Tuesday, January 9, 2018

JetBlue Delays Fleet Update as Boeing, Airbus Target Small Jets

JetBlue Airways has delayed a decision on updating its fleet of regional jets as it watches a brewing rivalry between Boeing and Airbus to gain sway in the market for smaller planes.

The carrier had hoped to decide by the end of last year whether to keep its 60 Embraer E190s. But an Airbus agreement to take control of Bombardier Inc.’s C Series program and Boeing discussions about a possible deal with Embraer introduced too many unknowns, said JetBlue Chief Financial Officer Steve Priest.

“It’d be short-sighted of us to progress with something definitive in this landscape that’s evolving,” he said in an interview. “If we leave money on the table because we rushed in during this changing landscape -- I don’t want to get into a position where we regret any decision.”

JetBlue is debating whether to keep the 100-seat E190s or replace them with an updated version from Brazil’s Embraer. The New York-based carrier might also switch to Bombardier’s smaller C Series jet, or order lower-capacity planes from Airbus. In addition to the E190s, JetBlue operates 130 A320s and 53 A321s made by the French planemaker. The carrier also is still considering whether to buy a longer-range Airbus jet.

The airline began a review of its fleet and aircraft investment plans early last year, assessing the profit margin produced by each plane and how it meets JetBlue’s needs. The evaluation dovetails with an effort to cut as much as $300 million from spending by 2020.

Late Stages

JetBlue had been in the latter stages of its E190 evaluation but hadn’t made a decision, Priest said, when Airbus said it would acquire a majority stake in Bombardier’s C Series program. The October agreement would provide Airbus with the Canadian company’s 108-160 seat narrow-body aircraft to compete with Boeing’s 737 workhorse. The deal added urgency to negotiations between Chicago-based Boeing and Brazil’s Embraer, according to a person familiar with the discussions.

JetBlue’s fleet evaluation continues and the timing of a decision on the E190s will be linked to what happens in the market, Priest said. “But I don’t feel paralyzed or handcuffed by it,” he said.

JetBlue is also still evaluating whether to buy a new, longer-range Airbus jet, the A321 LR, Priest said. The aircraft would allow the carrier to fly across the Atlantic to Europe, expanding an international network that currently focuses on the Caribbean, Latin America and northern South America.

JetBlue can decide on the A321LR at any time, although Airbus requires a two-year notice for delivery. If the airline wants the LR, it probably would convert some existing A321neo orders.

(Mary Schlangenstein - Bloomberb Business)

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