Mexicana closes in on 717s and evaluates CSeries

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Mexicana is close to finalising a deal to lease 25 Boeing 717s and is looking at acquiring the Bombardier CSeries as a potential replacement for the 717s when their leases expire in 2014 to 2016.

ATI first reported last week that Mexicana was negotiating with Boeing Capital a lease deal covering about 25 717s for its low-cost unit Click, which currently operates a fleet of 25 Fokker 100s.

Mexicana VP for corporate planning and fleet development, Ricardo Baston, told ATI in an interview yesterday the carrier has already signed a letter of intent for 25 717s and could finalise the deal as early as the end of this week.

"It's in the very late stages," Baston says, adding a series of contracts could be signed on 6 February. This includes a contract with Boeing Capital covering five-year leases on 25 717s, a contract with Boeing Commercial Airplanes covering spares and pilot training and a contract with Rolls-Royce covering engine support.

If the deal is finalised, Baston says Click will take delivery of the first four 717s in the April and May timeframe with roughly one additional aircraft to follow per month through early 2011.

He adds Mexicana plans to match up the delivery dates with lease expiration dates on Click's 25 Fokker 100. He says the first Fokker 100 lease expires in June and the last four leases expire in the first half of 2011.

Mexicana views the 717 as an interim solution and has already begun evaluating the new CSeries as a possible long-term solution for 717 replacement when those leases expire in 2014 to 2016. Bombardier plans to deliver the first CSeries in 2013.

"We're talking to Bombardier about CSeries," Baston reveals. "[But] we're not in a rush. This decision will take 18 to 24 months."

While Bombardier aims to secure orders this year from launch customers, Baston says Mexicana prefers not to be first. "To acquire an aircraft that is a paper aircraft would be very daring," he says.

Mexicana has also evaluated the Bombardier CRJ900 and Embraer E-190 but has decided to instead pursue leases on 717s for Click's short-term fleet requirement. Baston says the key driver was cost of ownership, explaining lease rates for the 717 have come down while it has become harder to lock in good rates on new aircraft due to the credit crunch.

"We like the E-190 but in today's context it will be very challenging to get competitive financing," Baston says.

With the 717 he explains Mexicana does not have to worry about trying to secure financing or be concerned about getting stuck with a payment plan that could become uncompetitive in two-to-three years. Boeing Capital is eager to place aircraft with Mexicana because 16 of its 717s have been sitting idle in the desert since Midwest Airlines returned them late last year.

"Boeing Capital has been very supportive of the deal," Baston says.

While the first 16 717s for Mexicana have already been identified as the ex-Midwest aircraft Baston says Boeing Capital has not yet identified the final nine. These could also come from Midwest if the Milwaukee-based carrier elects to phase out its remaining 717 fleet or from other 717 operators. Boeing Capital has some time to determine where to source these aircraft as these will be Mexicana's final nine 717s, slated for delivery in the second half of 2010 and early 2011.