A founder of WestJet, JetBlue commits to buying 60 Airbus planes for new airline
American-Brazilian businessman David Neeleman, right, talks to journalists during a join news conference with his partner Portuguese businessman Humberto Pedrosa, in Lisbon, Wednesday, June 24, 2015. (AP Photo/Francisco Seco)
The Canadian Press
Published Tuesday, July 17, 2018 11:51AM EDT
Last Updated Tuesday, July 17, 2018 2:01PM EDT
One of the founders of WestJet Airlines Ltd. and JetBlue Airways Corp. has committed to buy 60 Airbus A220-300 aircraft for a new U.S. airline he's launching.
A memorandum of understanding for the aircraft which was developed by Bombardier Inc. was announced Tuesday at the Farnborough Air Show.
The deal is worth US$5.4 billion at list prices, but airlines typically receive large discounts.
Deliveries of the former C Series jets are slated to begin in 2021, a year after the planes are expected to start coming off a new assembly line in Mobile, Ala.
The new airline is backed by a group of investors led by David Neeleman, who is also an investor in TAP in Portugal and controlling shareholder in Azul airlines in Brazil.
"After years of U.S. airline consolidation, the conditions are improving for a new generation of U.S. airline to emerge, focused on passenger service and satisfaction," he said in a news release.
Neeleman said the aircraft with up to 150 seats will enable the airline to serve secondary routes, especially longer-range flights.
The airline has been called "Moxy" in investor presentations, say published reports.
The commitment is the second since Airbus took control of the aircraft program. Last week, JetBlue ordered 60 of the same aircraft for delivery starting in 2020 with the option for another 60 starting in 2025.
Moody's Investors Service estimates JetBlue will pay between US$23 million to US$28 million per aircraft for a total price of between US$1.4 billion and US$1.7 billion, a 66 to 72 per cent discount from the list price.
Analyst Walter Spracklin of RBC Capital Markets said the A220 aircraft program is gaining traction with the JetBlue order and the commitment from Neeleman.
"We expect the joint venture will continue to win orders of meaningful size, with longer-term valuation implications owing to Bombardier's 34 per cent stake," he wrote in a report.