactive models for orders and deliveries for Boeing which we later expanded to include backlog numbers and a parallel line-up for Airbus, was to develop an airline fleet so we would see where the aircraft that are being delivered are actually going and what net changes occur. From a hotel room in Bucharest where I could see aircraft approaching for landing during test and training flights and aircraft, I started working on the framework of a monitor that would look at how fleets developed. Needless to say that at the time I wasn't even remotely aware that my trip to Bucharest would be the last one I made in the past year and that the Airline Fleet Monitor I had under development would lay the foundation of the COVID-19 Airline Fleet Monitor for which we have collected data over the past months for over 23,000 commercial aircraft representing 90% of the world fleet at the start of 2020 for users to interactively slice the data to visualize where changes to the fleet are being made by aircraft manufacturer, aircraft model, region and operator. Source: Air Canada In this analysis, we use the Airline Fleet Monitor freely available to subscribers of The Aerospace Forum to assess changes made to the Air Canada (OTCQX:ACDVF) fleet. The Air Canada fleet The fleet of Air Canada consists of the mainline fleet, Air Canada Rouge which is the low-cost arm of Air Canada, Air Canada Express for regional operations and Air Canada Jetz focused on the business market. Table 1: Air Canada Fleet (Source: Airline Fleet Monitor) Air Canada started the year with a fleet of 395 aircraft consisting of 184 aircraft in the mainline fleet, 143 aircraft in the regional fleet, 65 aircraft in the low-cost carrier fleet and 3 aircraft in the premium segment fleet. What we see is that Air Canada operated a mixed fleet where the older single aisle Airbus aircraft were to be replaced by the Boeing (BA) 737 MAX and Airbus (OTCPK:EADSF) A220 in the mainline fleet, whereas the long-haul fleet is dominated by Boeing but with a spot for the Airbus A330. The Rouge fleet consists mostly of older less efficient but low capital costs base aircraft and with the regional arm showing a strong fleet share for Bombardier. Figure 1: Share in Air Canada fleet by manufacturer (Source: TAF Airline Fleet Monitor) The Air Canada fleet consisted of 395 aircraft at the start of the year and in total, we found that 66 aircraft have been removed driven by the pandemic, 2 aircraft were removed before the pandemic put an immediate pressure on airlines and 54 aircraft will be removed in the future due to the reduction in demand for air travel. At the same time, 19 aircraft were added to the fleet resulting in 70.5% of the fleet being retained (including in-year deliveries) and 16% of the fleet being removed due to COVID-19, 0.5% retirements before COVID-19 and 13% in future removals. What we see is that the fleets are more or less evenly divided between Boeing, Airbus and the former Bombardier (OTCQX:BDRAF) with a smaller but not insignificant role for Embraer (ERJ). Around 16.7% of the fleet at the start of the year has been removed and from those removals we observed the following: Airbus accounts for 31% of the fleet at the start of the year but 18% of the retirements. Boeing accounts for 29% of the fleet at the start of the year but 45% of the retirements. De Havilland Canada accounts for 18% of the fleet at the start of the year but 12% of the retirements. Bombardier accounts for 11% of the fleet at the start of the year but 3% of the retirements. Embraer accounts for 10% of the fleet at the start of the year but 12% of the retirements. Note: Numbers do not add up to 100% due to intermediate rounding. The same can be done for the future removals making up for 13.7% of the fleet: Airbus accounts for 31% of the fleet at the start of the year but 83% of the future retirements. De Havilland Canada accounts for 18% of the fleet at the start of the year but 11% of the future retirements. Bombardier accounts for 11% of the fleet at the start of the year but 5% of the future retirements. Note: Numbers do not add up to 100% due to intermediate rounding. Figure 2: Removals in Air Canada fleet by aircraft type (Source: TAF Airline Fleet Monitor) What we see is that the biggest removals in the Air Canada fleet are for the Airbus A320ceo family and the Boeing 767. That does not come as a big surprise as we saw