American Airlines has more debt than any airline in world history. The carrier just reduced its intentional fleet by retiring Airbus A330s, Boeing 767s and Boeing 757s. Yet last month the airline told employees they’d go out and buy more planes if the price was cheap enough.
Last week American converted 5 Boeing 787-8s on order to larger 787-9s and deferred those to 2023 when 25 of those aircraft are slated to begin delivery.
Late in the week CEO Doug Parker gave additional context on the carrier’s thinking on future aircraft orders at an internal employee event, a recording of which was reviewed by View From The Wing. Since American has just retired planes, when they’re ready to grow they’re going to need to buy new planes again since the ones they have on order largely just replace aircraft they’ve gotten rid of.
We wouldn’t purchase new airplanes to fly the routes we’re flying now, but absolutely once we get back to a new normal we will be looking to, we’ve now done what a lot of airlines told us to do, which is retire the older airplanes.
A lot of times you see aircraft orders to replace older airplanes. We’ve done a nice job, we have a very young and efficient fleet with all the retirements we’ve done.
So when it comes time to start growing again, which hopefully won’t be too long, we’re going to need to get some new airplanes in. The airplanes we have, even though we’re flying them all, they aren’t being utilized as much as they can be. So we can still get a good bit of growth out of the existing fleet. As we get beyond that we’ll start looking at new planes.
American Airlines Boeing 787-9
It seems that no one likes ordering planes as much as Doug Parker, as his airline also has 787-8s, Boeing 737 MAXs, and A321XLRs also on order.
That’s great news !!! Now to get rid of those 49$ fares.
Someone should buy Delta’s 777s and keep the 3-3-3 layout in Y.
Shockingly, American doesn’t have a fuel or maintenance cost advantage despite touting the newest fleet of the big 4 while Delta execs said during their earnings call that they are seeing a 10% reduction in fuel efficiency per seat mile because of its fleet restructuring over the past year.
I think alot of the buying are gonna be for their regional fleet also . Alot of the 140-145 regionals are slated to be retired and need replacement
What does this mean?
“we’ve now done what a lot of airlines told us to do, which is retire the older airplanes.”
@david it seemed like he mispoke, he either means they’ve done what a lot of airlines did or that they did what airlines need to do
DON’T WORRY ABOUT AMERICAN’S DEBT!
American has debt because they purchased new aircraft etc.
DELTA on the other hand, needs to upgrade more than 75% of its fleet!
DELTAS OLD TIRESOME 767’S,757 AND 717’S NEED TO GO.
DELTA WILL PAY HIGHER INTEREST and wait quite awhile for deliveries.
And with ONEWORLDS MEGA NETWORK the addition of Alaska and jetblue, the money will be rolling in!
Mark,
first of all both Delta and United still operate the 757 and 767-300ER and 767-400 and the reason is because all of those models still have fuel burn disadvantages per seat that are in the single digit percentages worse than newer models (the A321CEO compared to the 757-200) and the 787-8 compared to the 767-300ER. The A321NEO and 737MAX are more efficient than the 757 but not likely enough to offset the higher ownership cost.
Delta and United will both likely be launch customers for whatever new generation transatlantic aircraft Boeing launches because there is no good replacement for the 767s.
The 717s were acquired to replace 50 seat regional jets – of which Delta has only about 60 left in its contract fleet – far less than American or United – while the 717 is far more efficient than 50 seat RJs.
In contrast, according to data provided by each airline to the DOT, Delta’s 333s burn 25% less fuel per seat than American and United’s 777-200ERs in international configuration while the 339s burn 1/3 less fuel.
Delta has long run a more efficient maintenance operation which it uses to gain revenue from other airlines, essentially subsidizing the cost of maintaining Delta’s own fleet. Delta’s engine overhaul contracts with Pratt and Whitney and Rolls Royce are worth more than what Delta spent on its existing A321NEO, A330-900 and A350 orders.
