Air Baltic is in the market for Boeing 737NGs as it looks to renegotiate interim leases on older-variant 737s ahead of its first Bombardier CSeries delivery in late 2015.
The Latvian flag carrier is streamlining its fleet under its 'ReShape' restructuring plan, initially aiming for a mix of 737s and Bombardier Q400s before replacing the former with at least 10 CSeries CS300s. By spring 2013 all remaining Fokker 50s will have been withdrawn and four additional Q400s will likely have entered the fleet, chief executive Martin Gauss says.
Air Baltic's forthcoming winter fleet will comprise nine 737-300s, two 737-500s, eight Q400s and five Fokker 50s. The airline also has five other Fokker 50s in storage or on the ground, and it wet-leases two Boeing 757-200s to Cambodia's Tonlé Sap Airlines.
"I hope [to firm up the CSeries order] this year," Gauss says. "We have asked external consultants to help us on the contract and the negotiation. We agreed in the letter of intent what time we intend to finish it ... it's definitely happening."
The first CSeries will arrive at the end of 2015, he says, with subsequent airframes arriving at a rate of one every one-and-a-half months. The 10 aircraft covered in the preliminary agreement will be used to maintain capacity as the 737s are gradually phased out. Any net growth will then be achieved by exercising Air Baltic's purchase rights for 10 more CSeries.
However, with all of the airline's older 737 leases expiring over the next two years, Gauss is also renegotiating interim contracts "piece by piece" - eyeing either lower rates on 737-300s or upgrades to 737-700s.
"We're looking actively for the -700s," he says. "We compare the -300 values with the -700, and if the -700 market is favourable then we will take used -700s instead ... We are discussing this basically every week with leasing companies."
Gauss credits the 737-700 with "lower fuel burn and maintenance advantages", but he will still consider 737-300s if the price is right. "We paid up to $207,000 a month for a -300 [before ReShape], and now we can get it for below $100,000," he notes. Four older 737s are up for renegotiation this year and two more in 2013, while two have been returned in recent months.
Air Baltic is also poised to exercise its options for four new Q400s - bringing the fleet size to 12 by next spring - in order to compensate for the exit of the Fokker 50s.
"The Fokker 50 fleet will be fully withdrawn by the beginning of 2014," Gauss confirms. "We are phasing them out gradually." Three of the aircraft are already in storage, two are in the process of being withdrawn, and the remaining five will fly over the winter before being taken out in spring 2013 - either to be returned early or kept in hangars.
Describing the fleet renewal as a "major part of the ReShape plan", Gauss says he expects significant cost savings from a more fuel-efficient, streamlined fleet. Airbus A320s are "not being considered anymore", he adds.