Air Canada won't replace Embraer jets with Bombardier CSeries

Thu May 15, 2014 10:26am EDT
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By Shubhankar Chakravorty

(Reuters) - Air Canada ACb.TO ACa.TO said it would not replace 25 narrow-bodied Embraer (EMBR3.SA: Quote) planes, dealing a blow to Bombardier Inc's (BBDb.TO: Quote) hopes of pushing its CSeries aircraft into the company's fleet.

The CSeries has been dogged by multiple delays and cost overruns, but was in the running to replace these aircraft, which are part of Air Canada's fleet of 45 E190 planes made by Brazil's Embraer.

Bombardier shares fell as much as 3.5 percent to C$4.05 in morning trading on the Toronto Stock Exchange. Air Canada shares were little changed at C$7.82.

"After careful consideration, Air Canada has decided to continue to operate the (Embraer) aircraft given their young age ... and to avoid additional capital expenditures and debt," the largest Canadian carrier said in a statement on Thursday.

Air Canada's decision comes after the company reported a higher first-quarter loss, mainly due to a weaker Canadian dollar.

"We had considered that if Air Canada was going to renew its E190 fleet, that the CSeries was a shoo-in as a replacement aircraft," RBC Capital Markets analyst Walter Spracklin said.

"We consider this decision a material negative for Bombardier as we had hoped the Air Canada order would help improve investment sentiment around CSeries new orders in 2014," Spracklin added.

In theory, however, the CSeries could still replace these planes at a later date.   Continued...

An Air Canada plane lands in front of a United plane at the Calgary International Airport in Calgary, Alberta, June 17, 2008. REUTERS/Todd Korol