32 Firm Orders, 64 Options

Boeing and Air Canada Monday unveiled their agreement to renew the airline's wide-body fleet with up to 36 Boeing 777s and up to 60 Boeing 787 Dreamliners. Air Canada will use the airplanes to modernize its existing fleet and improve operating efficiencies.

The agreement includes firm orders for 18 777s, plus purchase rights for 18 more, in a yet-to-be-determined mix of the newest 777 models: the 777-300ER, the 777-200LR Worldliner (the longest range airplane in the world), and the 777 Freighter. Deliveries of the 777s begin next year.

The agreement also includes firm orders for 14 787s, a mix of 787-8s and 787-9s, plus options and purchase rights for an additional 46 airplanes. Air Canada's first 787 will be delivered in 2010.

The firm orders are valued at approximately $6 billion at list prices. The order is subject to several conditions including final documentation. The companies expect to finalize the agreement by mid year.

"Our decision to modernize our fleet with the 777 and 787 Dreamliner will move Air Canada into a clear leadership position among North American international carriers with the world's two newest and most efficient twin-engine, long-haul airplanes," said Robert Milton, president and chief executive officer of ACE Aviation Holdings, Inc., the parent company of Air Canada. "The superior customer comfort and operating economics of these aircraft will put us in the company of the leading European, Middle East and Asia Pacific carriers."

The 777 and 787 are uniquely suited to meet Air Canada's current route structure and growth plans, which include long-range, non-stop routes for both passengers and cargo, with an increasing emphasis on growing markets in Latin America and China.

"Our analysis of these aircraft pointed to overwhelmingly attractive economics. We have estimated the fuel burn and maintenance cost savings alone on the 787 to be approximately 30 percent versus the 767s they will replace," said Milton. "Particularly important in the current high fuel price environment are that the savings on these two line items alone will be more than twice incremental ownership costs in acquiring these aircraft."

Operating in the same fleet, the 777 and 787 will allow Air Canada to tailor capacity to seasonal demand with two aircraft types that fly the same speed and range yet offer different seating capacities.

"We are proud to be a part of Air Canada's plans for future growth and look forward to supporting the airline fully as it begins to incorporate our 777s and 787s into its fleet," said Boeing Commercial Airplanes President and CEO Alan Mulally.

Montreal-based Air Canada said last week its strategy for passenger service includes enhanced daily non-stop flights between Toronto and Beijing by 2006, and Toronto and Shanghai flights by the middle of next year. It will start Vancouver to Guangzhou service in the summer of 2007.

For cargo operations, Air Canada will begin offering Toronto to Shanghai service next month and boost that cargo service on daily routes next year. Canada's flag carrier also expects to start Toronto to Guangzhou cargo service in 2007 and eventually plans to add Tianjin to its freight operations.

"The timing of Air Canada's decision is critical for locking in rapidly disappearing early delivery positions for the 787, which is essentially sold out through 2010," said Mulally. "Air Canada also has secured three of the very few remaining near-term delivery slots for the 777."

Air Canada is the 18th airline to select the 787 Dreamliner, bringing the total number of announced firm orders and commitments to 217. Air Canada joins a growing team of 787 launch customers who've recognized the 787's exceptional value and superior operating performance.

FMI: www.boeing.com