Reading through financial filings can be a tedious task. American’s 10-Q for the third quarter of 2023 clocks in at 211 pages, and most of that is only of interest to the finance types. But there was something in there that Courtney Miller at Visual Approach picked up recently that I hadn’t seen elsewhere. American has quietly deferred 10 new 787s by a few years. The global US carrier with the fewest widebodies by far can’t find a place for just a few more. That’s worth a deeper look.
You can read Courtney’s report if you’re a subscriber. And if not, you should consider it. In it, he details what you can find by comparing that Q3 10-Q to the Q2 filing. In Q2, American was planning on taking 11 of those 787-9s in 2024, 10 in 2025, 4 in 2026, and 5 in 2027 for a total of 30. Now it will take only 7 in 2024 and 4 in 2025, moving the other 10 in those years to be delivered in “2028 and Thereafter.”
American notes that it entered into this agreement with Boeing in August of this year. But why? Courtney brought up a variety of ideas, but I went straight to the source. An American spokesperson gave this explanation:
We look forward to welcoming 30 new Boeing 787-9 aircraft that will introduce new interiors with more premium seating. We continually evaluate delivery schedules with our manufacturing partners and make adjustments as necessary based on our aircraft needs. Deliveries of our new 787-9 aircraft are still scheduled to begin in 2024, but we have adjusted the delivery schedule to better align with anticipated demand and our growth plans. We are proud to operate the youngest fleet among U.S. network carriers and plan to continue growing both our narrowbody and widebody fleets with more than 150 aircraft to be delivered over the next few years. [Ed note: bold emphasis is mine]
I originally had two thoughts. One was that this was American trying to defer expenses to clean up its balance sheet further. That should be a benefit here, but it apparently wasn’t the motivator. The real motivation appears to be that American just doesn’t have a place for those widebodies to make money in the near future.
This is particularly striking since American’s widebody fleet has declined since before the pandemic. Take a look.
American Widebody Fleet at End of Year
We all know the story by now. During the pandemic, American took the opportunity to eliminate the A330 and 767 fleets. It then got hit by 787 delivery delays and was constrained in its growth as demand took off. Those backlogged 787 deliveries have all been cleared, and apparently American now wants to pump the brakes.
At the end of this year, it’s projected that American will have 16 percent fewer widebodies than it had at the end of 2019. It won’t surpass that pre-pandemic number until “2028 or Thereafter” in the current plan.
Did American just have too many widebodies before? The answer is: it’s complicated. The widebodies American had before were cheap or paid off, so they could be flown differently than the ones American has now. Now, American has to pay for those expensive 787s by flying them a lot — and on higher revenue routes — in order to make up the cost of capital.
Let’s take a look at exactly how American has deployed the widebodies in terms of short-haul vs long-haul, which I divided at 2,750 miles. That keeps Miami – Seattle as a short flight but Kahului – Phoenix as a long one. It seemed like the cleanest dividing line between “missions narrowbodies can easily do” and “missions you might need a widebody to fly.”
American Widebody Fleet % Flights by Mileage
Forget about what happened during the pandemic, but before that the pattern was very clear. Take those widebodies and run them mostly to Europe in the summer. Fewer than 20 percent of departures were on short-haul then. But during winter, those airplanes had nothing better to do, so they’d fly up to 40 percent on short-haul routes.
After the pandemic, the summer saw only about 10 percent of widebody departures on short-haul and this winter will see widebodies top out around 20 percent. It’s a big shift to keep those airplanes earning more their money crossing oceans, but it’s not as big of a shift as it seems when you break down the fleets.
American Widebody Fleet % Flights < 2750 miles
I just eliminated the early pandemic entirely on the above chart, but there’s a lot to unpack on either side. Before the pandemic, those now-retired A330/767 fleets would fly upwards of 60 percent on short-haul during winter and only dipping into the 30 percent range during summer. Think about domestic flights, but Caribbean/near Latin flying were also good targets for these fleets.
The 777 and 787 fleets stayed pretty low on short-haul, at least up until the winter of 2018/2019 when the 787s starting taking over some of the flying from the dwindling 767 fleet.
Those numbers remained elevated during the pandemic recovery, but as you can see now, the fleets have settled around 10 percent short-haul during the summer and maybe 20 percent in winter which isn’t much different than before for the 777 and 787. Without those cheap widebodies lying around, that flying has been sent more to the 737-8 MAX and A321neo fleets where possible. The economics have to be significantly better.
