American deal
July 21, 2011
Loss-making American Airlines aims to lower operating costs and improve earnings by trading in its gas-guzzlers for new energy-efficient aircraft from Airbus and Boeing.
The third-largest US airline by traffic has agreed to order 460 new planes, including 260 from Airbus. The order is split between current-generation Boeing 737s and Airbus A320s, as well as future versions of both planes equipped with new, more efficient engines, which are expected to be in the air later this decade.
To win a chunk of the business, Boeing shelved its plan of creating an all-new 737 short-haul jet and followed in Airbus' footsteps by choosing the cheaper and quicker route of developing new engines.
New engine pays off
The current-generation A320s and 737s on order will consume 35 percent less fuel per seat than the aircraft they will replace, according to American Airlines CEO Gerard Arpey. The new generation of aircraft fitted with improved engines is expected to boost efficiency by a further 15 percent when they enter operation in 2017.
Airbus is calling its new-engine version A320neo, which is still under development, while Boeing has yet to decide on a name for its improved 737.
American Airlines hadn't placed an Airbus order since the late 1980s, having retired its last Airbus model, the A300, in 2009.
The European manufacturer's decision to equip its A320 with new engines appears to have paid off – but it could have backfired, too.
Faced with growing threats from Boeing and new competitors in China, Airbus hatched the ideal of building the A320neo with much-improved engines last year. But industry observers say the company would not have been able to sit back if Boeing had indeed gone ahead with its plans to build a brand new, even more efficient plane, rendering the A320neo obsolete.
The A320 is Airbus' top-selling product and cash cow.
American Airlines, which lists high fuel prices among the causes of losses in 10 of the past 12 quarters, plans to spend nearly $40 billion on the new fuel-saving aircraft.
Many analysts believe the investment may not only be helpful for the airline's efforts to return to profitability, but also crucial for its long-term survival.
Author: John Blau (AP, Reuters)
Editor: Sam Edmonds