February 17, 2016 / 11:41 AM / in 2 years

UPDATE 3-Air Canada says costs may dip, to buy up to 75 Bombardier jets

* Plans to buy CS300 aircraft for list price of $3.8 bln

* Q4 adjusted earnings in line with average analyst estimate

* Operating revenue up 2.5 pct (Adds detail on maintenance deal with Quebec, quote about CSeries)

By Allison Lampert

Feb 17 (Reuters) - Air Canada said on Wednesday its costs would fall this year if the Canadian dollar remained unchanged from 2015 levels, and announced plans to buy up to 75 CS300 aircraft from Bombardier Inc and service the jets in Quebec.

The decision to maintain the CSeries planes in the province for the next 20 years is part of a deal in which the Quebec government agreed to drop a lawsuit against Canada’s largest airline over its heavy maintenance operations in Montreal.

Those operations were formerly run by Aveos Fleet Performance.

The Montreal-based carrier had filed an appeal in Canada’s Supreme Court over the issue.

“We are very pleased to have settled the Aveos lawsuit and the uncertainty it could have brought,” Air Canada Chief Executive Calin Rovinescu told analysts on a conference call to discuss the company’s fourth-quarter earnings.

Canada’s biggest airline said it expects the adjusted cost per average seat mile, which excludes fuel expenses, to fall 2 percent to 3 percent this year, “if the value of the Canadian dollar were at 2015 levels.”

Although airlines have been benefiting from a 70 percent fall in oil prices since mid-2014, the falling loonie, as the Canadian currency is sometimes called, has made Air Canada’s fuel as well as plane purchases more expensive.

The lower oil price also has hurt demand for airline travel in Canada, where oil and related industries are major employers.

Lower fuel costs helped Air Canada boost its operating margins by 1.5 percentage points in the fourth quarter.

Air Canada said on Wednesday it would purchase 45 of the CS300 aircraft, with an option to buy an additional 30 planes. Deliveries are scheduled to begin in 2019.

The order would be valued at as much as $3.8 billion based on the list price of the aircraft, Bombardier said.

Rovinescu said the 100-150 seater CSeries is “much more compelling at the lower end” than the 737-MAX produced by Bombardier’s rival, Boeing Co.

Air Canada’s net loss widened to C$116 million ($84 million), or 41 Canadian per share, in the fourth quarter, from C$100 million, or 35 Canadian cents per share, a year earlier.

On an adjusted basis, the company earned 40 Canadian cents per share, matching the average analyst estimate, according to Thomson Reuters I/B/E/S.

Operating revenue rose 2.5 percent to C$3.18 billion. ($1 = C$1.38) (Reporting by Anet Josline Pinto in Bengaluru and Allison Lampert in Montreal; Editing by Maju Samuel and Paul Simao)

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