American signed commitments for 260 Airbus A320 jets and 200 of Boeing’s 737s this summer to refresh its aging fleet. Among them were the A320neo and the 737 MAX, more fuel-efficient upgrades of aircraft models that are the workhorses of the airline industry.
Airbus Chief Operating Officer John Leahy said American Chief Executive Officer Tom Horton has “been very clear verbally to us” that he intends to keep the contract. Jim Albaugh, head of Chicago-based Boeing’s commercial airplanes, expressed similar optimism yesterday.
“They think their future is tied to the neo and the MAX order,” Albaugh said. “I’m assuming that they will go through this and they will emerge and sign the deal and take the planes.”
Horton describe the purchase plans yesterday as “rock solid” and said the newer, more fuel-efficient jets offer “a great opportunity for us. If we get our cost and capital structure where we need it to be, we have ample opportunity to grow the company.”
The Airbus deal is a firm order, as is Boeing (BA)’s contract for 100 of its current 737s, while the agreement for the 737 MAX is provisional. The deal hadn’t been completed because Boeing is still finalizing adjustments to the plane, which requires structural changes because its engines will be larger than those on the current 737.
Boeing decided to offer the 737 MAX, an upgrade with more fuel-efficient engines, to fend off the A320neo and help capture half of a $2 trillion market in the next 20 years.
The company had intended to replace its single-aisle aircraft with an all-new plane. It switched strategies in August after the Airbus neo became the fastest-selling jet ever, winning more than 1,000 orders and commitments from December through July. The neo also prompted American to order Airbus planes for the first time since 1987.
New A320s are 15 percent more fuel-efficient than the MD- 80s they would replace in American’s fleet, and the A320neos will add another 15 percent to operating efficiency, Leahy said today at a Credit Suisse conference in New York.
Airbus will convert about 200 commitments for its neos in the next two to three months, adding to the 1,250 contracts already signed, Leahy said.
Orders Top Deliveries
Some of Boeing’s 700 preliminary orders for the 737 MAX will be confirmed this year, Albaugh said yesterday in an interview at Bloomberg’s headquarters in New York. Pending deals include 100 planes for American Airlines and 201 for Indonesian budget carrier Lion Air.
Boeing has already more than doubled its internal goal for total commercial-jet orders this year, Albaugh said. The planemaker had won 516 contracts through Nov. 22, after saying in March it wouldn’t be able to match the 530 orders in 2010.
The company expects to sell more jets than it delivers each year through 2013, with a production plan for 500 to 600 jets a year.
“We’ve got more orders we’re going to announce this year, and this is all in the face of a lot of bad economic news,” Albaugh said.
Airbus’s overall jet orders will decline in 2012 from this year’s all-time high, Leahy said.
One of the orders the planemakers are competing for is from United Continental Holdings Inc. (UAL) Leahy said in an interview that the airline will probably order a mix of the current single- aisle planes and the neos or MAXes “later this year, but most likely next year.”
To contact the reporter on this story: Susanna Ray in New York via email@example.com.
To contact the editor responsible for this story: Ed Dufner in Dallas at firstname.lastname@example.org