American Air Bids to Provide Boeing 787 Maintenance
this was what I was eluding to at topics start.
By Mary Schlangenstein and James Gunsalus
Sept. 25 (Bloomberg) -- AMR Corp.'s American Airlines said it's bidding to become the sole provider of maintenance for North American companies that buy Boeing Co. 787 aircraft with a service program.
An order backlog for 377 of the jets, valued at more than $60 billion, has made the Dreamliner its most successful aircraft introduction, Boeing said. North American companies, including Continental Airlines Inc., Northwest Airlines Corp. and ACE Aviation Holdings Inc.'s Air Canada, have ordered 83.
American, the world's largest airline, has focused since late 2004 on winning third-party maintenance contracts to boost revenue, help stem losses and preserve jobs. The approach differs from most other U.S. carriers', which in recent years have increased use of contractors outside the U.S. to cut costs.
``American has been trying to turn its maintenance facilities into a profit center,'' said James Corridore, a New York-based airline equity analyst at Standard & Poor's. ``They have taken on a lot of outsourced maintenance for other airlines, and this would keep their maintenance bases full and probably make them some nice money.''
The bid for work on the Boeing planes ``is in step with American's overall strategy,'' John Hotard, a spokesman for the Fort Worth, Texas-based carrier, said in an interview today. ``We're a full-service provider'' and would perform both thorough overhauls and overnight repairs if it wins the 787 contract.
Decision by Early 2007
The GoldCare program that AMR is bidding on is contracted separately from the aircraft itself and typically would be a multiyear agreement. A formal bid process began earlier this year to pick a North American provider of the maintenance, overhaul and repair services, said Charles Bickers, a spokesman for Chicago-based Boeing.
The aircraft maker will choose the provider by early 2007, he said. Bickers declined to confirm American's bid or say what other companies are being considered. A contract may run as long as 12 years, he said.
American generated more than $65 million in revenue in this year's first seven months for maintenance for other airlines. The carrier has set cost-reduction and revenue goals at its repair bases in Tulsa, Oklahoma; Kansas City, Missouri, and Fort Worth, and earlier this month created a similar program for its 28 line-maintenance centers at U.S. airports.
It's too early to say how the 787 work would be distributed among the American bases if the contract is won, Hotard said.
AMR Chief Executive Officer Gerard Arpey has said the carrier is interested in flying the 787. He has declined to comment on any purchase plans.
Boeing is spending about $8 billion to develop the aircraft, which would seat 250 to 300 passengers. The first 787 is to be delivered in 2008.
Pending Orders
American has 54 Boeing aircraft on order. The forty-seven 737-800s and seven 777s are to be delivered from 2013 through 2017. Boeing agreed in 2004 to delay the deliveries, which originally were set for 2006 through 2010. The airline this year took delivery of two 777s for international travel.
Since 2003, American has reduced annual operating costs by $4.6 billion. The airline has said it expects to gain $700 million in additional savings this year.
AMR has posted net losses totaling more than $8.2 billion since 2000. The company had a second-quarter profit of $291 million as travel demand and fares rose.
AMR shares rose 56 cents to $24.80 at 4:15 p.m. in New York Stock Exchange composite trading. They have gained 12 percent this year.
European maintenance provider SR Technics, a unit of 3i Group PLC, is the only repair service company chosen by Boeing so far. Bidding for an Asian provider is under way, and Boeing has said it will need four or five such providers worldwide.
Dreamliner equipment suppliers Rockwell Collins Inc., Smiths Group Plc and United Technology Group Corp.'s Hamilton Sundstrand have signed on partners under Boeing's GoldCare service.
To contact the reporters on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net ; James Gunsalus in Seattle at jgunsalus@bloomberg.net
Last Updated: September 25, 2006 18:46 EDT