American’s Widebody Plans Crystallize with 787 Order, A350 Cancellation

787, Airbus, Boeing

What American would do with its widebody fleet has been top of mind for a whole lot of people lately. In the last couple of weeks, the airline broke off negotiations with Airbus for the A330neo as a replacement for its orphaned A350 order, so it was pretty much a foregone conclusion that the 787 would win the day. Now that the order for 47 of the Boeing birds is official (with some options as well), we get a real sense of where American wants its widebody fleet to be. This dovetails nicely with a recent discussion I had with Vasu Raja, VP of Planning for American, about how the airline is using its 787s today.

Let’s start by looking at American’s widebody fleet including orders that existed before this announcement. It’s, um, diverse.

Aircraft Capacity # in Fleet # on Order
767-300ER 209 24
787-8 226 20
A330-200 247 15
777-200ER 273* 47
787-9 285 15 7
A330-300 291 9
A350-900 ? 22
777-300ER 304^ 20

*American has a 260-seat configuration on the 777-200ER as well, but that’s being standardized
^UPDATED: Addition of premium economy has reduced seats from 310 to 304 and retrofit is halfway done

This looks like the fleet of an airline in transition, and really, it is. The Airbus fleet is something of a relic. It comes from US Airways before the merger, and it was really focused on flying East Coast to Europe since that’s almost all of the intercontinental flying that US Airways did. Pre-merger American, however, had a much broader network, but it also had some really old airplanes which needed to go away. (*cough* 767s *cough*)

In this mix, you had a whole bunch of issues that needed to be resolved.

  • The 24 767-300s need to be retired sooner rather than later (or American needs to pour money into them).
  • The 9-strong A330-300 fleet is tiny and has the same capacity as the 787-9, so it was on its way out.
  • The A350 order would have created a small subfleet for a big airline, and it didn’t provide a benefit over the existing 777 fleet, so that needed to be modified.
  • Some of the 777-200s will be getting long in the tooth in the next few years and will need to be replaced.

So, yeah, there’s a lot going on here. With all of that, American had to find a way not only solve these problems but also simplify the fleet. Originally it was thought that American might simply convert its order for the A350 into A330neos, but a couple weeks back American said Airbus was out of the running. That made the 787 the obvious winner, as mentioned, and now we know the details.

  • American will get 22 787-8s starting in 2020 to replace the 24 767-300s
  • American will get 25 787-9s starting in 2023 to replace the 9 A330-300s and some early-model 777-200s
  • American has canceled the A350 order
  • (American will also defer some 737 MAX deliveries, but I’m not dealing with narrowbodies in this post.)

In visual form, this is what the fleet will eventually look like:

Aircraft Capacity # in Fleet
787-8 226 42
A330-200 247 15
777-200ER 273 < 47
787-9 285 47
777-300ER 310 20

In the long, long range you can imagine the A330-200s and 777-200s will go away as well, but there won’t be as much of a hurry to make that happen, because if you think about it, this kind of fleet mix makes a lot of sense. I think of these as falling in three categories:

Small Widebodies
The 787-8s can do a few missions, and this is something I talked about with Vasu when we discussed the new Latin America strategy. First, these airplanes can serve routes with limited demand but decent premium cabin needs. Think of something like Chicago – London which has high frequency and doesn’t need bigger airplanes. I’d imagine this might also show up on something like Philly-Zurich (which is a 767 today). Second, these airplanes are good “range” airplanes. Something like Dallas/Ft Worth – Beijing which needs a lot of legs under it but also isn’t a terribly-large market. That’s how they are mostly deployed today, but now there will be a third role as a 767 replacement.

Today the sexiest thing a 767 does is act as a pathfinder to develop new routes like the new Miami to Cordoba run. But most importantly, it’s a workhorse airplane that provides 1985-levels of service (in coach, at least) to swaths of leisure travelers in thinner markets over the Atlantic (as well as hub-to-hub and some shorter-haul Latin American flying). The 787-8 in the current configuration seems a little premium-heavy for these roles, so I wonder if we may see a more dense subfleet come out of this. Or maybe we’ll see the A330-200 take over more 767 routes while the 787 takes over current A330-200 routes. Either way, the 787 isn’t the perfect airplane to serve these markets, but it’s the best option currently available in American’s eyes. And once it starts coming in the fleet in 2020, those 767s can finally be put out to pasture.

The A330-200, however, is well-suited for Transatlantic flying, even if it’s an older-generation airplane now. Those 7- to 9-hour flights are probably just about ideal for the A330, and like I said, I imagine it’ll step in on some of those 767 routes today that could absorb a little more capacity.

