First Q400 deferral as Horizon reaches deal with Bombardier

By Mary Kirby

Alaska Air Group subsidiary Horizon Air has reached agreement with Bombardier on a new schedule for Q400 turboprop deliveries, representing the first such deferral by a Q400 customer.

A total 14 76-seat Q400s were earmarked for delivery to Horizon as of November 2008.

The carrier took a single Q400 in December and intends to accept delivery of a total five of the type in 2009 under an admittedly "conservative" plan, says a Horizon spokeswoman.

Two of the five Q400s will arrive in the first quarter, "possibly this month", she says.

The last eight Q400s will be delivered to Horizon in 2010 and 2011. Further details are expected to be divulged this week in a filing to the US Securities and Exchange Commission (SEC).

The delivery schedule is subject to change, however. Horizon is trying to time deliveries to coincide with the remarketing and removal of its Bombardier CRJ700s, as it transitions to an all-Q400 fleet.

Two of a total 20 CRJ700s have already been remarketed. Horizon expects to incur charges of between $2 million and $3 million associated with the transition out of these regional jets during the fourth quarter and delivery to a third party under a sublease arrangement.

However, the carrier must still find homes for the remaining 18 regional jets. There "is interest" in the remaining CRJ700s and Horizon remains "hopeful" of remarketing the aircraft, says the Horizon spokeswoman.

The carrier expects further charges in 2009 "as we exit the remaining fleet, although we cannot estimate the amount or timing of any 2009 charges at this time", says parent Alaska Air Group in a SEC filing.

As previously announced, Horizon predicts capacity in the first quarter of 2009 will be 14% to 15% lower than the first quarter of 2008.

Additionally, it anticipates full year 2009 capacity will decline by approximately 9%, although plans for the full year have not yet been finalized.

Despite Horizon's plan to slow delivery of its Q400s, Bombardier this week revealed it may boost production of the turboprop.

The programme has suffered supply chain challenges since Bombardier began moving fuselage work from Japan to China and Belfast. But production of Bombardier Q200s and Q300s is expected to cease mid-year when final orders are filled, and management hopes this will free up resources for its Q400 programme.

"We are studying whether we can ramp-up the Q400 production rate at our Toronto facility," says a Bombardier spokesman.

As of 31 October Bombardier had received total orders for 322 Q400s. Its backlog stood at 113 of the type.

© Reed Business Information 2009

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