The aviation industry saw a significant change after Airbus officially took ownership of the CSeries, developed and previously ran by Bombardier. After gaining control of the aircraft, Airbus put a new name on the planes and turned them into the A220. The A220 is already beginning to attract the attention or airlines and has secured its first customer – JetBlue. However, to reach the sale objectives put in place, the manufacturer will need to provide the aircraft at lower prices than the standard.
Why JetBlue gets special conditions?
JetBlue placed an order earlier in July for the acquisition of 60 A220-300’s in an attempt to use them as replacements for its existing Embraer E190 aircraft. Although Embraer’s planes have served the company well, the A220-300’s will provide cost reductions as they offer a seating capacity of 130-160 seats, compared to the E190’s 100 seat capacity. The order includes options for 60 additional airplanes, active from 2025. What is interesting about the deal is that its overall price was between $1.4-1.7 billion when in reality, the total cost of the airplanes at their original price would bring the value of the deal to $5.4 billion. With the price of one jet placed between $23 and $28 million, JetBlue received a discount of up to 72 percent for its purchase.
Is such a discount normal?
The deal makes JetBlue the launch customer for Airbus’ A220-300 aircraft, following after Delta, who acquired the A220-100 airplane two years ago. Negative reactions have been received before in relation to Delta’s acquisition, as Boeing accused Bombardier of selling the aircraft to the carrier at unreasonably low prices, making competition unfair. As a result, the US Government had implied tariffs on Bombardier for its low sale prices, which were removed at the beginning of 2018. Sale discounts are often seen in the aviation market for larger purchases but the scale of the cost reduction received by JetBlue has attracted interest.
JetBlue’s ordered A220-300’s are scheduled for delivery from 2020 and the carrier has put high hopes on the aircraft and its capability of bringing significant benefits for the company. The carrier is expecting to receive its first four aircraft in 2020 and continue with deliveries until the full order is complete in 2025. The plane will provide an exceptional in-flight passenger experience, improved economics, reductions in noise and fuel consumption and an overall reduction in costs for JetBlue. The decision to acquire the A220 airplane is a natural evolution of the A320 Family growth within the carrier’s fleet.