AC's 737 MAX journeyI opened up my computer this AM to the news feed lead story revisiting 5 years ago. It explored the process of the grounding of the 737 MAX aircraft in Canadian airspace 5 years ago. One of the things that defines the modern AC is that it adapts to adversity. When given lemons, the Modern AC makes lemonade.
Lets look at the process. Air Canada in years previous had focused on renewing their wide bodied aircraft fleet and looked forward to set up its single aisle aircraft fleet. The initial order in 2014 was for 61 aircraft. The first trench was an order for 33 MAX 8s. There was an additional tentative order for 28 and 18 MAX 9s. There are things that ring a bell/siren in your head about that one if you're reading current news. This was followed by booking spots in the assembly line for 30 more MAX aircraft.
In the 2 year process of getting the MAX 8s back in the air, AC accummulated a lot of credits for delayed orders and loss of use of the equipment they had and had ordered.
The result was a payback of money plus a payback in "maintenance considerations". Also AC was allowed to dump all but 40 of the aircraft orders. A thing to note is that the cash and maintenance settlement was a bit ambiguous for valuation but it worked out that approximately half of the aircraft were discounted to zero cost to AC in compensation. The maintenance considerations were spread out over a few years and may even be keeping costs lower to this day. They have less than 40% of those orders in the fleet and they had 2 years to make sure they were right as rain before they were in service. Also they hung onto and paid the trained pilots for that fleet so they were good to go once the grounding was lifted.
The second and the biggest winner was because they must have seen something more wrong with the 737 program than some other airlines did. AC abandoned their commitment to go Boeing and the now the A220 plus the A321 now fill the demographic with added range and comfort. And the orders were made with proper equipment (engines in particular) so that they have kept flying.
Covid added to the mayhem and shut down airlines after 2021 so this helped AC continue the modernization focus of its narrow bodied fleet. Planes from the A321XLR production line have been delayed till fall but somehow AC managed to be at the front of the line for deliveries of that aircraft. So with that money that would have gone to buy up to 70 more 737s, AC bought and is buying more A220s for the fleet plus will not have to put up money for the A321s till later in 2024 at the earliest.
The third and biggest winner is AC's Public relations department. It does not have to deal one iota with this 737-9 and 737-10 assembly line news. Instead the analists pick away at customer service one ofs and a technology misstep and try to make a mountains out of mole hills.
I do not know if the internal audit at Boeing has slowed down the production of the 787-9s and 10s that were ordered. There are a few due soon. However, if delivery is slowed, the cash that was going to pay for them just continues to pile up and make interest or compound within the business. Here again AC ended up near the front of the 787 order fulfillment list. I just saw that Thai airways is looking at getting today's order in Singapore starting in 2027.
Enjoy your lemonade.