American Airlines wants 47 Boeing 737s four years sooner. - NewsFeed Researcher Overview Of: American, Boeing, Americans, Airlines, Airline, Order, Aircraft, Orders, Md-80s, Delivery, Md-80, Planes

Mar-29-2007

American Airlines wants 47 Boeing 737s four years sooner

(topic overview)
CONTENTS:

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. (More...)
SEATTLE American Airlines wants 47 Boeing 737s four years earlier than its original request, a move that industry experts said could signal a wave of orders for new passenger jets. (More...)
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. (More...)
The carrier, a unit of AMR Corp., said it has notified Boeing Co. that it will begin pulling forward the delivery of 47 Boeing 737-800 aircraft under an existing purchase commitment made in 1996. (More...)
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. (More...)
Randy Harrison, a Boeing spokesman, said the announcement coincided with an upcoming deadline for American to request an accelerated delivery schedule. (More...)
American spokesman Andy Backover declined to elaborate on a potential 787 order. (More...)
'The U.S. legacy carriers can't put off for much longer ordering replacement planes, and that's what we are starting to see,' Scott Hamilton of Seattle, an aviation industry consultant whose Leeham Co. Web site provides news, commentary and analysis on the Airbus-Boeing rivalry. (More...)
American, which has not been through bankruptcy, decided to move faster to start replacing about 300 McDonnell Douglas MD-80s by having the 737s delivered in 2009-12, rather than in 2013-16 as previously ordered. (More...)

REFERENCES

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] The moves by the world's largest airline likely herald a surge in orders for new planes from the Boeing Co. and Airbus SAS from long-established "legacy" carriers, including several that have been through or remain in bankruptcy reorganization proceedings and now operate aging fleets, analysts said.[4]

SEATTLE American Airlines wants 47 Boeing 737s four years earlier than its original request, a move that industry experts said could signal a wave of orders for new passenger jets. [5] 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]

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 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.[6] "Our existing agreement with Boeing gives us ample flexibility for our long-term fleet plan," said CEO Gerard Arpey in a prepared statement. He said American can buy additional 737s on short notice and has "the right to purchase 787 aircraft."[7] Airline officials said the fuel savings with 737-800s would be about 25 percent. According to a statement issued by American chief executive Gerard Arpey, the airline's goal is to improve fuel efficiency of its fleet by more than 20 percent by 2020.[8] 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.[9] "We believe that beginning to replace some of our MD-80s in a measured way makes economic sense and represents prudent and strategic investment in our business that will bring long-term benefits to shareholders, customers and employees," AMR Chairman and CEO Gerard Arpey said in a prepared statement.[10]

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. [11] 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.[12]

The aircraft are valued at as much as $3.5 billion. The new fuel-efficient planes will help American begin retiring its aging MD-80 jets as part of a plan to reduce fuel use by more than 20% by 2020.[13] 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.[14] The 47 planes will make only a small dent in replacing American's fleet of 325 MD-80s whose average age is 17 years but the deal leaves the door open for the carrier to consider Boeing's next generation of narrow-body aircraft.[15]

In November 2004, American deferred 54 Boeing aircraft deliveries until between 2013 and 2016, from scheduled dates of 2006 to 2010. A month before that decision, it canceled orders for 18 Embraer jets at its American Eagle commuter carrier.[14] American needed to decide on aircraft now rather than wait for Boeing's next generation of narrow-body jets and to keep slots in the planemaker's crowded production line, Boeing spokesman Randy Harrison said.[14]

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.[16]

The carrier, a unit of AMR Corp., said it has notified Boeing Co. that it will begin pulling forward the delivery of 47 Boeing 737-800 aircraft under an existing purchase commitment made in 1996. [17] 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."[7] Following the events of 9/11, Boeing agreed to delay delivery of 737-800s into the 2013-2016 time frame. That agreement provided American with the ability to move those deliveries forward when market conditions warranted such a move.[18] 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.[19]

