Well, there's somethin' you don't read every day.
In this Saturday's Financial Post:
Financial Post, with files from Bloomberg News
Saturday, April 12, 2003
Air Canada, along with three members within its Star Alliance, are in talks with a consortium of regional jet makers to strike a multi-billion-dollar deal to buy up to 200 planes -- a key move for the insolvent airline in its efforts to revamp its fleet and restructure its organization.
But the Montreal airline said any jet purchases are conditional on receiving approval for a restructuring plan it will try to develop while under protection from creditors.
The Montreal airline said it has teamed up with Deutsche Lufthansa AG
, Scandinavian Airlines System and Austrian Airlines Group to negotiate and evaluate regional jets from at least four manufacturers, including another Montreal company, Bombardier Inc.
A potential deal would be divided into two parts: a firm order for 100 planes, with an option to acquire 100 more. Early estimates value the purchase of 100 of the most expensive regional jets available -- the Airbus A318 -- at US$4.5-billion. Nonetheless, the order will be a boon for the struggling aerospace industry.
Besides Bombardier, the manufacturers involved in the Star Alliance talks are Airbus SAS, Boeing Co. and Bombardier arch-rival Embraer Brasileira de Aeronautica SA
By joining forces, the Star Alliance members are trying to extract a better deal from the manufacturers and share in the benefits of owning a common aircraft.
It believed to be first time a group of major airlines have come together to go plane shopping together. Star Alliance members have worked together previously on information technology initiatives and the bulk purchase of other in-flight accessories, such as blankets and pillows.
"The carriers have similar requirements for equipment," said Knut Lovstuhagen, a spokesman for Star Alliance. "The idea is to bring cost savings."
Laura Cooke, a spokeswoman for Air Canada, said the carrier's decision to join in on the Star Alliance negotiating team was based on "addressing current and future needs" for the airlines' involved.
"But any final commitment would be made by the individual carriers on their own timetable," Ms. Cooke said yesterday.
Moreover, she said Air Canada, currently under bankruptcy protection, would only commit to buy regional jets after "the adoption of a plan of restructuring."
Robert Milton, Air Canada's chief executive, has said as part of the airline's restructuring under the Companies Creditors' Arrangement Act, he wants to revamp the carrier's fleet -- by retiring smaller planes such as the Boeing 747-400 and 737-200, and the BAE 146, and adding more regional jets, such as CRJ-50s and 90-seat aircraft.
That's also been reiterated by John Luth, the U.S. airline restructuring expert hired to advise Air Canada.
Sam Barone, president of Ottawa consultancy Transportation Partners, said regional jets would give the airline more flexibility.
"You maintain schedule integrity, but you operate more efficient aircraft to meet demand," Mr. Barone said. "You incur the same number of flights, but not the same number of seats." He added that revamping the fleet with an emphasis on regional jets was in line with Mr. Milton's objectives on controlling costs at the airline.
By reconfiguring the fleet by using similar planes, airlines can save on maintenance and the purchase of parts. Also, pilots on regional jets are paid less than pilots on wide-body aircraft.
Sources say the planes that might be purchased include the Airbus A318, Boeing's 717 and Bombardier's CRJ700 or CRJ900.
"[The joint purchase is] going to happen, it's just a matter of when," Jim Phillips, head of Boeing's 717 program, said in an interview, adding the consortium has discussed buying as many as 50 717s, which each cost as much as US$39.5-million.
John Paul Macdonald, a spokesman for Bombardier's aerospace unit, declined to comment.
Also yesterday, in a message to Air Canada employees, Mr. Milton said management and its advisors are working on a restructuring plan, which would be released in the coming weeks.