Now that American has gotten rid of its cheap widebodies, it doesn’t really have a place to put expensive widebodies during the winter. I mean, sure, it could fill a plane to Orlando but economically that’s not a good use of an expensive asset. Long-haul is the way to go, but American’s long-haul network just isn’t close to what the other airlines have.
Let’s take a look at how United and Delta have used their widebodies in comparison.
Widebody Fleet % Flights < 2750 miles by Airline
Historically, American was an outlier in the winter when it really spiked its short-haul widebody usage. But since the pandemic, American has now become the lowest of the three. That being said, there is a huge caveat here with United. United has that fleet of 777s configured specifically for shorter-haul flying, mostly Hawaiʻi and hub-to-hub flying. So that will skew United’s numbers. (You could say the same for some of those ancient Delta 767s.) When those are retired, they will not be replaced with widebodies. In other words, none of these airlines are over-using their expensive widebodies on short-haul routes.
What’s lost in this chart is that American’s fleet is much smaller than the others. Delta has about 25 percent more widebodies than American while United has about 75 percent more. That really highlights how limited American’s long-haul network is compared to the others.
We already know that American can fill widebodies in the summer, but winter is the real issue. The key is figuring out what American could do with those planes to make them profitable year-round. To get to the bottom of this, we can look at how these airlines will spread around their widebody departures this winter.
January 2024 Widebody Flying by Region by Airline
The breakdown of flying is pretty telling. American has a much higher concentration in Europe and Latin America in the winter than the others. Europe probably has too much capacity in winter, but American has to fly those airplanes somewhere and Europe is it. Latin is good flying for American, but it has been on the weaker side than other regions. Further, American probably doesn’t have a lot of growth opportunity into deep Latin America where it would want to use those widebodies anyway. The real opportunity for American is in places where the MAX and neo aircraft can do the job.
United has pushed a lot of capacity into Oceania along with the Middle East and Africa over the last few years. (Middle East is actually depressed for all these airlines thanks to Tel Aviv suspensions.) Of course it has its Asian operation as well. Delta has Asia too. And while you’d think American would bulk up to Australia/New Zealand thanks to its joint venture with Qantas, it hasn’t put all that much in the market.
American doesn’t have that Asian option to deploy capacity, especially since it gave up on LAX as the Pacific gateway. Now it’s really just Dallas-Fort Worth for a small operation and nothing else. Nor has it done much of anything in the Middle East and Africa. The airline has instead decided to play it conservative and stick with its strengths. Draw a line from New York to LA. Anything south of that line is American’s sweet spot.
This is the safe way to run a business in the near term, and I can see how an airline that’s trying to catch up to the competition on margins might try this. But there is something to be said for trying to cultivate and develop new markets with United being the posterchild of that strategy. American isn’t thinking that way right now. It wants to keep getting bigger where it does best, and until it can figure out a good use of widebodies in the winter, it is going to keep a lid on that fleet.
57 comments on “American Has a Lot Fewer Widebodies Than It Used To… And It Recently Postponed Getting More”
It’s telling that they blamed their lack of overseas expansion on the 787 delays two years ago. Since then:
Chased out of LAX by DL and UA. Chased out of JFK by DL and B6.
Slowly but surely ceding ORD to UA.
Losing market share at both ends of the spectrum at MIA.
Abandoned what would have been an ill fated attempt at long haul from SEA thanks to DL (and possibly AS in the future).
I guess there are only so many places you need a widebody to fly from DFW, CLT and PHL. Shrinking their way into irrelevance, just like HP and US before it.
AA is the world’s largest airline by number of passengers. I don’t think they’re going to shrink into irrelevance any time soon.
They’re well on their way to being irrelevant across each ocean which should not be the case for the world’s largest airline.
Tad dramatic, huh?
I’d love to see you substantiate any of this…
AA hasn’t lost any gates at lax or ord. And has not given up any slots at jfk.
At lax, it’s easy to forget the relevance for AAdvantage members of the west coast alliance and how it allowed aa to prioritize resources elsewhere for a bit while not losing any relevance at LAX.
Per Seattle, aa can’t fly BLR due to Russian overflight, Asian demand is still rather depressed and there isn’t much point to fly something in that yield environment. AA still has their JVs flying to LHR, NRT, HEL, and DUB from Seattle. To say nothing of other partners like QR and TN.