Medium Widebodies
The 787-9 seems to be one of American’s favorite airplanes right now. You get most of the benefit of the 787-8 but with more capacity to drive operating costs down even further. Excluding London and Hong Kong, this airplanes flies all long-haul routes from Los Angeles for American now, for example. It seems to increasingly be the backbone of the Pacific. I imagine we’ll see it stretch into Europe more over time, as well, especially on routes with stronger demand.

The 777-200 may look smaller than the 787-9 in my chart, but that’s because it’s premium-heavy. This airplane has 37 business class seats (vs 30 on the 787-9), 24 premium economy (vs 21), 78 Main Cabin Extra (vs 36), and 134 coach (vs 198). So if American needs more premium capacity, this is the airplane to choose over the 787-9. In the long run, I imagine the 777-200 will go away, but that’s a very long way down the line. Even the early models won’t start going away until the new 787-9s start to show up in 2023.

Big Widebodies
Lastly, we have the 777-300ER all alone at the top. This is the big boy which will go on routes that a) need a lot of seats and b) have a lot of premium demand. After all, this airplane is the only one with first class onboard. It also has a whopping 52 business class seats. Look for it in the usual business spots like London, Sao Paulo, and Hong Kong.

Overall, this seems to solve American’s shorter-term fleet issues, and it creates a coherent fleet plan for the long run, especially with those options ready to be executed.

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33 comments on “American’s Widebody Plans Crystallize with 787 Order, A350 Cancellation

  1. What does this mean for the A330neo? People have been ringing the death knell of the A330neo (or at least the A330-800) ever since the Hawaiian 787 thing, but does this really mean the A330neo is in trouble? Or is it still premature to say? Or could it be saved by the A330 replacement market in the future?

    1. MK03 – Good question, as the A330neo has had a rough go of it lately. But the airplane is going to be made. It’s too far along. The -800 appears to be dead from a commercial standpoint, but the -900 still has a fair number of orders. It looks like it’ll end up being a niche plane unless Airbus gets some traction under it soon. When Boeing comes out with the 797 some day, that’ll probably kill the neo for good, but that’s years away.

  2. Re 787-8 “these airplanes can serve routes with limited demand but decent premium cabin needs.”

    They’re going to add premium economy into the current J mini-cabin, which should drop business class from 28 down to 20 seats.

    1. Gary – That is all rumor at this point. There will be a reconfiguration when they add premium economy but nothing has been announced. And for now, this is how they schedule these airplanes. A change in cabin config could alter that.

  3. From what I can see, it appears that the distinctions between small wide-body and large narrow-body airliners (in terms of seat count, passenger comfort, even range) have really narrowed in the past decade or so, and will likely continue to narrow. I’m sure the economics are different, but still.

  4. I recognize that the 767 is the oldest of the widebodies but AA’s birds are technically younger than the average of the same over at UA or DL. Is it just that those guys have so many more that they aren’t long-in-the-tooth there? From the Boeing marketing materials I’ve read the 787 is the modern day replacement for the 767 so in very simplistic terms this makes perfect sense. Also worth mentioning on the 777-300 is that in Y class you have 10 across seating. That would make me pine for that old 767…or go over to DL where the 777 & A350 are 9 across.

    1. A – American could pour a ton of money into the 767s and bring them up to speed if they wanted. But they decided long ago that it wasn’t worth doing because they wouldn’t want to keep them long enough to make it worth the investment. United and Delta looked at the 767 differently. United is even taking used 767s into the fleet.

      1. The other thing that is driving AA to not uprade the 767s and retire them, is that there is demand for used passenger 767s to convert into freighters. A fair number of the Amazon Prime Air planes were ex-AA 767s. The 767s have value on the resale market, but other airlines probably will fly them until they’re ready for the boneyard.

  5. Do you think they’ll ever order the 787-10? Also wondering how the economics are going to change on shorter widebody routes as they switch from 767 to 787. I had assumed that 787 had too much range and upfront cost to use profitably on something like east coast to Europe? If not-it’s odd that basically every other airline has used their 787s for ultra long haul instead of replacing 767s.

    1. Henry – The 787-10 could eventually be of interest, but at this point, I think American is probably happy with what it has. As for the 787 being too much airplane for Transatlantic, you’re right. But there are operating costs and there are ownership costs. If the ownership costs come down enough, then that can offset the operating costs. In other words, American probably got a smoking deal on buying these airplanes.

      1. “American probably got a smoking deal on buying these airplanes.” – Airbus said as much, when they conceded defeat, Brett. I’m presuming all these 787’s will come with GEnx, to avoid any Trent disasters…?

