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American Airlines Plans Largest Aircraft Order in Aviation History

July 20, 2011 By: George Dooley Travel Agent


(c) 2011 American Airlines

AMR Corporation, the parent company of American Airlines and American Eagle,  announced landmark agreements with Airbus and Boeing that will allow it to replace and transform American’s narrowbody fleet over five years and solidify its fleet plan into the next decade.

The new aircraft will allow American to reduce its operating and fuel costs and deliver state-of-the-art amenities to customers, while maximizing financial flexibility for the company, AMR said.

AMR Corporation also reported a net loss of $286 million for the second quarter of 2011 compared to a net loss of $11 million in the second quarter of 2010.

AMR said the company’s second quarter financial performance was negatively impacted by fuel prices that increased 31 percent compared to the second quarter 2010. Including the impact of fuel hedging, AMR paid on average $3.12 per gallon for jet fuel in the second quarter of this year versus $2.37 per gallon in the second quarter 2010. As a result, the company said it paid $524 million more for fuel in the second quarter 2011 than it would have paid at prevailing prices from the corresponding prior-year period.

“This past quarter was challenging in many respects,” said Gerard Arpey, Chairman and CEO of AMR and American Airlines. “We remain acutely focused on taking the necessary steps to manage through our near-term challenges while continuing to lay the foundation for long-term success. "

Under the new fleet agreements, American said it plans to acquire 460 narrowbody, single-aisle aircraft from the Boeing 737 and Airbus A320 families beginning in 2013 and continuing through 2022 – the largest aircraft order in aviation history. As part of these agreements, starting in 2017 American will become the first network U.S. airline to begin taking delivery of “next generation” narrowbody aircraft that will further accelerate fuel-efficiency gains.

These new deliveries are expected to pave the way for American to have the youngest and most fuel-efficient fleet among its U.S. airline peers in approximately five years.

American also said it will benefit from approximately $13 billion of committed financing provided by the manufacturers through lease transactions that will help maximize balance sheet flexibility and reduce risk. The financing fully covers the first 230 deliveries.

Arpey noted that the order represents another important step in the company’s strategy to build a strong foundation for the future.

“We have a long track record of meeting our obligations to all of our stakeholders, including strategic partners, lenders, suppliers and investors. We believe this history continues to help us navigate today’s challenges while remaining focused on doing what’s necessary to position American Airlines for long-term success, and we look forward to working with Boeing and Airbus to achieve it,” Arpey said.

“Today’s announcement paves the way for us to achieve important milestones in our company’s future, giving us the ability to replace our narrowbody fleet and finance it responsibly. This was an incredible opportunity for our company that presented itself from two great manufacturers. And, given our aggressive and ambitious fleet plans, we feel fortunate to have both Boeing and Airbus standing beside us to meet our needs. With today’s news, we expect to have the youngest and most fuel-efficient fleet among our peers in the U.S. industry within five years. This new fleet will dramatically improve our fuel and operating costs, while enhancing our financial flexibility. More than that, with the power of our network and partnerships and the dedication of our people, we will be an even stronger competitor," Arpey continued.

Said Tom Horton, President of AMR and American Airlines: “Our efforts in recent years have transformed nearly every corner of our business. We’ve strengthened our liquidity, focused our network and alliance relationships on serving the world’s most important markets with the best partners, enhanced our products and services with industry-leading technology, and worked to improve the customer experience. Today’s announcement will accelerate this transformation, delivering important benefits to our shareholders, customers and employees.”

Under the agreement with Boeing, American plans to acquire a total of 200 additional aircraft from the 737 family, with options for another 100 737 family aircraft. American has the flexibility to convert the new deliveries into variants within the 737 family, including the 737-700, 737-800 and 737-900ER.

As part of the Boeing agreement, American will take delivery of 100 aircraft from Boeing’s current 737NG family starting in 2013, including three 737-800 options that had been exercised as of July 1, 2011. American also intends to order 100 of Boeing’s expected new evolution of the 737NG, with a new engine that would offer even more significant fuel-efficiency gains over today’s models.

American’s most recent deliveries of the 737-800, with 160 seats, include the all-new Boeing Sky Interior, offering larger overhead bins that pivot down and out similar to those on the 787 Dreamliner, a contemporary feeling of spaciousness and variable LED lighting options for cabin ambience.

“We are pleased to continue our long and successful partnership with American Airlines,” said Jim Albaugh, President and CEO of Boeing Commercial Airplanes. “While the 737 family will continue to serve an important role in American’s narrowbody fleet – delivering customer and cost benefits in both its current form and future evolution – as American’s primary widebody partner, we are excited to deliver to its customers all of the benefits and cutting-edge technology of the Boeing 787 Dreamliner and the 777-300ER. We look forward to strengthening our partnership for the future.”

American also will acquire a total of 260 Airbus aircraft from the A320 Family and will have 365 options and purchase rights for additional aircraft. American has the flexibility to convert its delivery positions into variants within the A320 Family, including the A319 and A321.

American will take delivery of 130 current-generation Airbus A320 Family aircraft beginning in 2013. Beginning in 2017 American will begin taking delivery of 130 aircraft from the A320neo (New Engine Option) Family featuring next-generation engine technology. The new aircraft are approximately 15 percent more fuel efficient than today’s models. American will be the first network airline in the U.S. to deploy this new-technology aircraft.

“American’s order represents a strong vote of confidence in our product in the important North American market, and we feel certain our A320 Family aircraft will help the American team deliver a great experience for customers while helping the airline to achieve cost efficiencies that will benefit its shareholders,” said Airbus President and CEO Tom Enders. “We are proud to renew our partnership with a company that has a long history of airline industry leadership.”

The 737 and A320 families offer significant cost reduction opportunities in replacing American’s older fleet, AMR said. The agreements with Boeing and Airbus will continue American’s fleet simplification efforts, allowing American to transition four fleet types (MD-80, 737-800, 757 and 767-200) to two (the 737 and the A320 families, which offer significant commonality benefits within each family).

With a total of 465 options and purchase rights for additional aircraft from both manufacturers through 2025, these agreements give American the flexibility for replacement as well as growth opportunities under the right economic and financial conditions, with the ability to acquire up to 925 aircraft in total over 12 years.

Beyond today’s announcement, American said it continues to execute on other elements of a comprehensive fleet renewal plan that will deliver customer benefits in a range of aircraft types and sizes.

“While our network is our core product, designed to take our customers where they most want to go, our fleet is a critical element of our ability to deliver a superior travel experience, safely, reliably and comfortably,” said Virasb Vahidi, American’s Chief Commercial Officer, who leads American’s fleet and network planning and strategy. “With today’s announcement, I am confident that we will be able to meet our customers’ needs for decades to come with a modern fleet that will be second to none.” 


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George Dooley
George Dooley, Travel Agent’s senior contributing editor covering retail and technology, has a long-standing reputation as one of the top travel industry journalists. He notes...

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By George Dooley | July 20, 2011
The new aircraft will allow American Airlines to reduce its operating and fuel costs, which were the main factors contributing to a net loss of $286 million for the second quarter of 2011.