It would appear chicken little is screaming about the sky quite loudly at your house
AA does appear to be in a concerning structural position in the near term as it slowly turns into a mostly domestic carrier with a few niche long haul routes.
They have large exposure to the domestic market, which is seeing depressed demand. The US also currently has an overcapacity of ULCCs that is putting downward pressure on fares while labor costs are increasing. Their main international region of strength relative to United/Delta, Latin America, is also well within range of those ULCCs. And now apparently we’re hearing their hub structure is such that they can’t even find a profitable place to put 10 787s when they’re already ceding long haul to UA/DL left and right.
It’s not just the structural cost of the expensive physical assets. These crazy new pilot scales at all the majors are going to become an issue sooner rather than later (it’s not sustainable long-term), and since the pay rates only go up as the aircraft capacity increases, AA should find itself in a better position relative to DL & UA when the proverbial you know what hits the fan. Overall population growth in the US market is stalling, so finding new paying passengers will become more important as the US3 costs increase.
In an older Cranky article, it was reported that only AA’s London flights were profitable for its international operations outside of Mexico/Caribbean. It is smart for AA to get its balance sheet cleaned up and run with less leverage. No point buying expensive assets if they can’t return the cost of capital.
AA modernized its fleet after the USAir merger, which nearly bankrupted the company with leverage and stock buybacks. Southwest is one of the most profitable airlines and doesnt engage in flying outside of Mexico/Caribbean for intl operations. You dont need complicated networks with expensive equipment to make a profit.
@ Brian W
Great point on Southwest. One of their keys to profitability is to operate a single fleet. Yet, with this example to the rest of the US airline industry over the past 50 years, none of the ‘majors’ has absorbed the lesson. As AA’s widebody fleet has shrunk over the past couple of years, and they have eliminated 2 fleet types, they still have too many at this point. And, with the number of widebodies that Cranky is projecting for 2023 in the chart above, still having 3 fleet types (I believe the 787-8 & -9s can be considered one type), you still have at least one too many. In my opinion, AA needs to reduce one of their remaining fleet types, and I would suggest the A330. Most of that flying would be able to be done with the 787-9, and if they need a bit of extra capacity in terms of seats for a shorter long-haul route, they could potentially add the 787-10, without adding a new fleet type. The 777-300ER is still relevant for at least another decade, as that is their highest capacity widebody in terms of seats. Maybe in ~10 years, they start a phase-out plan of the 777, and then focus exclusively on the 787 family. At the end of the day, they need to simplify this fleet into one where they have great economies of scale, ala Southwest.
AA no longer flies the A330; they were retired during the pandemic. Widebody operations are only 777s (-200 and -300) and 787 (-8 and -9).
Thanks, Brett. Very fascinating analysis.
To me, this post makes a great case for how AA will likely (not “should”, but will likely) remain focused on the Western Hemisphere until very late in this decade at the earliest.
Using the 2,750 mile great circle distance referenced on the second graph as the dividing line between “short-haul” and “long-haul” and drawing radii of that distance around AA’s hubs on the map at the end of the post (those south of NYC – LAX line, i.e., PHX, DFW, MIA, & CLT), I get this: http://www.gcmap.com/mapui?R=2750mi%40MIA,2750mi%40CLT,2750mi%40DFW,2750mi%40PHX
Looking at that, AA can use its stronger hubs to provide short-haul flights to (almost) all of North America, plus the portion of South America that is north of roughly 5 degrees South (or the Amazon river, or from Ecuador northwards). US-based ULCCs already serve most of the relevant destinations in Central America & that most northern part of South America, and there aren’t a ton of great destinations in the southern 85% of South America for AA to fly its widebodies to in order to play to its traditional strength in LATAM/South America.
At KillRoy,
That would indicate that American is becoming a high-cost version of Southwest while the ULCC’s attempt to fill the niche to South America that American can’t satisfy. At this rate overseas flying will be turned over to One World/ JV partners as American isn’t able to make a profit outside London on it’s own.
PHL wasn’t mentioned, but a focus with hubs in the south creates inefficiencies for TPAC/TATL flying, both for the aircraft and passengers which connect. PHL and ORD are the only efficient geographic hubs AA operates for that flying but AA is weaker than UA in ORD and PHL’s position in the network is unclear.
That is do to a split operation between PHL & JFK. Yet Delta is able to have a split operation between LGA & JFK.
abcdefg – I’m never quite sure where to put Philly in all this. O’Hare has been abandoned as a long-haul hub and diminshed as a short-haul one.
