Air Canada Banks on Efficient Airbus Jet as It Explores New Routes

An Airbus A321XLR aircraft during an Air Canada preview event in the Montreal region. Photo by Nasuna Stuart-Ulin /Photographer: Nasuna Stuart-Ulin

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(Bloomberg) — Air Canada is making a major bet on a new fleet of A321XLR planes manufactured by Airbus SE to help open up new routes, generate revenue growth and save on fuel costs.

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Canada’s largest airline showcased the aircraft for the first time in Montreal ahead of a commercial flight debut next week. The company is trying to turn the page on months of negative headlines, including a strike by flight attendants, a fatal accident at New York’s LaGuardia Airport, the retirement of its chief executive officer after a public-relations crisis and the suspension of its financial outlook due to soaring jet fuel prices.

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The new single-aisle aircraft is the first of 30 Air Canada expects to receive from Airbus by the end of 2029 — a delay of about two years due to supply-chain issues. The narrowbody plane has a range of up to 4,700 nautical miles and a capacity of 182 passengers. 

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That will give the airline the flexibility to serve secondary routes, such as Toronto-Copenhagen or Montreal-Berlin, at lower cost, executives said. 

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The new Airbus jet “allows us to have either service year-round, whereas maybe before we were just able to do it in the summer,” Chief Operations Officer Mark Nasr said in an interview. “Or it allows us to have service on a daily basis, whereas maybe before we were servicing a market a few times a week.” 

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Canadians are traveling more to European and South American destinations as some shun the US in protest over President Donald Trump’s tariffs and his rhetoric about making Canada the 51st state. For Air Canada, passenger revenue on transatlantic routes rose 4% last year, but it dropped 10% for US flights. 

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The airline has launched new services such as flights from Montreal to Catania, Italy, and from Toronto to the island of Roatan, Honduras.

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The A321XLR consumes 20% less fuel than its previous generation, lowering the financial risk of exploring new routes, Nasr said. Air Canada has a target to raise its adjusted Ebitda margin to at least 17% by 2028, from around 15% last year. (Ebitda is earnings before interest, taxes, depreciation and amortization.) 

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In the new Airbus jet, Air Canada is introducing a cabin design that includes 14 lie-flat seats in business class — which it calls “Signature Class” — and ergonomic reclining seats in economy class. All seats include phone and tablet holders, 4K OLED screens, Bluetooth audio and free Wi-Fi.

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Most of the upgrades are in business class, where profitability is higher. “What we’ve seen, particularly since the Covid pandemic, is demand for premium experiences growing much more quickly than demand for the core product,” Nasr said. “As we’re going to take these new deliveries, we’re going to shift to be more of a premium offering, and we’ll grow revenue just by that change.”

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Air Canada also expects first delivery of Boeing 787-10 Dreamliner aircraft this year, on which it will test a higher level of business class that it’s calling “Signature Plus” — four suites in the first row of the plane, with a companion seat and a larger bed.