American places the largest aircraft order ever

Holy….

Yesterday American announced that they’ve placed the largest aircraft order in aviation history, completely modernizing their domestic fleet. The order includes over 260 Airbus 320 family aircraft and 200 Boeing 737NG aircraft, in addition to the 130 Boeing 737-800 aircraft that American has already taken delivery of or will be taking delivery of shortly.

This is in addition to the Boeing 787s and 777s they have on order.

When all is said and done, American will have the youngest fleet of any US airline.

This is shocking on a few levels. First of all, I’ve gotta wonder how American secured $40 billion worth of financing for aircraft, given that the industry isn’t exactly in great shape. More importantly, though I’m shocked by the sheer number of aircraft they’ve ordered.

I kind of assumed the legacies had paved out their business model at this point — they realize they can’t compete with low cost carriers domestically (not to mention there’s not a whole lot of money to be made there), so they’d outsource most of their domestic flying to regional airlines and focus on international routes, which are more lucrative.

American, on the other hand, is looking at a fleet of nearly 600 domestic aircraft, so clearly they feel otherwise.

Also, I love the “improved features” they list on their website:

  • Enhanced lighting options
  • Additional overhead bin space
  • A modern, contemporary atmosphere
  • Improved environmental footprint with greater fuel efficiency and reduced noise

C’mon, that’s pretty funny. Who needs decent entertainment options when you have things like… enhanced lighting.

Regardless, you can bet I’ll be looking forward to this. If only American picked up a few more interesting international destinations.

Comments

  1. Coins said… Also, I love the “improved features” they list on their website:

    Enhanced lighting options
    Additional overhead bin space
    A modern, contemporary atmosphere
    Improved environmental footprint with greater fuel efficiency and reduced noise

    Dan says… this could have been the copy when the 747’s were introduced back in the 70’s.

  2. It’s weird to me that they ordered two planes in very similar sizes. The -800 seats 162ish, the A320 seats about 150. I wonder why this was done. Was it to get more planes ASAP? Was it to secure some combination of financing that they wouldn’t get if they went all with one or the other? Was it to appease Boeing even though they wanted Airbuses, or appease Airbus after the A300s retired?

    Basically it doesn’t make sense to me.

  3. I will tell you my guess… They will link with jetblue so, the airbus are only for them… Its my guess and, i think i am the first to say about it…

  4. Aren’t most of these “orders” just orders with no or limited financial commitment? They aren’t like airline tickets (non-refundable).

    Also if their finances get bad enough they can file for bankruptcy and the commitments are gone (I think).

    @Matt, by working with both companies they got better financing and pricing. Obviously neither company wanted to miss out on a large order.

  5. I can honestly say I have no idea how they managed this. They have lost nearly $5 billion in the last three and a half years. They got their first 230 planes financed through the manufacturers, but if they do go bankrupt it isn’t like they keep the planes and shed the debt.

  6. I understand they got favorable financing terms based on the size of the order, but I still don’t understand how they can pay for this. Hasn’t AA lost money almost every year for the last decade? I don’t understand how they are still in business, let alone buying billions of dollars worth of new aircraft. I truly don’t understand airline math.

  7. Fun to see a320 with AA colors!
    Next step is to add great international routes and a couple 388!

  8. 2013 is a long time from now. They say that deliveries will start in 2013 but they don’t say how many years it is going to take to get all of those planes into their hands. Both Boeing and Airbus have pretty giant order backlogs these days.

  9. @Matt – The A320 order is part of AA’s preparation to take over America’s biggest operator of A320s – US Airways. 🙂

  10. I’d agree that either US Airways or JetBlue will get folded into American. US Airways is a legacy so they might be a little easier, but then they’d have to switch from Star Alliance to Oneworld (like CO went from Skyteam to Star before becoming part of United).

    OTOH JetBlue has agreements with AA already…but they’re a LCC. How does that even work? Say what you like about SWA/Airtran or Frontier/Midwest…by the time each twosome merged the smaller company was a LCC with some extra frills, not a legacy (with all the baggage that legacies carry).

    At any rate, I’m looking forward to flying non-rustbucket MadDogs between SAT and DFW when I (or a family member) flies AA due to it being cheaper than the alternatives. I actually prefer Airbii over 737s (comparing Frontier’s 319s to Southwest’s 73Gs) so that part of the order works fine for me, despite it not being for American metal.

  11. @Matt, the CEO said on CNBC yesterday morning that they went with two manufacturers in order to get the planes faster. Neither manufacturer was able to deliver the number of planes they wanted in a time frame they were looking for alone.

    I’d love to see US Air taken over by American. Living in Philadelphia, it really sucks when US Air is the majority of your best options

  12. Hmm… I thought they already had more than enough 737 orders in to replace all the MD-80s. I guess they are planning on replacing the 737s as they age out?

  13. The thought of an AA/B6 combination isn’t as hard as it seems. Just look at Jetstar and Quantas. Sometimes I think that is part of the reasoning behind the spin off of Eagle. Eagle/B6 can combine, get around all the pilot contracts and breach the 70-100 seat range. Then AA can declare chp 11, and combine with Eagle/B6 and perhaps US.

  14. “I’ve gotta wonder how American secured $40 billion worth of financing for aircraft, given that the industry isn’t exactly in great shape.”

    Well, the answer is rather simple, you actually answered it yourself:

    “Improved environmental footprint with greater fuel efficiency and reduced noise.”

    Fuel prices are what kills airlines, for AA this is simply a long term investment to make more money on fares.

  15. This is brilliant.

    As Pablo said, the improved fuel efficiency makes this work.

    On top of that, they just placed themselves as a big chunk of the order queue. This automatically makes those spots in the queue more valuable. If they don’t need or want the planes as fast as they would be available, they just sell those spots to others who want new fuel efficient planes. The competitors who don’t already have orders in the queue will have to wait even longer to get the more fuel efficient planes. And if newer, more fuel efficient, planes come out, they can just change the order to those.

Leave a Reply

Your email address will not be published. Required fields are marked *