In case you missed it, American has decided to buy an insanely large number of airplanes. With 460 orders and another 10 million options (ok, maybe just 465), this was easily the largest order ever for an airline. Not only did American order a lot of airplanes, but it gave the lion’s share to Airbus, a huge coup for the manufacturer. This is a huge chunk of change, so why is American, the airline with one of the weaker balance sheets around, playing with fire? A few reasons. This might actually be a smart move.
Unfortunately, we don’t know a ton of details about American’s plans just yet. We do know that American will buy 100 more current generation 737s, 100 737s with new, more efficient engines, 130 current generation A320 series airplanes, and 130 A320neo (new engine option) series airplanes. That comes to a total of 460. How will this massive buy fit into the airline’s fleet? That remains to be seen since American hasn’t said which versions of each series it will take. But we do know something.
When this order is fully filled, the MD-80, 757, and 767-200 will have disappeared from American’s fleet. The MD-80 retirement is no surprise. American has slowly been replacing those with 737-800s, and this will be the nail in the coffin for the older technology, less fuel efficient “Mad Dog” aircraft. I know a lot of people hate MD-80s, but I do have a special place for them. Soon enough, there won’t be any Douglas airplanes flying. Sad.
But time marches on, and it was a given that this would happen. Today, American has 214 MD-80s left in the fleet with 154 737-800s. There were previously 54 737-800s on order, so really, there were just 160 MD-80s that still needed to be replaced. That will undoubtedly happen with the 737 and A320 current generation airplanes on order in some form.
Then there’s the 757. It’s a great airplane that uniquely can fly passengers across the Pond to Europe, over to Hawai’i and into a variety of hot and high locations with ease. No other airplane has been able to duplicate this with so few seats, and even though it’s out of production, the airplane is still a strong performer. American has decided that it can replace it, but I don’t think that will be with one airplane. The 737 can do Hawai’i, the A321neo and next gen 737s should be able to get to Europe. It probably won’t be a one size fits all solution, but with these new-engined airplanes, there is finally a way to replace the 757.
The 767-200 is a niche airplane that primarily flies the JFK to LA and SF routes. That will be easy to replace, and probably should be toast sooner rather than later.
That’s pretty much what we know. The problem, as mentioned, is that we don’t know which airplanes in the series American will actually take. It notes that it has flexibility and can opt for any family member in each series, specifically the 737-700, 737-800, 737-900ER and the A319, A320, and A321 are mentioned. So what will the counts look like of each? We don’t know, and American probably doesn’t know either. The airline does like to talk about what amazing flexibility it has in this deal. It can make changes as it sees fit over time. One thing is clear; this will add a lot of airplanes to the fleet, and it reintroduces Airbus into the Boeing-loyal airline.
I’m still surprised that American bothered ordering from both Boeing and Airbus. It seems to me that Airbus had this thing sewn up thanks to Boeing’s refusal to move on an heir apparent to the 737 while Airbus had the A320neo. When Boeing finally budged (note that the new engine 737 isn’t approved yet by Boeing’s board but is part of the order), it was able to squeeze back in to the race. But why not pick one over the other? It would seem that with a re-engined option, one manufacturer could fill the need. But I think it’s all about money.
As part of this deal, there’s no doubt that American went back and forth to both manufacturers and played them off each other. They got the absolute best deals they could and then, they took them both. That’s a great move. There will be enough airplanes in each fleet to really not make much of a difference whether there’s one type or two. And this way, American can walk away with big money. In fact, the first 230 deliveries are already covered by financing from the two manufacturers. It’s like American is the kid who went up to its parents and asked for money . . . and dad handed over his whole wallet.
But with all these massive orders, American is still going to have a lot more airplanes than it has today. Let’s assume that American retires all its 757s, 767-200s, and MD-80s. That’s 299 airplanes out of the fleet but 460 coming in. Huh? That’s huge growth, and it doesn’t even count the options. I can’t imagine a need for that much growth, so how will this play out?
Some of it could be counting on the new-engined aircraft replacing some of the current generation 737s and A320s that come in, but there could be more to it. And that could lie with American Eagle.
American also announced that it will go ahead in spinning off American Eagle into a separate company. As part of that, the Eagle pilots got a guaranteed path into American with 35 percent of new hire pilots at American required to come from Eagle. American likes to say that it’s spinning off Eagle so that it can fly on its own and can start working for other airlines as well. Yeah, right. Eagle is expensive compared to other providers, and its chances aren’t great for getting new flying. The reality is that American really just wants to start looking for other airlines to do some of its express flying for less. So it spins Eagle off and slowly shrinks it into oblivion.
But remember, today American flies nothing smaller than the 140 seat MD-80. What if it chooses to get A319 and 737-700 airplanes as part of this order? You figure those would fly in around a 120 to 124 seat configuration. With that smaller airplane, could American start bringing mainline flights back to places that are served with 70 seaters today?
It might be a stretch, especially since my assumption is that the pilots aren’t going to work for less to win that flying back. But there are a lot of routes out there that are on 70 seaters today, like Chicago to Atlanta, that might work better with a larger airplane. American hasn’t had that type of capacity for years, so we have no idea how the airline would use it. But it could be a way of reducing dependence on Eagle, if labor is willing to take on the challenge.
In the end, we really don’t know what American’s strategy is. I doubt American even fully knows what it’s going to do with all these airplanes. But it is encouraging to see the airline make these moves. American is finally, actually, going to try to do something about its cost problem instead of continuing to whine about how others will eventually catch up. With sweetheart financing from the manufacturers and much more fuel efficient aircraft, this should help the airline keep costs down. If only we had more details to know for sure . . .
