WestJet picks Bombardier planes for regional carrier

Tue May 1, 2012 2:18pm EDT
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By Nicole Mordant

(Reuters) - WestJet Airlines Ltd (WJA.TO: Quote), Canada's No. 2 airline, has selected Bombardier Inc (BBDb.TO: Quote) to supply up to 45 aircraft for a regional carrier it is setting up to chip away at its struggling competitor Air Canada ACb.TO.

WestJet, which also reported a steeper-than-expected 42 percent rise in quarterly profit on Tuesday, chose Bombardier's Q400 turboprop over a model made by ATR, a joint venture of France's EADS EAD.PA and Italy's Finmeccanica SIFI.MI.

The low-cost airline, which flies across Canada, into the United States and to the Caribbean, said it signed a letter of intent to buy 20 Q400 Bombardier NextGen aircraft, with the option of purchasing another 25 over the next six years.

"I think it was the right choice. Range, speed and flexibility were key drivers," said Addison Schonland, a partner at airline consulting firm AirInsight, referring to WestJet's decision to choose the Q400 over the ATR 72-600.

Shares of both WestJet and Bombardier rose after the deal was announced. WestJet's stock also benefited from the stronger-than-expected earnings and an improved outlook.

WestJet declined to reveal a price for the planes but Stonecap Securities analyst Scott Rattee estimated the 20-plane commitment at around $620 million. If the 25 options are exercised, the deal is worth $1.395 billion at current list prices, he said in a note to clients.

The airline, which until now has only flown one type of aircraft, Boeing 737s, said in February that it will launch a regional operation to serve smaller Canadian communities as it searches for ways to expand.

It said then it was talking to Bombardier and ATR about buying about 40 turboprops - smaller, more fuel-efficient planes that can operate on shorter runways.   Continued...

A worker walks past the entrance to the Bombardier plant in Derby, central England, July 5, 2011. REUTERS/Darren Staples