Jul 20, 2011 4:54 - By: P. Ling
The board of American Airlines’ parent, AMR Corp., has decided to split a massive order for new planes between Boeing and Airbus. The order has been intensely fought over by both companies, and a lot more is riding on it than just an order for 460 narrow-body, single-aisle planes—the largest aircraft order in aviation history.
Airbus A320neo
American has been an exclusive customer for Boeing since 1996, and any inroads Airbus makes is a win for them.
After its narrow-body A320neo stole the Paris Air Show, Airbus aggressively courted American and offered it a $6 billion financing package.
The offer included an arrangement where a group of leasing companies would lease 70 planes to American, and Airbus would directly lease another 70 planes to American. The rest of the planes would have to be purchased directly by AMR.
AMR apparently took this $6 billion financing offer to Boeing and asked them to make a counter-offer.
Now AMR has announced that American will benefit from a total of $13 billion of committed financing provided by the manufacturers through lease transactions that cover the first 230 deliveries.
Boeing also responded by agreeing to provide American 737s with modified and more fuel-efficient engines. If it can do this on American’s schedule, it addresses one of the key reasons that AMR was ditching Boeing for Airbus in the first place—the more efficient A320neo, which offers 15 percent fuel savings.
But it’s too little and too late, because the AMR board has announced that they will be splitting the baby between the two plane makers.
“This was an incredible opportunity for our company that presented itself from two great manufacturers,” said AMR and American Airlines chairman and CEO Gerard Arpey. “And, given our aggressive and ambitious fleet plans, we feel fortunate to have both Boeing and Airbus standing beside us to meet our needs.”
Under the new agreements, American plans to acquire a total of 200 additional aircraft from the 737 family, with options for another hundred 737-family aircraft. American has plans to acquire 42 Boeing 787 Dreamliners, to be delivered starting in late 2014, with options for 58 additional 787s.
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. This includes delivery of 130 A320 planes beginning 2013, and 130 A320neo (new engine option) planes beginning 2017.
“American’s order represents a strong vote of confidence in our product in the important North American market,” 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.”
How this deal turns out is likely to make a big impact on the rest of the U.S. airline industry, with Delta ready to place an order by the end of the year. Southwest and United Continental Holdings are also mulling over placing new orders. If American is getting more fuel efficient single-aisle planes from both Airbus and Boeing, then the rest are going to want pretty much the same thing.
The point is that this deal commits Boeing to offering re-engineered 737s somewhere in 2018, instead of sticking with the original 737 for now and launching a completely new fuel-efficient replacement by 2020.
Airbus now has a firm foothold in the U.S. market, and Boeing will have to sweat hard to maintain the balance in the $1.7 trillion narrow-body jet sales estimated for the next 20 years.
Photo – Airbus
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