Air Canada to Buy 34 Airbus Jetliners : Boeing, McDonnell Douglas Lose on $1.25-Billion Order

OTTAWA — Canada’s state airline, Air Canada, today said it will buy 34 A-320 jets from Europe’s Airbus Industrie for $1.25 billion, bypassing bids from two U.S. firms.

The airline, which is refurbishing its aging fleet, said it has taken an option to buy another 20 of the aircraft.

Two U.S. firms, Boeing Co. and McDonnell Douglas Corp., were also bidding on the hotly contested contract, but the four-nation European consortium had for some time been considered the front-runner.

The decision to buy the A-320 Airbus, the world’s first fully computerized civilian aircraft, was delayed following the crash of an A-320 at a July air show in France in which three people were killed and more than 50 injured.

But Pierre Jeanniot, the airline’s president, gave the 137-seat, narrow-bodied plane a vote of confidence.

“Air Canada is very pleased to be the first airline in Canada to operate the A-320 and start its fleet renewal process with an aircraft that the industry clearly considers a winner,” Jeanniot said.

Delivery of the 34 planes will begin in March, 1990, and continue until 1993, replacing an aging fleet of 33 Boeing 727s on short- and medium-distance domestic routes, the airline said.

Approved by Cabinet

Sources said Prime Minister Brian Mulroney’s inner Cabinet gave final approval for the purchase late Tuesday.

Earlier this week, a bill allowing the privatization of Air Canada, which will help finance the aircraft purchase, was passed by the House of Commons.

The airline plans to sell up to 45% of its shares to private investors and to use the proceeds--estimated at $292 million--as a down payment on the new planes.

The share sale would be the largest sell-off under the privatization program launched three years ago by Mulroney’s Conservative government.

Also today, Air Canada said it will ban smoking on all North American flights effective Sept. 3.

“We have decided to expand our nonsmoking policy, not only within Canada but also in the United States,” the airline said in a statement.

“This means all of our North American operations, including flights to Florida, California, Hawaii and Mexico, will become smoke-free.”

The change will make more than 80% of Air Canada’s 475 daily flights smoke-free. The other flights are long-distance routes overseas.

Air Canada first introduced no-smoking two years ago on commuter routes between Montreal, Ottawa and Toronto.

Smoking is prohibited in many public buildings and offices in Canadian cities, and a new law passed last month banned tobacco advertising in print and requires manufacturers to disclose all the toxic contents of cigarette smoke.