(Incredibly, the only year-round flying it does over 2,750 miles is to London and Paris, that’s it!) But Philly will probably make some kind of comeback now that the NEA has been crushed. The problem is that American has already ceded a lot of ground there and is still well below pre-pandemic levels. So I don’t know where that ends up, but it is still south of that NYC-LAX line, so it counts!
CDG is not year-round from ORD. (Yep, even more depressing.)
At this point, I can’t imagine there are many Chicagoland frequent flyers who don’t prefer United.
BRMM – Oh you’re right. Looks like it’s the only other market that flies through the holidays with everything else ending in October. But it does take a break post-holiday until the summer season begins in late March.
That last map conjured up images of Eastern.
Based on your January flying by region graph, it appears as if UA & DL also have “challenges” flying wide bodies in the winter given the fairly sizeable amount of domestic flying.
Is the bigger issue that AA cannot find any profitable domestic routes to deploy its widebodies while both UA & DL can? These domestic routes surely have lower costs associated with them.
Eric – This goes back to what I was saying about the makeup of the widebody fleets. And now you’ve twisted my arm so I dug deeper. For United, it has 23 777s configured for domestic flying. Those are mostly old 777s with limited range (A models) that have 364 instead of 267 seats onboard. So these are airplanes built for the domestic market as configured today and when they get retired, it’s pretty unlikely they’d be replaced with widebodies again.
If we remove those from the equation for United, then in Jan 2024 United will have 20.1 percent of widebody departures on domestic routes. That’s actually below where American is at 22 percent. I’ve updated the chart to show that on the post now, so it has both options.
Do you think UA could pick up some used but newer 777s from other airlines when the oldest ones retire? They should be plentiful when the 777X deliveries start and ramp up in a few years.
Jason – I’m sure they could, but I would be surprised if they bothered.
It’s already been about 10 years since the last -200 rolled off the line.
I’d be surprised if those didn’t just go to freighters. Chances are the cost to refit wouldn’t be worth it.
Anyone that has followed the airline industry for more than a few years knows that Doug Parker justified the AA/US merger on the basis that the new AA could compete with DL and UA; that has clearly not happened. Anyone that has access to DOT international O&D data knows that AA has only reached average fare parity with DL and UA or exceeded their levels to Tokyo, London and most deep S. America on a year round basis. AA has consistently underperformed most of non-Tokyo Asia plus the S. Pacific plus continental Europe. Anyone that reads and believes DOT US airline profitability by global region – which is just a compilation of data the US airlines send to the DOT – knows that AA’s revenue underperformance precisely explains why it has lost lots of money flying Asia/Pacific, breaks even to Europe, and makes all its international money to/from Latin America.
AA is simply accepting the reality that it cannot compete in parts of the world where DL and UA are much larger, Tokyo and London are limited access markets, and AA does not get the international business revenue outside of S. America and its JV hubs that DL and UA get.
DL also retired dozens of widebodies during the pandemic – the 777s and some 767s – but replaced all of those aircraft w/ new A350s and 330NEOs. UA did not retire widebodies but will have the biggest bill for widebody replacement and will be operating its international network at higher costs than either AA or DL.
The 767s at DL and UA are virtually the same age; DL has a larger 767 fleet but they are using some of their 2024 deliveries to start retiring the rest of the 767-300ERs.
The real differentiator in international route performance between the big 3 will be ultra long haul capability. Although its A350-1000 order has not yet been announced due to tough negotiations, DL will still have the most capable and longest range widebodies among US airlines as it receives its newest A350-900s in 2024 and beyond. The -1000 order will only add to DL’s capability. Since their current A350 fleet is far less capable than the current A350s, DL has had no choice but to wait for newer aircraft to reliably operate what the 777-200LRs did. DL is and will grow its international network beyond its JV partner hubs.
It is also noteworthy that several US airline routes are easily exceeding 17 hours in the air of late – DEL-NYC (AA and UA) has exceeded 18 hours, JNB-ATL (DL) and SFO-SIN (UA) have been over 17.5 hours. Payload restrictions are certain on the aircraft that each airline is using on those routes.
While it is sad to see that AA is slow-growing its international network, it is helping DL and UA and also means that AA is pushing back retirement of its 777-200ER fleet until the latter part of the decade and delaying a $7 billion expenditure.
AA’s southern hub strategy is working; the real question is how much premium domestic revenue they can get with a much smaller international network.
