Air Canada in talks to buy over 100 Boeing jets - source

Reuters

By Tim Hepher and Susan Taylor

(Reuters) - Air Canada (TOR:AC.B), the country's largest airline, is in advanced talks to buy or place options for more than 100 of Boeing Co's (NYS:BA) 737 MAX aircraft, a source familiar with the matter said on Wednesday.

Boeing is trying to outpace European rival Airbus (PAR:EAD) for the lucrative deal to renew the Canadian flag carrier's fleet of mainly Airbus narrow-body aircraft.

Air Canada said it had no comment and Boeing declined to comment.

While advanced negotiations do not guarantee a sale and such talks typically go down to the wire, a win for Boeing would mark a major competitive victory and a rebound on its home turf after Airbus displaced it at low-cost Mexican airline VivaAerobus in a fierce contest earlier this year.

Airlines do not switch between different jets frequently, however, due to the high costs associated with training and maintenance. Aircraft are typically sold below the list price, but analysts say discounts tend to be particularly deep when trying to persuade an airline to switch suppliers.

Industry sources said it is not uncommon for aircraft to be sold at up to a 50 percent discount to win a strategic customer. Both planemakers also have the firepower to cut attractive deals when necessary on their best-selling aircraft and still make money.

The Boeing 737 MAX competes with the Airbus A320neo and has a list price of $104 million (63 million pounds). Montreal-based Air Canada's fleet of single-aisle aircraft includes more than 50 Airbus A320 and A321 jets, as well as 45 Embraer 190 planes.

Air Canada was expected to address its fleet renewal in two phases, industry sources said last week, starting with a decision on whether to stick with Airbus for medium-haul jets, and pick its revamped A320neo version, or switch to the Boeing 737 MAX.

Both jetmakers say their newest medium-haul aircraft are more fuel efficient and have lower maintenance costs.

The decision will mark the climax to a bruising and widely watched campaign between the world's dominant plane makers.

Airbus had more orders than its U.S. rival for the first 11 months of the year, but it is difficult to say who will dominate the 2013 order book as recent deals could sway the balance.

(Reporting by Tim Hepher and Susan Taylor; editing by Elaine Hardcastle, G Crosse)

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