Grandpa +65
Well-known member
- Joined
- Mar 1, 2006
- Posts
- 315
Aug 3, 2011
By Darren Shannon
Washington The fanfare was loud and generated the desired attention, but now that the euphoria has subsided it is apparent that AMR Group’s deals with Airbus and Boeing to overhaul American Airlines’ narrowbody fleet are more wishful thinking than concrete achievement.
For one thing, there is no firm order for 460 aircraft. Under American’s labor contracts—notably its agreement with the Allied Pilots Association—the carrier cannot add a new aircraft type, even a different variant, until a pay scale has been negotiated. From this perspective, American only has the authority for the 100 leased Boeing 737-800s it plans to add from 2013-17, while the remaining deals for both current model and new-engine-option Airbus narrowbodies—never mind the nonexistent re-engined 737—must now go through the rigors of employee approval.
And time is not on American’s side. President/CEO Gerard Arpey may believe the deals will “be a catalyst” to jump-start stalled labor negotiations, but similar expectations from the operator’s 2008 arrangement for up to 100 Boeing 787s have yet to yield an accord and that order still remains absent from Boeing’s orderbook, despite a supposed 2014 first delivery date.
This aside, American’s ambitious plan also calls for the replacement of its aging MD-80s and Boeing 757s (almost 340 aircraft as of July 20) in just five years, but offers no details on how it will integrate so many aircraft that quickly or even how many narrowbodies it eventually wants in its fleet. The carrier also leaves open the idea that similarly sized Airbus and Boeing aircraft could be assigned to similar operations, even the same route, but with no clarification on how, or why, this would be implemented.
American’s financial woes also trouble industry observers. On the same day it unveiled the aircraft deals and a proposed divestiture of regional affiliate American Eagle Airlines (two key tenets of its Flight 2020 restructuring plan) the airline also posted a net loss of $286 million as costs—notably fuel—wiped out gains from a 7.8% rise in revenue. Delta Air Lines and United Continental Holdings, meanwhile, though posting reduced profits, still returned net incomes of $198 million and $538 million, respectively, and sales growth in excess of 10%.
Investors reacted immediately, and despite all the good news, including speculation that the operator was getting each new aircraft at half price, AMR’s share price started a slow downward trend that continued for nearly a week. The aircraft order may be the savior that Arpey and his management team have trumpeted, but for now, they appear to be the only ones to share that vision.
By Darren Shannon
Washington The fanfare was loud and generated the desired attention, but now that the euphoria has subsided it is apparent that AMR Group’s deals with Airbus and Boeing to overhaul American Airlines’ narrowbody fleet are more wishful thinking than concrete achievement.
For one thing, there is no firm order for 460 aircraft. Under American’s labor contracts—notably its agreement with the Allied Pilots Association—the carrier cannot add a new aircraft type, even a different variant, until a pay scale has been negotiated. From this perspective, American only has the authority for the 100 leased Boeing 737-800s it plans to add from 2013-17, while the remaining deals for both current model and new-engine-option Airbus narrowbodies—never mind the nonexistent re-engined 737—must now go through the rigors of employee approval.
And time is not on American’s side. President/CEO Gerard Arpey may believe the deals will “be a catalyst” to jump-start stalled labor negotiations, but similar expectations from the operator’s 2008 arrangement for up to 100 Boeing 787s have yet to yield an accord and that order still remains absent from Boeing’s orderbook, despite a supposed 2014 first delivery date.
This aside, American’s ambitious plan also calls for the replacement of its aging MD-80s and Boeing 757s (almost 340 aircraft as of July 20) in just five years, but offers no details on how it will integrate so many aircraft that quickly or even how many narrowbodies it eventually wants in its fleet. The carrier also leaves open the idea that similarly sized Airbus and Boeing aircraft could be assigned to similar operations, even the same route, but with no clarification on how, or why, this would be implemented.
American’s financial woes also trouble industry observers. On the same day it unveiled the aircraft deals and a proposed divestiture of regional affiliate American Eagle Airlines (two key tenets of its Flight 2020 restructuring plan) the airline also posted a net loss of $286 million as costs—notably fuel—wiped out gains from a 7.8% rise in revenue. Delta Air Lines and United Continental Holdings, meanwhile, though posting reduced profits, still returned net incomes of $198 million and $538 million, respectively, and sales growth in excess of 10%.
Investors reacted immediately, and despite all the good news, including speculation that the operator was getting each new aircraft at half price, AMR’s share price started a slow downward trend that continued for nearly a week. The aircraft order may be the savior that Arpey and his management team have trumpeted, but for now, they appear to be the only ones to share that vision.