And, Delta is deferring orders, just like every other airline, and paying lower interest rates than American – verifiable from their financial reports.
Delta expects to pay cash for aircraft deliveries this summer.
American has spent more on new aircraft than any other U.S. airline ever, doesn’t have a cost advantage, and will have to spend more to replace aircraft like the 777s for which it doesn’t have enough orders on its books.
I’m pretty sure it’ll be close to five years before any new major aircraft orders from either Boeing or Airbus can be delivered (with the exception of the Airbus A220, which is largely a niche aircraft at this point). The backlogs for the most popular models are huge, especially with all of the deferrals that have been made. I’m guessing the industry will be rather different by then.
Mark,
Where to even start with your comment. Aside from the misinformation on fleet composition, your comments make no sense as it relates to basic economics. There’s a bit more to debt reduction thank just filling aircraft. There cost of debt, which American pays the premium. There’s margin, which American continues to lag as they have for a decade. It’s basic business.
Delta has the best maintenance operation in the industry and as a result, they can fly older aircraft more efficiently and at a higher yield. It’s called business strategy. Have you looked at performance metrics for the past 5-years before the pandemic? On-time performance – Delta was consistently number 1, while American was near bottom. Same with flight cancellations. Same with customer service. Same with net profits.
Look at the Asian and Arabian air companies. They are still ordering new planes, because they belive in a bright future of travel. AA will lose it’s possitions on the international market, if they will not resume their flights soon.
Radio,
there are more than adequate delivery slots available for virtually all commercial aircraft models within the next five years. The A220 has one of the lowest availabilities because it still has relatively low production capability. If Airbus decides to build the A220 at one of its European plants, which it could do to increase sales and win large orders such as the proposed A220-500 which Air France and other airlines want, the 737MAX would then have all kinds of availability.
And virtually every major airline has large amounts of aircraft on option which are price and delivery date defined; however, American no longer publishes information on its aircraft options.
@Tim Dunn,
You’re probably right about the available slots. But the airlines are also at the point where they need to delever their balance sheets, and especially American (and its management and board are well aware of that). Delta mentioned its desire to delever during its earnings call, and American was preaching that mantra before the pandemic. All of that takes time. Southwest is in the position it is because of its history of steady capital investment. Its recent 737-MAX7 order is an example of that. Southwest committed to 100 aircraft, not 300. The problem with all companies is the need to balance needed capital expenditures with the need to clean up their balance sheets. In my opinion, American’s current problems stem from the fact that it (and US Airways) have historically deferred investment in new aircraft too long, and then went overboard to catch up (in stark contrast to Southwest’s measured approach). There is a long history of transportation companies that economized their way into oblivion by failing to make needed long-term investments in capital and equipment. Again, the key is to find the right balance (no pun intended – maybe).
you are correct in finding balance.
AAL simply bought too many now previous generation aircraft when it would have been better off waiting for newer generation aircraft. It also bought the 737-800/MAX8 and then tries to seat just about one row less passengers than AS DL and UA seat on their 737-900s/MAX 9s. And AAL still has 4 dozen 777-200ERs, the least fuel efficient widebody in the US carrier fleet, while seating about 45 fewer passengers on its 777-300ERs and about the same as DL puts on its A350-900s.
American has simply bought too many of the wrong aircraft.
Delta says it will pay cash for new aircraft deliveries this summer.
UAL previously invested heavily in its widebody fleet to the exclusion of its domestic fleet but that may change or else they will be forced to cut their capacity plans with the very likely permanent grounding of at least a part of its Pratt and Whitney powered 777-200/ER fleet. And UAL now has the oldest fleet.
let’s be honest, though. No US airline will either soar to the top or fall to the bottom of the industry by their fleet strategies which may cost them more but not disproportionately more than other cost items like personnel or their ability or inability to gain enough premium revenues.
Right way to have a medically centered catch 22 of correct minutes of a great time of the older past of a new quote of source 4 in airline open papers of the past.