Last week I told you that American Airlines was poised to buy new widebody aircraft. At Wednesday morning’s annual shareholders meeting, CEO Robert Isom acknowledged that the airline “has an RFP in the market” with both Airbus and Boeing as they work on their “next order for widebody aircraft.”
Isom noted that American currently has:
- 19 widebodies on order
- Options for 28 more
- An expectation of retiring Boeing 777s in 2030s
He downplays the urgency of the order, framing this as a need for long-term planning given the long timelines involved in acquiring aircraft, and noting that they already have done their narrowbody fleet planning.
Two years ago American placed an order for 260 narrowbody aircraft: 85 Airbus A321neos, 85 Boeing 737 MAX 10s, and 90 Embraer E175 regional jets. They also took options on 193 more planes. I had been first to report that this order was in the pipeline about 9 months earlier.
In fact, the need is much more urgent than framed at the stockholders meeting. American Airlines retired 40% of its long haul planes during the pandemic. They retrenched to becoming primarily a domestic airline, with long haul flying outside of South America mostly to partner hubs like London Heathrow, Tokyo, and Sydney – plus summer seasonal Europe. While Delta and United have international partnerships, American relies on those more to carry its customers around the globe.
And they’ve been cautious in adding large planes that can fly passengers around the globe to their fleet. The airline last ordered widebody aircarft 8 years ago – but they’ve even deferred some of the Boeing 787-9s they ordered at that time.
Brian Znotins, who runs network planning for American, has said he prefers domestic flying over international. He also prefers “adding a second frequency to some destinations, using two of these smaller planes instead of one larger one.”
[T]hat sixth trip from DFW to Indy is what we’re going to be earning a profit on instead of going to some speculative destination in Europe or Asia where you don’t have as many people wanting to go there and we’re not as successful on those routes.
The Airbus A321XLR was supposed to be American’s small ball strategy to fly long haul, but they’ve even cut back that order from 50 to 40 (the plane doesn’t have the originally-promised range).
A great deal has been changing at American Airlines. They no longer see Frontier Airlines (and Spirit) as their primary competitor. They’re trying to reposition themselves as a premium global airline. And for that they need planes.
A couple of months ago I wrote that “a long haul aircraft order is now expected, and the Airbus A330-900 seems plausible (for delivery slots) even though American eliminated Airbus widebodies for simplicity.”
I wrote last year that there was finally talk of a new widebody order. CEO Robert Isom has previously said that the 787-10 isn’t a good fit for American. But circumstances change, and the actual deal on the table can change these things, too.
Boeing and Airbus have huge order backlogs. Isom has said that doesn’t matter, American Airlines is an important enough customer that airframe manufacturers will find the planes to sell to them. But my A330 suggestion comes from potential for delivery slots. There would be a certain irony in this, since they gave up all their A330s. But some of those were due for retirement, there’s a different CEO now, and a realization that the previous strategy wasn’t working.
Notably, Isom’s confirmation about a planned widebody aircraft order is confirmation both of what everyone knows American Airlines needs to do – and of leaks in the past and as recently as last week by JonNYC and of my telling you in March that “a long haul aircraft order is now expected.”
“small ball strategy” love it
DL might or might not have gotten 787 delivery slots earlier but I doubt Boeing has alot if any significant 787 delivery slots any time soon.
Besides, UA has to get rid of scores of older 777s and they already have massive 787 orders right now. All of those new deliveries while cash flow is down due to higher fuel prices will add debt for UA. New aircraft that are just used for replacement won’t do much to increase revenue – but they will decrease near-term operating costs.
I’m not sure why AA thinks the 787-10 isn’t a good fit for them but that just leaves AS, DL and UA to enjoy the advantages of that plane – which is great for 10 hour flights- most TATL and S. America flights.
I think the 339 is where AA will land. It is smaller than the 787-10, it is readily available and it is much lower cost than the 787 since it isn’t a brand new composite aircraft – but still manages to post comparable operating costs to the 787 on 10 hour segments.
AA is probably also finding out – as I have said – that the XLR just cannot do what it claims esp. at competitive costs to widebodies including to carry cargo.
Let’s go Boom 🙂
Might even be delivered before the big guys. 😉
They should just lease/buy some aircraft from QR. A lot of them are parked around the world gathering dust.