Air Canada significantly reducing the size of its low cost carrier, which was composed of 22 older and less efficient Airbus A319ceo aircraft and 25 Boeing 767 aircraft. These aircraft were inefficient compared to the newest available aircraft but what also played a role was the age of the aircraft. A quick look at the fleet database of Planespotters shows that many aircraft were older than 25 years meaning that the aircraft will be past their retirement age or approaching the retirement age once the air travel market is fully recovered. So, removing these aircraft does make sense. Air Canada Rouge saw the removal of 25 Boeing 767-300ERs and 2 Airbus A319ceos with the removal of 20 Airbus A319ceo aircraft pending. Also in the mainline fleet we saw some fleet removals: 5 Boeing 767-300ERs driven by age and efficiency. 10 Airbus A320ceo aircraft; 1 Airbus A319 ceo, 9 Airbus A320ceo aircraft driven by age and efficiency. 14 Embraer E190. Noteworthy is that the removal of the 14 Embraer aircraft was already expected this year and has merely been accelerated. In similar fashion, net reduction of 22 Airbus A320ceo aircraft was already planned with 9 rendered so far. The unplanned mainline reductions are the Airbus A319 of which one has been removed and 12 are scheduled to be removed and the 5 Boeing 767-300ERs. The regional Bombardier CRJ fleet initially was expected to see 7 aircraft removed and 7 aircraft added. In total, 4 aircraft have been removed including 2 pre-COVID-19 removals while 5 aircraft have been delivered. The turboprop fleet was already expected to be reduced by 14 units this year and so far 8 aircraft have been removed. Low-cost carrier Rouge has seen a total of 25 Boeing 767-300ER reductions in the fleet whereas only 2 were previously planned and the entire fleet of 22 Airbus A319 will be removed and in fact the first two aircraft have already been removed. What we are seeing is that for now, Boeing saw the biggest relative decline in the fleet as the entire Boeing 767 fleet has been removed. Interesting to note, however, is that some of these aircraft might be re-entering the fleet to become the backbone of freighter operations. Interesting to note is that once everything is set and done, Airbus will see 47% of the installed base disappear and that is actually more or less in line with what we saw with Boeing. In the regional segment, retirements were driven by pre-planned simplification of the turboprop fleet and fleet renewal of the CRJ fleet. Conclusion We are seeing Air Canada coming out of the crisis as an airline that will initially be 30% smaller. However, interesting to note is that from of 122 retirements, both before COVID-19, during COVID-19 and in future removals, roughly half was unplanned and the other half was planned and in some cases accelerated. We don't see any sentiment against a particular jet maker although you might get that impression if you look at Boeing's seemingly high share in the retirements that already occurred, but once the Airbus aircraft will also be removed from service as the plans are now, the share in the removal will be more or less equal and important to note is that currently some older aircraft are being removed, aircraft that did make sense in the growth market of 2019 but no longer make sense in today's market for air travel. Those jets are the Airbus A319ceo, which is also less efficient than the Airbus A320, and the Boeing 767-300ER. If it weren't for a market supporting a low-cost operation airline those aircraft would already have been removed years ago. One thing I am quite interested in seeing is how the future fleet plans of the airline are looking because while getting rid of the less efficient and old aircraft does make sense, airlines should pace retirement and delivery of deferred aircraft in order to grow again with the market in the future. The Aerospace Forum is the most subscribed-to service focusing on investments in the aerospace sphere, but we also share our holdings and trades outside of the aerospace industry. As a member, you will receive high-grade analysis to gain better understanding of the industry and make more rewarding investment decisions. Disclosure: I am/we are long BA, EADSF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. https://seekingalpha.com/article/4389893-air-canada-shrinks-30 Link to comment Share on other sites More sharing options...
