Air Canada suspends financial forecasts amid turmoil over Boeing 737 MAX planes
Canada said on Friday it was suspending its 2019 financial forecasts as a consequence of the grounding of Boeing Co’s 737 MAX planes, becoming the first major airline to publicly attach dollars and cents to the uncertainty surrounding the new jets.
Countries around the world, including the United States and Canada, banned Boeing’s fast-selling 737 MAX this week after a fatal Ethiopian Airlines plane crash on Sunday, the second deadly disaster for the aircraft in five months.
Shares of Air Canada were 1.6 percent lower in early trade on Friday.
Airlines bought the 737 MAX for its longer range and fuel efficiency, and some carriers’ business plans are facing disruption because of the grounding, which U.S. lawmakers have said could last for weeks at a minimum.
The causes of Sunday’s crash are still unknown.
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Boeing suspended deliveries of its 737 MAX aircraft on Thursday but continues to produce its single-aisle jets at full speed.
Air Canada, the country’s largest carrier, has been renewing its narrowbody fleet with MAX aircraft to replace its existing Airbus A320 narrowbodies. It had expected to expand its fleet of 24 MAX jets to 36 by the end of 2019.
Montreal-based Air Canada has said it operated seventy-five 737 MAX flights daily out of a total schedule of approximately 1,600 flights system-wide.
Air Canada would face the costs of re-booking passengers after the planes were grounded, and other costs from not having scheduled access to the more efficient MAX, said AltaCorp analyst Chris Murray.
The airline estimated that savings on fuel and maintenance costs would make the MAX 8 aircraft 11 percent cheaper to operate per available seat mile (CASM) than its existing Airbus A320s. CASM is a closely watched industry metric.
Murray said he expected Air Canada to find a way to “mitigate” the impact of higher costs, and noted the company’s forecast for annual profit margin remained in place for 2020 and 2021, suggesting this would be “a short term disruption.”
The grounding of planes has left U.S. and Canadian carriers wrestling with customer calls and flight cancellations. [
Southwest Airlines, the world’s largest MAX operator with 34 jets, and American Airlines with 24 MAX in its fleet, both declined to comment on Friday. United Airlines , with 14 MAX and Canada‘s WestJet Airlines, which operates 13 of the jets, could not be immediately reached for comment.
© 2019 Reuters