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Air Canada seen buying Brazilian jet

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Air Canada seen buying Brazilian jetProblably the Embraer 170 !!:)From"Air Canada seen buying Brazilian jetBombardier's rival Embraer is considered to have an inside track on a pending orderBy BERTRAND MAROTTE00:00 EDT Wednesday, October 15, 2003MONTREAL -- Bombardier Inc.'s Brazilian rival, Empresa Brasileira de Aeronautica SA, has the inside track on a pending order for about 40 jets from Air Canada , an analyst says."We believe Embraer has all but clinched that order from Air Canada, even though [Air Canada] already operates some 30 Bombardier CRJ200s," Jacques Kavafian of Octagon Capital Corp. said in a research bulletin to clients yesterday."The Embraer aircraft being of newer technology and with a seating capacity that could stretch from 75 to 108 seats, may be better suited to [Air Canada's] need," he says.Bombardier's CRJ700 and CRJ900 regional jets offer about 70 and 86 seats, respectively. "Furthermore, [Air Canada] has already started shaping the media and public opinion to the shock that it is buying Brazilian jets, not from its Montreal neighbour, by publicly chastising the Canadian government's export loan subsidies."Having told everyone that Canada, like the U.S., Brazilian or [European Union] governments, subsidizes exports of aircraft but not the domestic sale of such aircraft, Air Canada is now in a position to place the blame on the federal government for having chosen the product of Bombardier's competitor," Mr. Kavafian said.Last month, Air Canada boss Robert Milton and Bombardier Aerospace president Pierre Beaudoin said Bombardier is at a disadvantage because it's technically ineligible for government export financing on domestic deals, unlike rivals Boeing Co. of Chicago, Embraer and Airbus Industrie of Europe.However, analysts have pointed out that Bombardier could structure a deal with Air Canada for export-finance eligibility by simply exporting the new jets to a foreign leasing company that would in turn lease the planes to Air Canada.Analyst Ronald Epstein, who covers Embraer for Merrill Lynch & Co. Inc. in New York, said last month that Bombardier likely has the "home court advantage" on the Air Canada deal.The fuss being made over the lack of export financing available to Bombardier is likely just a "negotiating tactic with the Canadian government," Mr. Epstein said in a research note, citing his colleague Ihor Danyliuk, who covers Bombardier from Toronto.Air Canada and Bombardier are based in Montreal.Bombardier spokesman John Paul Macdonald said yesterday the company does not discuss the status of potential transactions.Air Canada spokeswoman Isabelle Arthur also said the carrier would not comment, citing previous statements by Mr. Milton that a decision on which aircraft type or types to go with is expected before the end of the year.Mr. Kavafian, who says in the research note that he is downgrading his recommendation to "sell" from "hold," views Embraer as ultimately surpassing regional-jet market leader Bombardier."Large orders of regional jets are still elusive, and with Embraer launching its new program with more modern aircraft, we believe it could win greater orders than Bombardier, which has relied too much on its quasi-monopoly status to date and has not updated its regional jet program." While the 70-seat CRJ700 and the 86-seat CRJ900 are new aircraft productions, they rely on the older CRJ200 technology to give the products a commonality that we believe is less important than having a modern aircraft," he said.Bombardier's campaign to sell Air Canada on its CRJ900 and CRJ700 has highlighted the advantages of commonality within the Bombardier "family" of jets, which ends up being cheaper because of reduced crew training and maintenance costs.Last month, Mr. Milton played down talk that Bombardier is at a disadvantage because -- unlike its rivals -- it doesn't have a 100-seat model to offer.Air Canada is in the throes of a sweeping financial restructuring that includes major cost-cutting initiatives."

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So, basically, Embraer=cheaper cost of acquisition for cash strapped airlines!!:-wavePete

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