Fido Posted November 19, 2020 Share Posted November 19, 2020 I wish that someone would find a way to dump the 737MAX fleet. It will be a drain on the company for many years. Link to comment Share on other sites More sharing options...
conehead Posted November 19, 2020 Share Posted November 19, 2020 17 minutes ago, Fido said: I wish that someone would find a way to dump the 737MAX fleet. It will be a drain on the company for many years. Why do you say that? I don't think it's necessarily true, if Calin got some huge concessions out of Boeing for them, then they are money-makers, no? Link to comment Share on other sites More sharing options...
Guest Posted November 19, 2020 Share Posted November 19, 2020 6 minutes ago, conehead said: Why do you say that? I don't think it's necessarily true, if Calin got some huge concessions out of Boeing for them, then they are money-makers, no? Only if passengers will accept them and only if they are placed into service rather than sitting empty/idle with payments being met. Link to comment Share on other sites More sharing options...
conehead Posted November 20, 2020 Share Posted November 20, 2020 I think passengers will happily get on board if the fare is discounted by $1. Link to comment Share on other sites More sharing options...
Guest Posted November 20, 2020 Share Posted November 20, 2020 5 minutes ago, conehead said: I think passengers will happily get on board if the fare is discounted by $1. I hope you are right but I suspect you are definitely wrong. It is however all academic right now as the aircraft is not yet certified to fly within Canadian airspace and it's longer operational legs will not be needed until Europe opens up and that could be ........ Link to comment Share on other sites More sharing options...
Seeker Posted November 20, 2020 Share Posted November 20, 2020 28 minutes ago, conehead said: I think passengers will happily get on board if the fare is discounted by $1. Ain't that the truth. And then, after the flight they will post on Facebook about how terrifying the flight was and about how they thought they were going to die the whole time! Link to comment Share on other sites More sharing options...
North of You Posted November 20, 2020 Share Posted November 20, 2020 There’s already a rumour going round that they may change the Max’s name to 737-8. I mean, how many people would be able to tell the difference once seated in the back anyways?! Link to comment Share on other sites More sharing options...
Maverick Posted November 20, 2020 Share Posted November 20, 2020 Of note, Air Canada has "737 Max 8" as a graphic of the aft fuselage whereas WestJet has "737-8" on theirs. Leading the pack yet again. Link to comment Share on other sites More sharing options...
Kip Powick Posted November 20, 2020 Share Posted November 20, 2020 Based on the public's knowledge of aircraft types, Air Canada could probably put the graphic as Air Plane Link to comment Share on other sites More sharing options...
AIP Posted November 22, 2020 Share Posted November 22, 2020 On 11/19/2020 at 6:47 PM, seeker said: Ain't that the truth. And then, after the flight they will post on Facebook about how terrifying the flight was and about how they thought they were going to die the whole time! Don't forget the call to CBC to have them waiting at the airport after arrival to cover the whole experience. Link to comment Share on other sites More sharing options...
CanadaEH Posted November 22, 2020 Share Posted November 22, 2020 On 11/20/2020 at 8:57 AM, Maverick said: Of note, Air Canada has "737 Max 8" as a graphic of the aft fuselage whereas WestJet has "737-8" on theirs. Leading the pack yet again. I think it's the other way around? Link to comment Share on other sites More sharing options...
Maverick Posted November 22, 2020 Share Posted November 22, 2020 1 minute ago, CanadaEH said: I think it's the other way around? Link to comment Share on other sites More sharing options...
Kip Powick Posted November 22, 2020 Share Posted November 22, 2020 Anyone know if the safety cards have been changed...?? Link to comment Share on other sites More sharing options...
Innuendo Posted November 22, 2020 Share Posted November 22, 2020 1 hour ago, Maverick said: Nothing a bit of speed tape couldn't fix. Link to comment Share on other sites More sharing options...
CanadaEH Posted November 22, 2020 Share Posted November 22, 2020 3 hours ago, Maverick said: Interesting. Book a flight on westjet.com and it says aircraft type is 737 Max 8. Link to comment Share on other sites More sharing options...
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