At some point AA needs to recognize who they are and leverage those strengths rather than attempting to be something they are not and continuously failing in the process.
A four foot tall person will be much more successful at polishing shoes than attempting to become the next Shaq.
that is absolutely right.
Let’s keep in mind that all large jet US airlines are for-profit and publicly traded so they have a responsible to their shareholders.
AAL’s profits relative to the industry are the best in a long time, notwithstanding the 3rd quarter which was probably NEA and sales issues related.
AA has more hubs in the southern US which is financially stronger and growing more than the rest of the country; southern US hubs do not lend themselves as well to transatlantic and transpacific networks. Large parts of Latin America can be done on narrowbody aircraft so there isn’t a need for as many widebodies. Let’s also not forget that AA has the only big 3 carrier largest gateway to a global region where it has no competition – MIA Is the largest single gateway to Latin America. The NK/B6 merger will push up fares to Latin America which will be good for AA, even as S. Florida continues to grow, esp. to Latin America.
The chart above tracking AA vs DL vs UA widebody percentage of departures is particularly insightful, esp. pre-covid. The data says that AA aggressively used its widebodies during the winter to Latin America as domestic was at a low point while DL probably had too few widebodies in the summer for the peak periods. DL has “found” the S. Pacific and appears committed to growing there along w/ to S. America in partnership w/ Latam. UA is the most stable of the big 3 but also gave up a lot of domestic revenue esp. in the summer which AA and DL have been able to capture.
While the UA 777-200s are essentially domestic aircraft, the ex-Latam A359s are also not configured for DL standard longhaul international service so those aircraft have been just peak summer high volume to Europe in the summer with some to S. America and then domestic high capacity during the winter. As those aircraft are reconfigured, they will be flying more “normal” international flights even w/ fewer total seats. The 777-200As for UA might get replaced by a few older 777-200ERs but UA will very likely realize like AA and DL that narrowbodies work just fine on domestic routes; the only reason the percentage of widebodies is low for UA is because they have so many on international routes.
AA will be ok. the A321XLRs might be more important relatively important for their international network than for any other global airline including UA which will always have a large widebody fleet and also a heavily northern US-skewed hub system.
“ knows that Doug Parker justified the AA/US merger on the basis that the new AA could compete with DL and UA; that has clearly not happened”
While your usual spiel is amusing… always
Doug Parker never said parity meant flying the same number of widebodies on aa metal to Europe or Asia. That’s a pretty silly twist, even for you, tim
What aa has done is take market share from delta all over the SE and continues to with the amazing quad of dfw/clt/dca/mia, maintained parity in the size of each TATL JV while adding depth to their JV as well, expanded their Miami hub to its largest ever size, built an Oceania JV — the only one that spans NZ and AU, taken HND slots from delta (or so it seems likely) that delta told The world they can’t fly to hnd from many places profitably, and come up with very innovative ways to make up for their domestic network like the West Coast Alliance or the NEA (that obviously didn’t last :) )
Of course I’d like to see more beautiful huge aa widebody planes just like I love it whenever I see a UA 78x at ORD or flying on an FJ a359 but AA’s partners are more than happy to carry more lift in the JV based on their strengths
It’s just a bit silly the handwringing that goes on with regard to AA’s widebody count as though the death of the airline is nigh based on widebody fleet count.
Also remember that routes like EZE, GIG, GRU, SCL (widebody requirement markets for AA) all typically have long aircraft sit times so that there are overnight flights on both sides. That is very inefficient for aircraft usage and as a large portion of longhaul flying will even further depress their utilization.
AA really has no options for year-round widebody usage without a west coast hub. There are a number of markets that they could make work from LAX potentially, but they require a sales team to fill those VFR seats and that ship has sailed/sunk with their sales team being decimated. All this to say I think AA has to throw in the towel on flying anything to Asia that isn’t out of DFW. JFK-HND will be a disaster if it happens.
Great point. Too bad they’ve decided sales teams don’t add any value. Maybe a couple teams focused on JFK and LAX would have helped sell some tickets on routes that ended up being axed.
Agree with Bill, this is another great point.
Serious question: Given the sit times to allow for the preferred redeye timings of US to BR/AR/CL routes, would the local operators in those countries be at a potential aircraft utilization advantage, when factoring in flights over the Atlantic with the same aircraft that could then more quickly turn for flights north to the US? In other words, could a widebody plane (or a group of them) fly to (say) MAD, LIS, FCO, or MXP and back, then do a run to the US & back, and not have to sit for nearly as long?
