JetBlue says Airbus joint venture with Bombardier secondary reason to order A220
Deal announced Tuesday valued at $5.4B US at list prices, but airlines typically receive large discounts
Shares of Bombardier Inc. hit a nearly seven-year high Wednesday after the C Series jet it developed secured the largest order since the announcement of a joint venture with Airbus.
JetBlue Airways Corp. ordered 60 of the aircraft, renamed by Airbus as the A220-300, for delivery starting in 2020 with the option for another 60 starting in 2025.
The firm deal announced late Tuesday was valued at $5.4 billion US at list prices, but airlines typically receive large discounts.
The airline said the plane's economics was the primary motivation rather than Airbus taking majority control over the aircraft's joint venture which happened after JetBlue launched its 15-month review.
"The marriage between Bombardier and Airbus was a secondary factor," chief financial officer Stephen Priest said in a conference call.
"But the good news about that when it came to fruition was it allowed us to reshape our Airbus orderbook to make sure that we continue to maintain our mid- to high single-digit capacity growth over the foreseeable future."
Bombardier shares climbed to $5.58 in early trading on the Toronto Stock Exchange, a price last reached in August 2011. They closed up three cents at $5.43 in the afternoon session.
Five A220 planes are scheduled to be delivered in the first year, ramping up to a high of 22 in 2024.
JetBlue will become the first American airline to fly the larger A220-300 with 130 to 140 seats. Delta Air Lines Inc. ordered 75 A220-100s in the spring of 2016.
The U.S. low-cost airline said it could switch some of its order to the smaller, 120-seat A220-100 plane.
JetBlue said the decision to order the aircraft was driven by three strategic factors: profitability from the plane's low operating costs, flexibility to use both aircraft models and its range.
Priest said the A220 opens up the possibility of transcontinental flights and more options for overnight Caribbean flights.
"This is a game-changer for JetBlue. It's a real margin builder for our business...and so we're very, very confident with the orders," Priest said.
The A220s will replace 60 Embraer E190 planes. JetBlue said it needs smaller planes, but the Embraer aircraft would require costly upgrades over the next decade.
The airline also considered the new Embraer 195 E-2 planes. Priest said the competition was very tight, but the aircraft selected aligns with the other Airbus planes in its fleet.
Analyst Benoit Poirier of Desjardins Capital Markets said JetBlue's order confirms the strength of the Airbus—Bombardier partnership.
He said more A220 orders could be announced at the upcoming Farnborough Airshow.
Bombardier has said interest in the plane has surged since the announcement of the partnership.
Airbus recently said it could book more than 100 A220 orders by the end of the year and slightly more than 3,000 sales over the next 20 years.