@Tim Dunn — I wouldn’t discredit the XLR (other than the whole seat issue Delta faced); however, for AA and for widebodies, hope they go with 339 or 350.
@Common Sense — Yeah, soon after Boom finds a working engine… any.. day.. now..
I don’t see AA ordering the A330NEO. Remember, AA is open, they make money flying to Latin America year round, Europe during half the year except London, and beyond that maybe to their One World partner hubs in Asia (NRT/HND, HKG, SYD). So yes, they need to replace their 777-200ERs but airlines value fuel efficiency and the 787 is just more fuel efficient, especially the 787-10 vs A330NEO. The 787-10 can make all of AA’s Latin America routes from DFW and MIA and can make all of AA’s Europe routes from JFK/PHL/CLT/MIA/ORD/DFW. So I see AA ordering more 787-9 and 787-10. Yes, they’ll have a long queue in front of them, but as a major Boeing customer they will be able to move up as orders are cancelled.
American Airlines should use American airplanes. 787-9s and 787-10s for those widebody orders, and stay away from Airpus garbage.
Spectrum Boy, cannot help bringing UA and Georgia Klan Air into an AA discussion, but again facts are stubborn things. UA is not getting more debt for their current orders, even though you oddly wish it so. If one reads the reports filed by the airlines, one would know those have already been financed, locked in, and basically paid for. The rates are not negotiable now and they are favourable in this envirnoment. Doesn’t Ever Leave The Airport actually has flux financing on an entire tranche of jets, so maybe you are projecting?
As for AA, it is a smart move to rectify the Vasu Raja-ing of the past and COVID mis-steps and will allow them to grow a bit to South America, where they have strength and bolster primary Europe and North Africa. Regardless of whatever kompromat Isom has on the BoD, they will like this move. And it helps down the road with locales like PHL as well, which are pegged to grow trans-Atlantic based on recent reports. Bravo AA.
@Common Sense – If you’re in that big of a hurry, nothing is going to beat photons over fiber-optic lines (i.e. teleconferencing). From a commercial standpoint, “Boom Supersonic” is a solution in search of a problem.
Since I’ve never been the CEO of an airline, I’m not qualified to make claims about the “mistakes”, or the lack thereof, of any airline management teams. But I can make a couple of observations based on what I’ve seen and heard. These are strictly my opinions. They are not facts. And I’m not going to present them as facts. I try (not always successfully) not to conflate opinion and fact.
In checking Airbus’ website, it still shows the A321 XLR’s maximum advertised range as 4700 nm. It’s quite possible that Tim Dunn’s observation (written elsewhere in these comments) is much of what drove the reduction in American’s order.
I’m guessing (and only guessing) that American will probably opt for more 787s (exact model(s) unknown). The only reason I believe this is that American has long had a bias for both GE engines and fleet simplicity.
One thing critics have going for them is 20/20 hindsight. Yet, history has often shown that decision makers can draw the wrong lessons from the past.
@O’Hare Is My Second Home — Ugh, insufferable… you, fine Illinois brethren.
@1990 – It’s pretty telling that, per their website, Boom appears to be pivoting into building gas-turbine generators for Text Extrusion Machine datacenters.
@Denver Refugee — Ahh, yes… Boom… the AI company… just like Allbirds… *facepalm*
Jim,
do you think that you could follow the example of 1990 and a few others, even Ghost, that can disagree w/ people without engaging in personal attacks.
Airbus simply builds good, reliable aircraft and they delivered more widebodies to DL for 2 years post covid than Boeing could deliver 787s to AA, AS and UA combined
the 339 is readily available and it is a proven competent aircraft.
and, despite what some right, it has very similar fuel burn on 4000-5000 mile seg,ments as the 787 but the 339 costs a whole lot less to acquire – which is a key factor for AA.
I don’t know why AA is ruling out the 787-10 but they do seem to be less interested in large widebodies.
The long term prospect of high fuel costs mean that a lot of older generation widebodies will be retired; AA’s interest in replacing its 777-200ER fleet is undoubtedly because the cost of refurbishing the cabins on top of higher fuel burn and higher maintenance costs doesn’t work in their forecasts for the next 10 years.
