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![]() ![]() ![]() ![]() | Mar-29-2007 American speeds up 737 order(topic overview)CONTENTS:
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FORTH WORTH, Texas - American Airlines said Wednesday it plans to accelerate the delivery of 47 Boeing 737-800 aircraft, as it replaces some of its aging MD-80 fleet. The carrier said the move is part of its plan to improve fleet fuel efficiency by at least 20 percent by 2020. [1] American Airlines, the world's largest carrier, is accelerating delivery of 47 previously ordered Boeing 737-800 jets by four years as it begins replacement of some of its oldest planes. The earlier deliveries will not spur Boeing to accelerate its assembly line at the 737 plant in Renton. "This does not affect production rates," said Boeing spokesman Randy Harrison.[2] American, the world's largest airline, also disclosed that it has purchase rights for Boeing's 787 Dreamliner, though it has not yet ordered that plane. The development could be just the start of a surge in demand for new Boeing and Airbus jets by mainstay U.S. carriers, which hunkered down and simply tried to survive after the 9/11 attacks in 2001 sent the airline industry into its worst-ever downturn.[3] Most of the U.S. legacy carriers have large fleets of older, less fuel-efficient planes, and sky-high fuel prices are hurting airline profitability. American has about 300 aging McDonnell Douglas MD-80s and wants to start replacing them with new 737s from Boeing.[3] Mr. Arpey said the carrier's agreement with Boeing gives it "ample flexibility" in the long term. He added that American could purchase additional 737s on as little as 15 months' notice. "We believe that beginning to replace some of our MD-80s in a measured way makes economic sense and represents prudent and strategic reinvestment in our business that will bring long-term benefits to shareholders, customers and employees," he said.[4] American has notified Boeing that it wants delivery of three of the aircraft in 2009 instead of the previous 2016 schedule. In a statement, American said it plans to accelerate the delivery of other aircraft from their 2013-2016 delivery date to a time frame of 2009-2012, depending on such factors as future economic and industry conditions and the financial condition of the company.[5] Harrison said Boeing held delivery slots for American when the carrier deferred deliveries following the steep industry downturn caused by the 9/11 terrorist attacks. The contracts agreeing to those deferrals specified dates by which the airlines needed to decide whether to completely give up the slots, he said.[2] American, the biggest carrier by passenger traffic, joins other major airlines in placing plane orders after industry losses of more than $40 billion from 2001 through 2005.[6] American has returned planes, canceled aircraft orders or deferred deliveries at least four times since 2002. The carrier pared its fleet to six types of aircraft from 14 to simplify operations and reduce costs as losses built to more than $8.2 billion over five years through 2005.[6] The decision follows the carrier's return to profit in 2006 after five years of losses. The new planes will help American begin retiring its aging MD-80 jets as part of a plan to reduce fuel use by more than 20 percent by 2020.[6] Replacing some of American's MD-80s has become a priority, company executives said, as the price of fuel has escalated. American's 2006 fuel bill was $6.4 billion or nearly 30 percent of its total operating expenses of $21.5 billion. American's average fuel price per gallon last year was $2.01, up 16.5 percent from a year earlier and more than double its average price of 78 cents in 2000.[7] American estimates that the new 737-800s will consume about 25 percent less fuel per available seat mile a standard industry measurement for cost than the narrow-body MD-80.[4] While the MD-80 remains an excellent aircraft that serves us and our customers well, the new 737s will be a great addition to our fleet that will lower our operational costs, boost the fuel efficiency of our fleet and also bolster our efforts to lower emissions and noise levels," said AMR Chairman and CEO Gerard Arpey, in a statement.[8] American Airlines, Inc., a wholly owned subsidiary of AMR Corp., has accelerated its fleet renewal plan by beginning the replacement process for a portion of its MD-80 fleet.[9] NEW YORK - American Airlines said it will speed up replacement of its aging fleet of fuel-hogging jets, making the change earlier to a more efficient aircraft.[10] In another sign that legacy U.S. airlines have returned to life and will need new airplanes for the domestic market, American Airlines announced Wednesday that it will push up by four years the delivery of 47 Boeing 737 jets.[3] The Fort Worth-based airline said its board has notified The Boeing Co. that its wants "to begin pulling forward the delivery of 47 Boeing 737-800 aircraft under a previously existing purchase commitment."[8] Scott Hamilton, who publishes an online newsletter about aircraft manufacturers, says Boeing can provide major customers with deliveries as needed, even when other customers may have to wait longer for deliveries of sought-after aircraft like the 787. "What Boeing does is to reserve delivery slots for customers such as American," he says, "or they will overbook sales in anticipation that there will be some cancellations."[11] In 1997, Boeing tried to ramp up production too fast, and its assembly lines broke down when parts did not arrive in time. Boeing said it will not have to boost its 737 production any more than already planned in order to speed delivery of the 47 American 737s. Earlier delivery positions had been reserved for American in case they were needed, Boeing said.