European airplane manufacturer Airbus scored a major victory Wednesday, breaking rival Boeing’s longtime monopoly on sales to American Airlines and winning the contract to build more than half of the 460 new planes ordered by the Dallas-based carrier, in what is being described as the largest single aircraft purchase in U.S. history.
American officials announced they would split their purchase between the two manufacturing giants, acquiring 260 Airbus A320 planes and 200 Boeing 737 models over the next decade.
“Today’s announcement paves the way for us to achieve important milestones in our company’s future, giving us the ability to replace our narrow-body fleet and finance it responsibly,” said CEO of American Airlines Gerard Arpey. “We expect to have the youngest and most fuel-efficient fleet among our peers in the U.S. industry within five years.”
Both airline manufacturers stand to gain from the deal, but the order will greatly increase Airbus’ North American market presence, airline analyst and former American fleet planner Robert Mann said.
“This will be a huge boost for Airbus because they will pretty much be in every large airline in America,” Mr. Mann said.
The manufacturers will deliver the planes between 2013 and 2022, in the deal which will cost about $38 billion. American secured financing for the first 230 airplanes through leasing agreements with Airbus and Boeing.
Mr. Mann said the two airplane manufacturers have basically agreed to finance the first part of the order because they are so “enthusiastic” to fill American’s order.
“American’s so desperate to renew their fleet and manufacturers are so desperate to provide a short-term need,” he said.
American’s announcement comes at a fortuitous time, Mr. Mann said, after other international airlines canceled orders from both manufacturers. The buy will also launch a flurry of orders from rival airlines, he predicted.
Airline analyst Ray Neidl said the American order is not a defeat for Boeing, which has long been the sole provider for the airline. Overhauling American’s fleet would be too big an order for Boeing to fill alone, he said, and the split decision allows Airbus to increase its North American market presence and Boeing to benefit from a substantial commission.
Boeing’s share price actually rose $1.54 to close at $72.07 in Wednesday’s trading.
“You’d have to call this a victory for both,” Mr. Neidl said.
As part of the deal, American will debut both Airbus and Boeing’s new, more fuel-efficient models. High fuel costs and less efficient planes have hurt American’s bottom line. With fuel prices increasing by 31 percent this year, AMR Corp., American’s parent company, announced a second-quarter loss of $296 million, 85 cents per share, on Wednesday.
Fuel prices are expected to double every five years, Mr. Mann said, and most airlines will follow American’s example and invest in fuel-efficient models with sleeker body structures and redesigned engines. But American may not see the savings from its move for several years, however.
“These airplanes aren’t going to fly tomorrow,” he said.
Mr. Mann also said the speed and size of the order might indicate another aircraft order bubble.
“The industry has a history of going through wide swings, not only in demand but in orders placed in the up part followed by deliveries that arrive in down part of the business cycle,” he said
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