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WestJet Airlines Ltd. plans to order as many as 20 Boeing Co. 787-9 Dreamliners valued at $5.4 billion, adding the wide-body to its fleet as Canada’s second-biggest carrier expands long-distance service.
The move takes a page from Air Canada, which has relied on the Dreamliner’s fuel efficiency to lower operating costs. The order also helps clarify WestJet’s strategy for competing with the country’s largest carrier by entering new markets in Asia and the Western Hemisphere.
“This answers one of the primary questions about WestJet’s future but is a significant increase in overseas capacity,” Doug Taylor, a Canaccord Genuity analyst, said in a note to clients. “The market will want more detail on this expansion.”
The order marks a victory for Chicago-based Boeing over Airbus SE amid depressed sales for twin-aisle jets. WestJet Chief Executive Officer Gregg Saretsky said last year that the carrier would evaluate competing aircraft models from Boeing and the European planemaker if it decided to expand the wide-body fleet. WestJet’s order means Canada’s two biggest airlines will fly the 787, with Air Canada operating 24 Dreamliners at the end of last year.
With a range of more than 14,000 kilometers (8,700 miles), the Dreamliner “will give WestJet the ability to serve new destinations in Asia and South America, and to expand its service offerings into the European market,” the Calgary-based company said in a statement Tuesday. The carrier now operates some leased Boeing 767 aircraft that are more than 20 years old on European routes.
Founded in 1996 to cater to leisure travelers, WestJet has been moving away from its original no-frills model —patterned after U.S.-based Southwest Airlines Co. — by adding premium economy seats, rolling out a short-distance unit and starting overseas flights to European destinations such as London. It unveiled plans last week to start an ultra-low-cost carrier to fend off Canadian upstarts.
WestJet plans to buy 10 of the 787-9 for delivery between early 2019 and the end of 2021, with options for 10 more of the planes to be handed over through 2024. The purchase would be valued at as much as $5.4 billion, based on list prices. Discounts are typical in the industry. WestJet also will convert orders for 15 single-aisle 737 Max jets, listing for a combined $1.7 billion, to options.
The Dreamliner order likely will elevate capital spending over the next several years, Cowen & Co. analyst Helane Becker said in a note to clients. She said she expected that management would address its plans for the ultra-low-cost carrier in a conference call Tuesday.
“Clearly a lot happening in Calgary, which may cause growing pains along the way,” she wrote.
WestJet announced the order as it reported first-quarter profit of 41 cents a share, trailing the 51-cent average estimate of analysts surveyed by Bloomberg. Revenue was C$1.11 billion ($810 million), while analysts predicted C$1.12 billion.
WestJet fell 3.7 percent to C$21.99 at 9:44 a.m. in Toronto, after dropping as much as 5.7 percent for the biggest intraday decline in six months. Boeing rose less than 1 percent to $183.08.
The carrier won an agreement from pilots in December for expanding long-distance routes overseas after starting services from Canadian cities to London. At the time, it was considering adding to its fleet of Boeing 767 planes.
–With assistance from Julie Johnsson
©2017 Bloomberg L.P.
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