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American Airlines makes bumper plane purchase

Bob Moon Jul 20, 2011

American Airlines makes bumper plane purchase

Bob Moon Jul 20, 2011

Kai Ryssdal: Washington maybe be stuck, but the wheels of global commerce do indeed grind on. American Airlines announced today it’s ordering up 460 brand new fuel-efficient jets. About 260 of ’em will made by Airbus, the European consortium. The rest will be built here by Boeing.

The headlines are calling it the largest aircraft order ever. And it is, because American Airlines figured it had to go big or go home.

Here’s our senior business correspondent Bob Moon.

Bob Moon: Except for just two profitable quarters, American has suffered through losses for three straight years. And one of the big reasons has been ever-rising fuel costs.

Tom Horton is the president of the airline’s parent company AMR. In a conference call with analysts today, he blamed American’s aging fleet.

Tom Horton: We’re looking at total fuel efficiency improvements of about 45 percent, versus our current MD-80 fleet.

Those MD-80 planes were built nearly three decades ago by McDonnell-Douglas, which has long since been swallowed up by Boeing.

Horton: With this plan, we’re jumping to the front of the line, to have the latest, most fuel-efficient technology.

In other words, it’s not about adding seats. David Swierenga is an industry consultant at AeroEcon.

David Swierenga: This order is for replacement aircraft, and not a lot of additional growth.

And as for American’s contention that it’s now jumping ahead of its peers, airline consultant George Hamlin questions that.

George Hamlin: Other carriers also have new equipment on order. American’s rival, Southwest, has recently changed to add the 737-800, which is the same airplane American will be getting, to its fleet. So I’m not sure what that statement means.

Hamlin suggests the big order is more of a case of, “What took so long?” The likely answer: American stayed out of bankruptcy, and that’s been a struggle.

Hamlin: They’ve kept their pension obligations intact, for example — you know, they pay on these. That’s something to be applauded, but then it produces difficulties on the cost side.

American is aggressively aiming to resolve that now, to keep avoiding the flight plan taken by so many of its rivals.

I’m Bob Moon for Marketplace.

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