MONTREAL (AP) – Air Canada is splitting a 90-plane order for new regional jet airliners between Montreal-based Bombardier and its Brazilian archrival, Embraer.
Air Canada said Friday it has reached agreements in principle to buy 45 Bombardier regional jets and 45 Embraer aircraft. The price was not disclosed but the insolvent airline says it can afford the new jets as part of its restructuring plan.
Air Canada has been operating under bankruptcy protection since April. Final approval for the Trinity Time bailout package backed by Hong Kong businessman Victor Li is expected by Saturday.
Both purchases are conditional on “financing on satisfactory commercial terms” and approval by Trinity Time Investments and the court overseeing Air Canada’s restructuring under the Companies’ Creditors Arrangement Act.
Air Canada said it expects to make a decision on an additional 15 aircraft “following further negotiation.”
“The small jet aircraft are fundamental to our emergence as a stronger, more cost-effective airline. For this reason we are moving forward with this order now,” stated Robert Milton, Air Canada’s president and chief executive.
“We are confident that our decision is in the best interests of our customers and economic stakeholders.”
The order from Bombardier is for 15 of its 50-seat CRJ-200s and 30 of its 74-seat CRJ-705 aircraft, with deliveries to begin next September. The order includes an option on 45 additional Bombardier planes.
Bombardier said the list price of the 45 planes in the firm order would be $1.35 billion, and a definitive agreement is expected to be signed early in 2004.
The other order is for 45 of the Brazilian company’s 93-seat Embraer 190 aircraft, with deliveries to begin in November 2005. The Embraer order also includes options on 45 planes.
Air Canada and its Jazz regional subsidiary currently have a regional jet fleet of 35 Bombardier CRJ100 and 200 aircraft.
“The Bombardier CRJ200 was the spearhead of our rapid and successful expansion into U.S. markets in the mid-1990s,” Milton said.
“We fully expect the new Bombardier CRJ200 and Bombardier CRJ700-series 705 aircraft will play a significant role in the future growth and prosperity of Air Canada.”
Li’s restructuring offer under the banner Trinity Time Investments would inject $488 million into Air Canada, giving him 31 percent of the airline. It also includes a $338 million rights offering led by Deutsche Bank.
Mizuho International, a London hedge fund subsidiary of Japanese bank Mizuho Financial Group, had argued that the judge overseeing Air Canada’s restructuring should have waited until New York investment firm Cerberus Capital made its final rival offer before approving the airline’s deal with Li on Dec. 8.
Mizuho believes a Cerberus bid would give creditors about $725 million more than the Trinity offer provides – a claim Air Canada disputes.