[3] Engine and airframe manufacturers are working on the next phase of aircraft, but have yet to make the breakthroughs in efficiency and emissions that would justify launching new models. Boeing recently said its 737 order book was full until early 2011, and has been cautious about boosting production across its product range to avoid the manufacturing problems that beset the group in the late 1990s.[12] The 737-800 is Chicago-based Boeing's most popular model, accounting for 61 percent of the 737 order backlog of 1,512 planes. It carries a list price of $66 million to $75 million, which doesn't include discounts traditionally given to airlines.[6] Shares of parent AMR Corp. dipped 84 cents, or 2.7 percent, to $30.40 in morning trading on the New York Stock Exchange, as airline stocks overall fell on rising crude oil prices.[13] ![]() The move approved by American's board and its parent company AMR Corp will pull forward the deliveries of all 47 planes to a 2009-12 timeframe from a 2013-16 schedule. [14] American will tap a previous agreement with Boeing to move up three deliveries of the single-aisle, medium range 737-800 from 2016 to 2009.[10] American needed to decide now rather than wait for Chicago-based Boeing's next generation of narrow-body jets to keep slots in the planemaker's crowded production line, Boeing spokesman Randy Harrison said.[15] The new jets will replace some of American's 300 MD-80s, which have an average age of 17.2 years and are the largest single jet type in the airline's 672-plane fleet.[2] In a note to clients after the American announcement, Ronald Epstein of Merrill Lynch said the news "supports our thesis that the current commercial aerospace cycle will be smoother than previous cycles as North America and Europe legacy airlines are just beginning to place orders for narrow- and widebody jets.[3] American Airlines' efforts to secure new planes underscores the balancing act airlines face as the aerospace industry rushes to assuage growing appetite for jetliners.[16] Robert W. Mann, an aviation consultant in New York, said American's 737-800 order was overdue. "The technological inefficiency of the MD-80 has been a known issue for a long time," he said. He also said that the MD-80 is the wrong size for today's industry and that some current routes using the MD-80 would be better served with larger airplanes that can bring in more revenue.[4] Spending on jet fuel is the carrier's second- largest expense, after labor. "It's time for them to do it,'' George Hamlin, president of Hamlin Transportation Consulting in Fairfax, Virginia, said today in an interview. "It's not only a question of high fuel costs with the MD-80s, but also a question of reliability.''[6] Replacing the aging planes is part of American's plan to reduce operating costs and fuel consumption.[17] American said the 737 consumes 25 percent less fuel per available seat mile than the narrow-body, twin-engine MD-80.[18] Last year, American decided against replacing engines on the MD-80s because it wouldn't generate enough savings.[6] ![]() American's contract with Boeing allows the airline to buy more 737s on short notice, as well as the right to purchase wide-body 787 Dreamliners. [6] Randy Harrison, a Boeing spokesman, said the announcement coincided with an upcoming deadline for American to request an accelerated delivery schedule. He said such an option is "not uncommon" for large orders.[4] ![]() The jetliners carry an average list price of about $71 million each, though big customers like American get discounts. [16] American is simply reversing the earlier deferrals, said airline spokesman Andy Backover. It will now take the 737s starting in 2009, through 2012, instead of the previously scheduled -16 timeframe.[2] The airline said any decision to accelerate deliveries will depend on economic conditions and the company's financial strength.[1] The winglet work is being done at American's Maintenance & Engineering Center in Tulsa. A "fuel smart" program begun two years ago has reduced fuel consumption by 95 million gallons a year, officials said, and the company hopes to increase the savings to 125 million gallons this year.[7] Harrison said that after the Sept. 11 attacks, the contract with American was rewritten so as to allow the carrier to defer deliveries to the 2013 to 2016 time frame.[11] The decision follows the carrier's return to profit in 2006 after five years of losses, and increasing pressure from fuel costs to fly more efficient airplanes.[2] ![]() Airbus, in need of cash, has responded more aggressively. This year, it has produced an average of 30 single-aisle jets per month, against Boeing's average 25.5 jets. [2] REFERENCES 1. AMR accelerates Boeing 737 deliveries 2. Business & Technology | American Airlines puts rush on getting 737s in air | Seattle Times Newspaper 3. American speeds up 737 order 4. Airline speeds plane delivery | WFAA.com | Business 5. Latest News | News | Hemscott 6. Bloomberg.com: Worldwide 7. Tulsa World 8. American Airlines wants its 737s sooner - Puget Sound Business Journal (Seattle): 9. StreetInsider.com - American Airlines (AMR) to Accelerates 737 Deliveries 10. newsobserver.com | American Airlines replacing old jets 11. AMR Nears Fleet Changes 12. American'agrees to buy 47 Boeing aircraft - Financial Times - MSNBC.com 13. AMR Accelerates Boeing 737 Deliveries | Chron.com - Houston Chronicle 14. American Airlines To Move Up Order Of Boeing Aircraft - Biz News - Playfuls.com - Business & World 15. American moves up Boeing order 16. AMR Accelerates Orders For Fuel-Efficient 737's - Preview 17. American accelerates 737 orders - Dallas Business Journal: 18. AMR's American Air Accelerates Fleet Renewal Plan | Autos & Transport | Reuters.co.uk ![]() |
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