  6. It is perhaps most significant that, regarding the 767 replacement, American has no choice but to retire the 767 due to its poor reliability and outdated cabins even though the 787-8s will come into service perhaps just 5 years before the 797 or Boeing’s all-new middle of the market aircraft. DAL and UAL have said they are strongly interested in the 797 which will almost certainly have better per-seat economics than the 787 since it will not be capable of flying 14 hour flights and will undoubtedly incorporate new technology. DAL and UAL have managed and plan to keep their 767s (both -300s and -400s) in service until the market at least gets definition around the 797. Given that the 737 does not compete well in its largest variants against the A321, it is very likely that Boeing will have no choice but to develop an all-new aircraft that will cover the large narrowbody/small narrowbody segment. By ordering 787-8s now, American will very likely be competing against an even newer aircraft just a few years into the life of the newest 787s.

    1. If the 797 was available now, AA would surely order some to succeed the 767s. … the 787 seems like too much aircraft to be an exact 767 replacement, But by the time the 797 actually does come to market, AA may be ready to start retiring its remaining A330s. And presumably there’ll be some reshuffling of 797 and 787-800 routes, with the 787-8s moving to the ‘long thin’ routes of the late 2020s — routes that perhaps aren’t being flown, or thought of, today.

  7. I can imagine the 787-8s came with some attractive pricing/financing as well. Boeing must have been quite happy to get another large order from a blue chip customer given the 787-8’s relative sales struggles compared to the -9.

    1. Boeing had always said that they thought the -9 was the “sweet spot” for the 787 line. There’ve been just under 420 orders for the 787-8, which puts it well-ahead of the lifetime record for the 767-200, which had 249 orders (between the -200 and the -200ER).

      Another point of comparison, the A330-200 had just over 650 orders since it was launched in the early 90s – so the 787-8 isn’t doing too badly compared to the smallest variants of other widebodies.

  8. Isn’t there some sort of penalty to American for canceling their A350 order? Manufacturers spend years planning out their production issues based off of order books – and orders are such big publicity news every time one is placed – that it shouldn’t seem possible for airlines to just cancel willy-nilly. Otherwise, what’s to stop airlines from placing orders all over the place just to cancel them later and making order announcements like these meaningless?

    1. Frank – There often can be, but remember, everything is a negotiation.
      American is an enormous Airbus customer, so I would assume that they sat down, explained the predicament, and found a way to work it out without too much pain. It’s only 22 airplanes where AA today operates over 400 from Airbus alone, so Airbus wants to make sure to keep that relationship in top shape. (Maybe we can all dream that American started talking about a C-Series order now that Airbus is involved in that. I wish.)

  9. I’ve seen a lot of discussion about the MoM / 797 as it relates to this order. A thought to throw out there: Even though “…the 787 seems like too much aircraft to be an exact 767 replacement (to quote a reply elsewhere)…” the extra costs could be offset by the simplicity and flexibility made possible by having fewer types of aircraft in the airline’s fleet. That was part of the rationale given for choosing the 787 over the Airbus offerings. I’m guessing the GE engines played a part, too. Fewer engine types increases flexibility and reduces costs. All in all, a prudent choice.

    1. Fleet simplicity is supposed to cut costs but American has not shown that its fleet management costs are any lower than other carriers even where it has said it is pursuing a strategy of simplicity for a particular fleet. Remember, American ordered 767s and A300s side by side decades ago and even now has A320 and 737 aircraft on order. If fleet simplicity was really the issue, then it would carry through other fleet decisions that American has made and their fleet costs would show it.
      Part of the reason why fleet simplicity won’t be lower in this case is because the 787 is still a complex overly capable aircraft for the mission. Boeing would have had to discount more than 60% in order to get costs down to levels that will likely be below the 797. Remember also that DAL and UAL are likely to get launch pricing for the 797 when it enters service.

      1. This management team didn’t order all of those aircraft. Fleet complexity is one of the issues with mergers, especially among carriers this size. Delta’s fleet is more complex than American’s. But they apparently don’t mind because their fleet’s low acquisition costs offset the higher operating costs. It’ll be interesting to see what Delta and United do in the future, as both of their fleets are quite a bit older than American’s.

      2. Tim – As was mentioned, this management team didn’t make those decisions.
        But more importantly, if you have a big enough fleet,then it doesn’t matter. Those A320 and 737 fleets are huge and there’s not a ton of value when it comes to having 800 of one vs 400 of each. They’re big enough to be easy to support. Having 22 A350s, however, is a different story. You end up probably isolating to one or two hubs so you can keep the spare part inventory down. It’s already an issue with the A330s, but those have most remained isolated in old US Airways hubs as is. That’s not all that efficient. By sticking with the 787, they can flow them through all hubs and have a big enough fleet to justify having spares everywhere. So there is value in simplicity to a point.

