New airplane ordersThis week a post of the next 90 Air Canada airplane orders was published. Up till now there has been much ado about this and how much debt this will cause. I am open to correction but here is what I have read.
30 A321XLRs...The company that owned the slots in the production line was a leasing company so Air Canada will be leasing most of these. I believe they did make an agreement to buy a few of them cash.
27 A220s....Not sure what is happening here. It may be a mix. No matter what the interest rate that the lease is based on is lower than it was before last year.
12 737 MAX aircraft...I believe that these were ones that were going to be leased by Lynx Air but Air Canada took them over. The only cost could be customizing it to Air Canada interiors and safety equipment.
18 787-10s...Since the current fleet is already 80% owned, I believe this will be paid for with a mix of lease and paid for in cash or possibly all cash.
2 - 767s...they already own these airplanes so the only cost is to get the interiors upgraded. I think that these are likely to be a replacement on the YYZ - SFO route that is currently being serviced by Air Omni on a wet lease (including crew). If anything this may be a cash outflow and debt reduction move. UA and DAL have lots of them flying around currently so they won't look out of place.
Air Canada's debt has come down $10 billion in the last 4 years. It has updated its fleet with the addition of 787-9s, A220ss and 737MAXs while doing this. The debt was renegotiated at much lower rates and a cash pile of $10 billion has been accumulated.
Cash cow Aeroplan has expanded from under 5 billion users to close to 10 billion users. That means twice as much free cash flow is being created just from Aeroplan.
Do you get it yet? The goal was to turn Air Canada into a "financial company"... As predicted by Airlineinvestor years ago, Air Canada is emerging in 2025 and 2026.
The market will set the price.