American Speeds Jet Purchase
AMR Corp.’s American Airlines said it would accelerate its purchase of 737-800 aircraft from Boeing Co. to modernize its fleet and retire older, fuel-guzzling airplanes.
The move, which speeds up the delivery of an existing order for 70 737s and adds six to the order, follows American’s decision earlier this year to accelerate plans to begin replacing its aging fleet of 300 MD-80s. That aircraft, a workhorse airplane that American uses for most of its domestic flights, has an average age of 18 years at the airline and burns about 35% more fuel than the 737s that will replace them, American said.
Like other carriers, American, the world’s biggest as measured by passenger traffic, is responding to the recent run-up in fuel prices by grounding aircraft and reorganizing its fleet to fly more fuel-efficient planes. Aging aircraft are a problem for most of the big U.S. carriers, which kept older planes longer than they would have preferred, as they restructured following the post-Sept. 11 industry crisis.
“Fleet replacement remains a key element of the actions we are taking to better position our company,” said Tom Horton, AMR’s chief financial officer.
To help pay for the 76 aircraft, which will be delivered progressively through 2010, American said it secured a financing option that could fund about two-thirds of the total cost. The funding is important at a time of tight credit for most industries and amid an operating climate for airlines in which most are hoarding their cash as a buffer against further instability in the fuel market.
While the terms of the revised order haven’t been disclosed, the market price for a 737-800 is about $65 million. The airline also is scheduled to receive another 11 737s in 2013, as part of its existing order. Altogether, the price tag for the 87 aircraft could total about $5.6 billion, though American is one of several customers with whom Boeing has an agreement for lower than its list prices.
American declined to give details on the financing package or who provided it. Boeing declined to comment on whether the company’s financing unit, Boeing Capital Corp., is involved in the transaction.
Over the past couple of years, Boeing Capital has shed unwanted airplanes and other assets from its books in preparation to provide backstop financing, particularly to U.S. carriers. In a recent filing with the Securities and Exchange Commission, the company said it had commitments for $9.2 billion in potential backstop-financing obligations.
Source: American City Business Journals
Tags: American Airlines, Boeing, fuel costs, fuel economy