The same is certainly true of UA’s 777-200/ER fleet; whether people can admit it or not, UA will use a much larger portion of its 787 orders for fleet replacement than people are willing to admit.
and UA’s debt is increasing; they are taking delivery of aircraft by paying cash but then engaging in sale/leaseback transactions which is debt according to GAAP principles.
Higher fuel costs mean UA (and every other airlines’) cash generation is reduced; UA’s massive orders – including many aircraft which are delayed but Boeing is now starting to deliver on top of previously contracted deliveries for this year and next – means that UA will have massive capex commitments – on top of all of the new terminals that are coming online and which UA will have to occupy. High fuel prices mean capacity cannot grow.
UA’s high growth/high spending strategy was always very risky particularly to situations like now with high fuel prices and/or a weaker economy.
In contrast, DL has made continuous purchases of aircraft at about 60% of the capex of UA even though DL has higher profits and income.
AA cannot and will not spend money like UA is doing but they have to renew their fleet and they cannot afford to buy the volume of aircraft that even DL is buying.
With 28 current options on 787s doesn’t that give them advantages in slot sequencing? The 330neo and -9 are essentially identical in pax capacity with the latter giving the advantage of not just Atlantic coverage but also transpacific. Clearly for Atlantic routes nothing beats the -10
The fact that no expansion of MCE seating to the match the scope DL/UA offerings has been announced leaves me questioning whether AA has fully decided who their competitors are.
Do they still own the 330’s they retired? Gary wrote a couple of years ago about how a couple of their 330’s were sold to Qatar or someone like that. If they still own them, are they still paying for them? How does all that work?
“Why use what you have when you can buy new” -says not very smart people…
Here’s hoping AA goes for the A330neo.
Mainly because I’m a big fan of the 2-4-2 coach config vs the 787 3-3-3.
You’d think Airbus would be inclined to make a sweetheart offer to get AA back on board with their widebodies. Add in earlier delivery slots than Boeing…and it’s a great deal!
I do wonder if AA has any interest in the 777x. Part of me thinks AA might think it’s too much plane for their needs.
Spectrum Boy, I will put $10k in an escrow for you and give back my Ed.D. in psychology if you test negative for being in the spectrum. It is just who you are: that is not an insult. Words like stupid, dumb, moron, etc. thrown at a person are insults. Noting you reside clinically in the spectrum based on your posted prose at Alpha and on various sites is not an insult, just a trained observation.
The rest of your writing about aircraft and the financing is, per normal, factually inaccurate, as are many of your replies. Especially since UA did not take more debt on those planes (even on the GAAP) break down. When you have to lie or redirect and move goal posts you are not helping your cause.
It would be quite the slap in Scott Kirby’s face for Airbus to sell A330NEOs to AA with delivery times far sooner than what UA could get for the A350 or the B777X.
and the 330NEO is also powered exclusively by Rolls Royce Trent 7000 engines – a version of the same engine that is available as an option on the 787-9. The 339 engine has had far fewer problems and what it has had are being corrected.
and DL is the exclusive MRO provider for the Trent 7000 in the Americas – but AA and DL have done reciprocal engine work for each other in the past so it is unlikely they will object the way UA will.
AA is being rationally run and trying to get back on course – even with slim margins for error – while UA is being run like a drunk sailor trying to return to the ship from a wild night onshore.
@Tim Dunn — “AA is being rationally run…” that is not the usual sentiment shared on this site… bah!
@1990: While not discounting the difficulty of what they’re trying to do, they are actually quite promising (pun not intended). They are trying to build their own engine and having AI companies find it and use it a test base is actually an amazing idea, providing that they can execute on it.
Their blog is pretty fascinating. But they still have a way to go.
I see more B789’s and possibly the B787-10. For AA’s needs, the B787-10 will be the perfect replacement for their B77E’s. Their B77W’s aren’t going anywhere for a while either.
@Common Sense — I’m still rooting for AA (and B6), because I want them to survive and improve. (Oh, wait, you were referring to Boom… psh, nope, that’s a pipe-dream. All hype.)
1990: Doesn’t seem like you bothered to take the time to understand what they’re doing and how they operate differently than the other aerospace companies.