I don’t know how to easily do the flight times & schedule checks myself, but I’d appreciate others’ thoughts on that.
Kilroy – No, the issue is that there is an enormous preference for overnight flights in both directions on Latin trips, so you have no choice but to sit the airplane all day whether in the US or down in Latin America.
The local operators would just have the aircraft sit all day at the other end, at the US airport instead.
Cranky, one thing I’d like your opinion on: Why does AA not try any long-haul to South America from ORD? UA runs ORD-GRU nonstop, even in (northern) winter. With AA’s traditional strength in South America, you’d think this might be worth a gamble.
Because there’s hardly any business traffic from ORD to anywhere in South America. Most traffic going south from ORD would be VFR, and the farthest south that goes is Nicaragua.
That’s the thing.. AA doesn’t want to gamble on anything. It just wants to pay down debt.
Maybe in the future with a healthier balance sheet AA might take 787’s from ORD to rio or gru. Perhaps Paris year round.
BRMM – It would seem like something American might consider trying, but it just hasn’t really cared about Chicago. And as has been mentioned, Latin American flying requires a ton of aircraft time since the airplane sits on the ground all day in South America. So they probably just aren’t willing to spend that aircraft time.
What about flights from AA’s focus city in BOS to Brasil?
BOS area has more Portuguese speakers (> 1 million, by some estimates) than nearly anywhere on the planet outside of Portugal & Brasil. I assume that the foreign airlines have the market pretty well covered (and there are a number of nonstops to Brasil & Cape Verde on other airlines), and I doubt the VFR market yields that well, but it might be worth throwing a dart at if there aren’t many better options for the planes.
With the exception of originating traffic in Chicago that could fly nonstops, AA can serve SA from the Midwest just as efficiently through DFW and to a lesser extent, MIA. If you are going to Sao Paulo from Indy, Milwaukee, or Des Moines, might as well fly through DFW. Or MIA in some cases.
AA is in a better position to serve SA from those hubs than one in Chicago. But tellingly, the only South American city UA currently serves nonstop from Chicago is Sao Paulo anyway. They also prefer to serve SA from southern hubs (Houston).
AA is doing fine with their current strategy. The only place they are hurting is Asia. The pandemic absolutely walloped that traffic, and then the loss of the LAX hub made it worse. And for whatever reason (leaving politics alone), people in Asian countries have not resumed traveling internationally nearly as fast as the rest of the word. And them being closed for so long took them out of mind for Americans to visit.
Without overthinking this too much, the way AA has operated its network is the byproduct of being overly leveraged and laser focused on repairing the balance sheet.
A broke person doesn’t experiment at different restaurants. It goes to the store to buy the basic bread and butter ingredients it knows will work. That’s AA in a nut shell.
A future AA with a healthy balance sheet might start competing in Asia, lax and ord. The question is.. by the time they’re ready to compete again, will there be anything to compete for? Will their neglect in those market places cause irreparable damage? Will AA dehub ORD and LAX? Will they stop flying to Asia altogether and find more JV’s?
What will the next travel recession do to AA and other legacies post pandemic plans? Lots of uncertainties, but especially with AA.
Sure this maybe isn’t the sexiest strategy, but I don’t hate it for AA. They are limited in what risks they can take given their balance sheet, fleet profile, and network structure. Factor in their strong partner profile (IAG group, JL, etc.) and you can focus on resetting in your core/strength markets over the next 5-7 years.
Something to keep in mind about these fleets. UA and DL have a much higher percentage of old equipment. UA has 56 767s, and they also have 61 757s. Delta has 66 767s and 111 757s. In both cases, these planes average over 26 years old. They will need to be replaced pretty soon. UA’s 777s also average over 20 years old.
When you compare just newer/more efficient planes (777, 787, A330, A350):
AA 126
DL 96
UA 167
American still has 4 A321s on order, as well as 75 MAX8s and 50 A321XLRs. I expect them to pick up some new orders soon, possibly more MAX8s or maybe MAX9s or even 10s.
Finally someone mentioned the A321XLR. PHL/CLT/MIA/ORD and to a lesser extent DFW/JFK/PHX will benefit from this frame once the numbers of aircraft on property reach a decent level. DL has none on order and IIRC UA has the same number as AA, give or take. For UA, EWR/IAD/ORD are basically it for longer haul opportunities for this aircraft. AA will be in a sweet spot once those arrive in bulk. If this plane can do 80% of what Airbus is suggesting, AA is sitting pretty.