The new planes are to replace MD-80 aircraft in a move to lower operational costs, improve fuel efficiency and lower emissions and noise, the company said.[19] 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.[15] 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.[10]

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] American's announcement'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,' Ronald Epstein of Merrill Lynch wrote in a note to clients. 'We continue to expect more orders from these carriers in the next 12-18 months,' Epstein added.[8]

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.[14] 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.[20]

The airline estimates that the 737 uses about 25 percent less fuel per available seat than an MD-80.[21]

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.[15] American Airlines' efforts to secure new planes underscores the balancing act airlines face as the aerospace industry rushes to assuage growing appetite for jetliners.[22] The company noted that future decisions to accelerate the delivery of aircraft would depend on economic and industry conditions, as well as the financial condition of the airline.[21]

Airlines often trade delivery positions and American's position as the world's largest airline is expected to give it priority in securing production slots.[16] 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.[14] In a second announcement yesterday, the Fort Worth-based carrier disclosed it has rights to purchase the Boeing 787, although it hasn't ordered any of that model.[23]

The agreement included 103 firm aircraft orders valued at $6 billion, and purchase rights for 527 more over 20 years.[14]

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. [15] 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.[12] 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.[7] 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.''[14]

Replacing the aging planes is part of American's plan to reduce operating costs and fuel consumption.[21] 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.[10]

American spokesman Andy Backover declined to elaborate on a potential 787 order. "You can assume that widebody production times would be longer," he said. [7] Boeing, meanwhile, has recorded two years of record orders and has been increasing production following drastic cuts that resulted from the worldwide air travel slump that followed the terrorist attacks of Sept. 11, 2001.[8]

'The U.S. legacy carriers can't put off for much longer ordering replacement planes, and that's what we are starting to see,' Scott Hamilton of Seattle, an aviation industry consultant whose Leeham Co. Web site provides news, commentary and analysis on the Airbus-Boeing rivalry. [8] The carrier said it may accelerate more deliveries, depending on economic and industry conditions.[14]

American, which has not been through bankruptcy, decided to move faster to start replacing about 300 McDonnell Douglas MD-80s by having the 737s delivered in 2009-12, rather than in 2013-16 as previously ordered. [8] The jetliners carry an average list price of about $71 million each, though big customers like American get discounts.[22]

REFERENCES

1. AMR Accelerates Boeing 737 Deliveries | Chron.com - Houston Chronicle
2. Business & Technology | American Airlines puts rush on getting 737s in air | Seattle Times Newspaper
3. American speeds up 737 order
4. American Airlines wants 47 Boeing 737s four years sooner
5. SignOnSanDiego.com > News > Business -- American Airlines wants 47 Boeing 737s fast
6. Latest News | News | Hemscott
7. AMR Nears Fleet Changes
8. American speeds up order for Boeing 737s
9. American Airlines wants its 737s sooner - Puget Sound Business Journal (Seattle):
10. Tulsa World
11. StreetInsider.com - American Airlines (AMR) to Accelerates 737 Deliveries
12. American Airlines Advances Schedule to Replace MD-80s @ AMTOnline.com Top News
13. News Brief: American Airlines to Buy 47 Boeing Jets @ AMTOnline.com Top News
14. Bloomberg.com: Worldwide
15. Airline speeds plane delivery | WFAA.com | Business
16. American'agrees to buy 47 Boeing aircraft - Financial Times - MSNBC.com
17. AMR's American Air Accelerates Fleet Renewal Plan | Autos & Transport | Reuters.co.uk
18. WebWire | Boeing and American Airlines to Accelerate Delivery of 737-800s
19. American Airlines To Move Up Order Of Boeing Aircraft - Biz News - Playfuls.com - Business & World
20. AMR accelerates Boeing 737 deliveries
21. American accelerates 737 orders - Dallas Business Journal:
22. AMR Accelerates Orders For Fuel-Efficient 737's - Preview
23. KGBT 4 - TV Harlingen, TX: American Airlines wants 47 Boeing 737s four years sooner

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American Airlines wants 47 Boeing 737s four years sooner

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