        As for the 797, that’s too far away for it to be a viable 767 replacement for American’s purposes. Remember, these 767s need big investment if they’re going to keep flying much longer than the 3 or so years they have left. So could AA invest a bunch in that aging fleet and hope the 797 shows up in time? That’s a risk since we are very far away from that airplane being anywhere near going into service. Heck, it hasn’t even been launched yet. The 787-8 is already a generally unwanted airplane (most want the bigger ones), so I’m sure AA got a smoking deal.

        1. I was going to reply to Desert Ghost and say, “just watch — when the 797 comes to market, AA will order it.” And I’m not going to say that they won’t, but after mulling the matter over, I’m not so sure. For one thing, there’s the point that AA’s widebody fleet is so much smaller than its narrowbody fleet that the airline will indeed want to avoid having more types than necessary. And the other thing is, by the time the 797 is available, it’s likely that narrowbodies (A321LR) will have displaced widebodies from a substantial share of transatlantic traffic, just as they’ve displaced widebodies from domestic transcon travel. So it’s possible that when the 797 is rolled out, AA will decide that filling the gap between the A321 and the 787-8 isn’t worth bringing in a new type.

        2. I don’t have a problem w/ AA saying that they are ordering the 787 over the A330 because of fleet simplicity. Problem is that AA hasn’t shown that it can extract lower fleet costs.
          My issue is that the 787-8 is not a CASM effective aircraft for the Atlantic esp. given that AAL and UAL are upgauging their transatlantic fleets as new aircraft enter service while AAL is going the opposite direction.
          Sure you can argue that AA can’t wait for the 797 but that is the point; DL and UA have managed to keep both their 767-300ER and 400ER fleets in service and appear to have no immediate need to replace them.
          AAL gave up on maintaining the 767 fleet, its amenities are far inferior to the industry and AAs other aircraft types (and the 767 won’t be gone for several years either), and they will almost certainly have a bunch of 787-8s in their fleet for years after other carriers including DAL and UAL have a new generation transatlantic/small widebody aircraft.

          You are free to disagree but I can’t see how AA will end up in an improved competitive situation in a decade, esp. over the Atlantic where AA is already #3 of the 3 US airlines. There is a good chance that AA will be competitively worse off and yet few people will be willing to look back to this past weekend and realize where AA’s transatlantic strategies took yet one more hit.

          1. If you look at American’s updated investor guidance published on April 10, you’ll note that the 767s are being drawn down rather quickly. There will only be 5 in the fleet at the end of 2020. The goal of an airline is to be profitable, not to have the largest market share. Many airlines who went for market share over profitability have gone away.

  10. Cranky, would you agree that some of the options will eventually go to the 787-10 to replace the remainder of the 777-200ER fleet. Betweem the 9 and the 10 you can do everything the 772 currently does.

    1. Alex – I doubt even American knows that. It’s going to retire the 772s when the time comes, but that’s not going to start until at least 2023 and probably later (since the A330-300s need to be replaced first). So by the time American actually thinks about replacing the 772 fleet, it’s going to be so far down the line it’s not possible to really plan that far out.

  11. Why do you think AA switched from Airbus to Boeing? Do you think it’s because Boeing gave them a better deal, they want to move towards an all-Boeing long haul fleet, something else?

    1. A – Good question. I think it’s a matter of numbers. Pre-merger American loaded up on Boeing widebodies. When the US Airways team came in, they had only 24 Airbus airplanes, and that fleet wasn’t going to grow. Sure, they had the A350 on order, but that’s a new fleet anyway. Once you looked at the Boeing widebodies and the ability to slot in 787s, it probably made sense to go Boeing when US Airways never would have made that choice since it had no Boeing fleet to start with. That doesn’t mean Airbus wouldn’t have still been in the running. But the A350 had too much overlap with the 777, so they would have looked for a different type to fill another need.
      That’s where the A330neo came in. Now, my guess is Boeing really wanted that order, so it went rock bottom on pricing, and it allowed American to defer the 737 MAX deliveries. Remember, pre-merger American ordered a ton of narrowbodies as well, more than anyone else would want on order.
      American had so many coming in that it was going to start retiring 737-800s because it had more capacity coming in than it wanted. Now, it can keep the 737-800s longer and not have to worry about the MAX coming in. So I think there were probably a ton of reasons why this fell into place.

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