John,
first the A330-300 for DL burns 16% less fuel than the 777-200ER does for AA or UA according to actual usage data that all 3 have provided to the DOT.
second, DAL’s actual system fuel efficiency is more than 6% better than AAL or UAL. Fleet usage and having the most fuel efficient airplanes in the right places is why fleet age doesn’t matter.
third, AAL will have to spend less on new aircraft because of its younger fleet but AAL’s fleet capex is only a couple billion less than DAL’s even though DAL has more than 300 firm order narrowbodies and over 100 options. UAL is the carrier that is spending more than 3X more on capex than DAL. UAL is not more profitable than DAL on an annual basis so there is no way that UAL won’t be adding lots of debt when AAL and DAL are both spending far less on aircraft.
alot of people seem to forget that the big 3 pay for their regional carrier operations, including them in their system financial reports, and DAL’s smaller regional jet operation contributes to its better fuel and labor efficiency.
UAL probably won’t be announcing any new orders while AAL is widely rumored to be adding more narrowbody orders and DAL is expected to announce a widebody order. Even with AAL and DAL’s expected orders, they will be each spending less than half on new aircraft than UAL this decade.
I agree that UA is in the weakest long term position of the three, Tim.
One thing not mentioned is that AA and DL have monster fortress hubs in DFW and ATL. They can run all sorts of crazy traffic levels through these, while UA doesn’t have one like them.
ORD has the smaller AA hub there…DEN has both F9 and WN to deal with. EWR is…EWR.
Houston is the closest but they are not able to put the kind of traffic there due to tue presence of the two mega hubs also.
While not an Airline Revenue Management type, I am a long-time Commercial Revenue-&-Business Management type and my comments come from this perspective.
It is GREAT to see AA making decisions that align with a Balance Sheet with large amounts of Debt. This is what should be happening. In addition, ALL the analysts also show AA with work to do on Operating Expenses too.
VERY interesting to see AA having a Southern Hub strategy below the NYC-LAX line. Has AA articulated this in their Investor Relation presentations?
If AA is “pausing” their presence in ORD and LAX, are these two airports easy to expand back into in that they are lacking slots-&-gate restraints?
The comment that AA should invest in a Corporate Sales Force for LAX and ORD makes too much sense if they plan to grow in the future. Filling Premium Seats absent a Sales Force seems to be a “Futuristic Strategy” as most any business has both “Price-focused” and “Time-focused” buyers with Corporate Sales an ideal way to optimize “Time-focused” buyers. For Commercial Matters greater than $xx million “deal-size” or “issue-size” it is folly to try and save money on Travel Expense at the risk of Human Mental State optimization.
It might be an interesting analysis to map Fortune 500 Headquarter Sites vs Premium Seats via Big3 Hubs.
NICE to see Tim Dunn providing kudos-&-complements to both UA and AA in addition to his norm for DL. This is clearly due to their improved Financial Performance (..Operating Margin%!..)
My overall read on the AA push-out of 10 B787 platforms is that they will be in a better position in the future to make a better decision. It does appear that it is a better Balance Sheet Investment (owned, leased) in narrow body (B737, A320/321) than wide body. Given how weak TPAC has been, AA pulling back probably helps JAL load factor as they have much better TPAC network anyhow and GREAT hard and soft product.
Lastly, letting B6/NK “settle-out” and now AS/HA “settle-out” too again favors a time-based “delay” and/or “pause” approach.
As someone who lives north and usually travels to places north of this LA – NYC line, I find AA to be the least useful of the major US airlines.
I still find it interesting that they are the largest carrier even though thy don’t have as many widebodies as Delta or United. Plus, they seem to offer a slightly inferior product since they don’t have seat back screens like Delta and United is adding them.
For Basic Economy, I’ve always considered United to be inferior because they don’t include a “free” carryon bag as part of a BE fare, while American & Delta do, though that’s easy enough to account for when pricing & booking flights.
Ignoring the differences in what is included in BE, I could see the argument that AA’s onboard product is inferior to Delta’s (I don’t fly United nearly enough to pass judgment on their project). That said, I don’t place much value on on-board product myself, and I would argue that power outlets are often more valuable/useful than seatback screens.
I tend to multitask and do something on my computer while watching the screen. Plus, with Delta and JetBlue, you got TV as an option as well. I know Delta has power at the seats and a USB port in the screen for charging my devices while flying.
