Air Canada Orders $6B Worth of Boeing Jets

Air Canada on Monday announced firm orders for 32 Boeing Co. (BA) wide-bodied jets in a deal worth $6 billion, adding to the top U.S. aircraft maker's recent winning streak against archrival Airbus.

The order by Air Canada's parent, ACE Aviation Holdings Inc. (search) , includes 18 Boeing 777 (search) jets and 14 of Boeing's newest 787 Dreamliner (search) jets.

After last year missing its own target for 787 orders, Boeing has racked up a series of wins for the new plane this year as Airbus' proposed competing model, the A350, has struggled to gain traction in the marketplace.

Canada's largest airline, which emerged from court protection from creditors at the end of September, had said it was considering Airbus aircraft as it modernized its fleet, including the A340-500, which it already has in its fleet.

"We would expect Boeing shares to move higher in this environment of rising orders," said Jeffries & Co. analysts in a research note. "Air Canada has been adding Airbus wide-body planes to its fleet. This is a significant change."

Boeing shares were up $1.50, or 2.6 percent, at $59.38 on the New York Stock Exchange (search), outperforming the U.S. aerospace sector.

As part of a plan to overhaul Air Canada's fleet, ACE said it also had options to buy a further 18 777 jets and a further 46 787s. If it buys the extra aircraft, the whole deal could be worth as much as $14 billion.

Air Canada initially did not specify the value of the order, worth at least $5 billion based on the jets' list prices. Boeing put a price of about $6 billion on the deal.

The order brings the total of firm orders and commitments for the 787 Dreamliner to 217. The 200- to 300-seat jet, which will use 20 percent less fuel than today's aircraft of similar size, is set to have its first flight in 2007.

Boeing has vowed to reverse the dominance of European rival Airbus, which has outsold the Chicago-based plane maker in every year since 2001 and is due to grab headlines on Wednesday with the maiden flight of its A380 super-jumbo.

Boeing in December named Scott Carson to replace its head of commercial aircraft sales after a lackluster 2004. He recently vowed Boeing would beat Airbus in orders this year. Airbus and some analysts are skeptical.

"We expect Boeing to continue to lose share to Airbus over the next several years," said Prudential analyst Jared Muroff, adding that the cutthroat competition between the two would also squeeze margins.

ACE said the deal with Boeing, to be finalized by mid-year, would help it cut costs in the long run as fuel prices soar.

"The operating cost of the 777 and 787 will be significantly less than our current airplanes," said Robert Milton, ACE's chief executive. "The acquisition costs will be spread over several years and the asset values of the aircraft we will replace and sell are significant."

ACE said it will sell more than 60 wide-bodied aircraft in the next decade to raise cash to help buy the new planes.

Separately on Monday, Boeing said Panamanian airline Copa had ordered up to 15 additional Boeing next-generation 737 jets, including five firm orders. Copa is 49 percent-owned by Continental Airlines Inc. .

Shifting to the largest end of Boeing's product line, General Electric Co. (GE) said Boeing had selected GE's next- generation jet engine to power its 747 Advanced airplane.

Boeing is trying to sell the 450-seat jet to keep a toe- hold in the market for the largest passenger jets, where the Airbus A380 threatens to eclipse Boeing's current 747.