American Said to Be In Talks for 100 Airbus Single-Aisle Planes
June 21 (Bloomberg) — Andrew Herdman, director-general of the Association of Asia Pacific Airlines, a group representing 15 of the region’s carriers, talks about Asian demand for new airplanes. Herdman speaks from Kuala Lumpur with Susan Li on Bloomberg Television’s “First Up.” (Source: Bloomberg)
AMR Corp. (AMR)’s American Airlines is in talks with Airbus SAS about buying at least 100 narrow-body planes, a possible break from its longtime reliance on Boeing Co. (BA) jets, two people familiar with the matter said.
The board of the third-largest U.S. carrier may make a decision as soon as July, said one of the people, who asked not to be identified because the discussions are private. Jets from Airbus’s A320 series would replace American’s less-efficient models such as Boeing 757s and MD-80s, the people said.
An order at American would buoy Airbus as it tries to crack Boeing’s grip on single-aisle plane sales to the biggest U.S. airlines. It would also add to pressure on Boeing, which is deciding whether to match Airbus and put upgraded engines on its 737 or wait to build a new jet by 2020 with more fuel savings.
“We’ll do everything we can to retain American Airlines as a Boeing customer,” Marlin Dailey, the Chicago-based company’s sales chief, said in an interview yesterday at the Paris Air Show. “I wouldn’t say they’re drawn more to Airbus. They obviously are seriously evaluating their options.”
An A320 has a list price of $85 million, giving a potential American order a value of about $8.5 billion. Airlines typically buy planes at a discount.
“We assume AMR is attempting to seek out price concessions from Boeing” or urge 737 efficiency gains, Will Randow, a Citigroup Inc. analyst in New York, said in a note to clients. “The addition of Airbus narrow-body aircraft to the fleet would likely increase complexity and potentially costs in regards to maintenance, network planning, and other areas.”
Stefan Schaffrath, a spokesman for Toulouse, France-based Airbus, said the company doesn’t discuss conversations with potential customers. Fort Worth, Texas-based AMR doesn’t comment “on rumors and speculation,” said Roger Frizzell, a spokesman.
AMR fell 10 cents, or 1.7 percent, to $5.75 yesterday in New York Stock Exchange composite trading, while Boeing slid $1.86, or 2.5 percent, to $72.12 for the worst drop among 30 stocks in the Dow Jones Industrial Average. Airbus parent European Aeronautic Defence & Space Co. gained as much as 2 percent to 22.29 euros in Paris today.
American’s main jet fleet is the world’s second-largest, behind Delta Air Lines Inc. (DAL)’s, according to industry researcher Ascend. It consists only of Boeings, and the carrier’s last Airbus jet flew in 2009. Delta has a mix of Boeing and Airbus planes, as does United Continental Holdings Inc. (UAL), whose United and Continental units are still tallied separately. United Continental and Delta are the biggest airlines by traffic.
The 216 twin-engine MD-80s at American are among the oldest jets at major U.S. airlines, with many logging more than 20 years of service, and they burn more fuel than the single-aisle 737s the company now has on order.
Airbus may manage another upset later this year when Delta decides on an order for as many as 200 narrowbodies over a range of capacities. Nat Pieper, the Delta fleet strategy chief, said earlier this year that the company was looking at all of the available options.
The Boeing 737 is the world’s most widely flown airliner and competes with the A320 family in the biggest segment of the civil airline market. Airbus will start shipping its upgraded A320neo with revamped engines in 2015, a plane that has become the company’s fastest seller on the strength of more than 600 commitments since its unveiling in December.
Airlines crave fuel economy because jet fuel is, with labor, one of their biggest costs.
No major U.S. airline has yet ordered from the A320neo family, so a deal with American would bolster Airbus’s efforts to market the model to other large carriers. Boeing for many years had exclusivity clauses in contracts with American Airlines, Continental Airlines and Delta Air, an accord that came under scrutiny and was eventually scrapped as part of European approval for Boeing’s $15.5 billion purchase of McDonnell Douglas Corp in the late 1990s.
A320s with upgraded engines and new, modified wingtips that Airbus calls sharklets are a good replacement for the Boeing 757 on so-called long, thin routes — long-haul flights with passenger travel demand to profitably fill a single-aisle jet, not a wide-body aircraft, according to C. Jeffrey Knittel, president of transportation finance at CIT Group Inc. (CIT)
“Airlines are looking for those types of planes,” Knittel said June 21 after the lessor ordered 50 planes from the A320neo family. “And while this aircraft doesn’t cover 100 percent of the missions, it covers most of them.”
Boeing understands “the challenge we’ve been given,” Dailey, the sales chief, said when asked about the status of the company’s talks with American, adding that it wouldn’t be appropriate to discuss details about a sales campaign.
“You never know how things play out,” he said. “We’re moving. Working it hard.”
Captain John Hale, American’s chief pilot, said he couldn’t confirm or deny whether the carrier had already chosen a supplier for new narrow-body jets.
“We’re always going to look at every opportunity to create value for our airline, our shareholders and our customers,” Hale said in an interview yesterday at the air show, where American and Boeing announced a trial program for fuel- efficiency improvements. “We’re very measured and we do our homework before we do anything.”
American’s main jet fleet consists of 613 planes, according to the company, with the MD-80s the most-numerous type and 153 737s. It began taking deliveries of the new 737-800 model in 2009, and is scheduled to get the last of those planes in 2013. American has 124 757s.
An A300, which is no longer in production, made American’s last flight with an Airbus plane, in August 2009. At the end of March, American still had 10 of the twin-engine, wide-body planes on its books as leased or owned but not in operation.
Airbus and Boeing have an almost equal share of the global single-aisle market, and Airbus has sought to extend its position by offering new engines on its A320 by the end of 2015.
The A320neo won more than 300 orders during the first three days of the Paris Air Show. Boeing, which says it will take the rest of the year to decide on re-engining or building an all-new model, tallied 75 orders for the 737.