It’s totally a personal preference. I just know what I like in this case.
Agreed. I can see the value of the screens, and they certainly seem to get a lot of use by pax.
To your point, much of it is personal preference.
Question I have is – does American get better Gross Margin from having its JV partners operate flights?
It has IAG, JAL and Qantas covering key markets. If it’s more profitable to have JV partners fly those markets then why fly them yourself? Why take the risk on asset utilisation when others can?
A joint venture isn’t money for doing nothing, it’s that revenue is shared across all the airlines. It would be proportionally to the amount of flying each airline actually does and of course the details determine exactly how, maybe by number of flights or number of seats.
So if AA flies one US-Japan flight and JAL flies 9, then AA gets around 1/10 and JAL gets around 9/10 of the pooled revenue.
If anything, it’s less risky for AA to add a flight into the joint venture, since both the revenue and the risk are shared by both or all airlines.
Ed – You have to fly yourself usually because your employees will revolt.
I believe there’s something in the contracts with pilots that limit what they can do with other airlines without adding their own metal.
Jason H nailed it. Would also add in AA’s situation, I would guess they probably get less of a revenue premium that most other airlines (market dependent of course). But let’s look at the Pacific for example, JL adds another US-TYO flight, they probably get decent revenue on that. But if AA adds another US-TYO, probably a lower revenue premium (but more likely a revenue gap vs OAL). However, as a shared entity, AA benefits from JL’s revenue premium in the shared revenue pool, which is probably why AA is ok “outsourcing” most of that flying
Seems like another factor here might be the weakness of OneWorld’s Europe network. I have no idea if the financials back that up, but just looking at the map, London is really only the major US-Europe hub they’re feeding as opposed to DL and UA both have at least 2 through SkyTeam and StarAlliance, plus those both have more high-quality European secondary market options as well.
remember that US was part of the Star Alliance (IIRC) but not as a JV partner. With the merger, AA rightfully focused on BA/IB but Spain is simply a smaller market and much less conducive to connections to the rest of Europe, Africa, the Middle East and Asia than Skyteam and Star’s major hubs in Europe.
Add in that AA has a long list of routes to continental Europe that they operated and pulled going back to the early days of the 767-300ER and it isn’t a surprise that they realize they are structurally at a disadvantage in continental Europe.
However, AA has no JV partner in S. America and flies plenty of widebody flights there. They also have a large presence at LHR so the only real risks of ticking off their pilots for not meeting requirements to operate their own widebodies is in Asia. DL and UA both bought into Asia even if both have significantly revamped what they bought. AA has tried multiple times to build their own Pacific operations on their own without success.
Their management is simply recognizing that 45 years post deregulation is more than enough time for experimenting and time to focus on what they do well.
This won’t be a popular comment but that’s not my problem.
As Exec Plat on AA and Premier 1K on United, there are a couple of anecdotal observations.
AA does almost nothing in terms of soft product to say ‘thank you’ for all of the $$ spent. Night and day difference compared to United where service seems like a team effort.
Lack of extra legroom seats and smaller first cabins on mainline fleet
Albeit subjective, AA’s clientele in the forward cabin is just different than on UA. It could be price point, origin/destination, etc., but there is a difference. Anyone with the $$ has the right to fly however and wherever they like, but it seems like there are more ‘bargain shoppers’ on AA. It’s made for some very unusual front cabin experiences with less respectful travelers.
So American may be also just dealing with company service culture decisions they’ve made. Hard to fill up widebodies to intnl destinations if you aren’t taking care of service levels from start to finish.
I don’t know what UA flights you’ve been on, but my experience is FAR different. The cabin crew on UA are very often surly and disagreeable. AA has some of those also, but wherever you are getting “service as a team effort”, I have not experienced it.
Second, the first class cabins are the same. AA has 20 F seats on 321s, 16 on 738s, 12 on 320s, and 8 on 319s. UA has 20 F seats on 739s, 16 on 738s, 12 on 320s, and 8 on 319s. Where is the difference?
You have a problem with the passengers on AA in first? Hmm.
This all sounds very subjective, from someone who doesn’t like American and is looking for reasons to bash them.
Completely incorrect assumption and does not line up with the first line of the post.
If I hated AA so much how am I Exec Plat with them?
UA has a large fleet of 757’s, AA has none. 24 seats in F on the 757-300 compared to 20 on AA 321