Air Canada cancels Max aircraft order
Airline cites ‘evolving’ long-term needs; shares’ 12%-plus plunge adds to losses
Air Canada cancelled its order for 11 Boeing 737 Max aircraft in the midst of the novel coronavirus outbreak that is wreaking havoc on global air travel and triggering a collapse in airline stock prices.
Canada’s largest airline on Wednesday confirmed it cancelled its order for 11 Max 9 versions of the plane due to “evolving, long-term fleet planning requirements,” spokesman Peter Fitzpatrick said in an email.
“Aircraft purchases are longterm commitments based on future projections,” he said, noting Air Canada placed its original order for 61 Max jets in 2013.
“Since that time, our requirements have evolved, so we are making adjustments to our order to better meet our anticipated needs.”
Air Canada shares sank more than 12 per cent on the Toronto Stock Exchange, adding to losses sustained as investors abandon airlines during the COVID-19 outbreak.
Air Canada’s stock has dropped about 45 per cent since the beginning of January.
Air Canada already has 24 Max 8 jets in its fleet, although those planes have been parked for a year since regulators ground the jets globally after two crashes killed 346 people.
Air Canada still has firm orders for 26 more 737 Max 8 jets, options for 18 aircraft and rights to purchase an additional 30, Fitzpatrick said.
“Air Canada is fully committed to the Boeing 737 Max aircraft,” he said. “Prior to the aircraft’s grounding in March 2019, we were one of the largest operators of the 737 Max and we are actively preparing to return this aircraft to service following regulatory and other safety approvals.”
It wasn’t the only airline to reduce orders with Boeing, which has been struggling to get the 737 Max fleet re-certified for flight after faulty software was blamed for the fatalities. The U.S. plane manufacturer reported 46 cancelled orders for the month of February, a month in which it only received 18 new orders. Boeing ’s stock plummeted 17 per cent on the New York Stock Exchange.
Air Canada’s decision comes as the airline works to mitigate impact from the coronavirus crisis that the World Health Organization is officially calling a pandemic.
The airline announced Wednesday that it will relax some of its rebooking fees and rules.
Customers with existing bookings to any destination before April 30 can make a one-time change to their flights for free. Passengers can either re-book their tickets or cancel their bookings to receive credit for future travel.
In both cases, passengers must pay the fare difference and travel before Dec. 31.
Previously, Air Canada limited the change fee waivers to customers who booked after March 4 or were supposed to travel to destinations where Air Canada temporarily suspended flights due to the outbreak.
Full refunds are only available to passengers scheduled to fly on cancelled flights to China, Italy, South Korea, Hong Kong or Tokyo.
In an email to customers, Air Canada chief executive Calin Rovinescu outlined the airline’s hygiene procedures and that it is in “constant dialogue” with Canadian and international health authorities.
On Monday, Rovinescu and WestJet Airlines Ltd. chief executive Ed Sims both spoke with Economic Development Minister Mélanie Joly to discuss challenges facing the airline industry.
The federal government, which on Wednesday released a $1-billion coronavirus containment plan that focused mostly on health care, is also expected to develop a mitigation plan for air travel and tourism.
Prime Minister Justin Trudeau reached out to airline industry leaders including Rovinescu, Air Canada’s spokesman said in an email.
“We took the opportunity to discuss the impact of the situation on our industry. It was an informational conversation.”
Chinese tourists generate about $2 billion annually in Canada, but their numbers have dwindled and revenue from their visits is expected to be down by $550 million by June, Joly told reporters in Montreal last week.
We are making adjustments to our order to better meet our anticipated needs.