AA will take 767 and 777 jets it cant afford

FA Mikey

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American buys Boeing jets, but airline can't afford them [BR][BR]By David Bowermaster[BR]Seattle Times aerospace reporter[BR][BR][BR][A href=http://archives.seattletimes.nwsource.com/cgi-bin/texis/web/vortex/display?slug=boeing23&date=20030123&query=American+buys+Boeing+jets][STRONG][FONT face=Times New Roman size=3]American buys Boeing jets, but airline can't afford them[/FONT][/STRONG][/A][FONT face=Times New Roman size=3] [/FONT]
 
The newest 767-300 was scheduled to be delivered today. N342AA was to be delivered to AFW from PAE. Also, two F-100's have made their way out to Mojave. 2AJ and 2BU were both sent this week.
 
On the financing side... is Boeing pulling an "Airbus?" (the type of finance chicanery of which Boeing has accused Airbus)

If only AA were in Chapter 11... they could walk away from the deal and thumb their nose at Boeing ala UA and US.
 
I rememeber several years ago when AA announced the Boeing Exclusive Twenty year deal where AA stated it will eventually become an all boeing fleet.
The high point of that deal, according to American, was that depending on market conditions and AA's needs, AA would be able to defer deliveries and/or cancel as required. What happened to that deal?
 
Jeff Campbell talked about this topic a bit on the earnings call. The way it sounded, financing with Boeing is already in place for all of the deliveries. While there won't be any cash out of pocket due on delivery, AA will still be making payments on them. If we default, Boeing gets them back, rather than a bank or a leasing firm like ILFC.

The Boeing deal does require advance notice, which is why these 11 weren't able to be deferred, but those due for delivery later in 2003 and in 2004 were able to be deferred or cancelled. I'm sure AA tried to get someone else to pick them up (similar to the 737-800 deliveries last year -- they all went to QF), but there simply isn't any demand for widebodies right now.

Also, there were deposits and progress payments paid on all 9 deliveries, so if AA walks away from the aircraft, even in Ch.11, they would be foregoing those payments as well.
 
While I'm not familiar with the specifics, I'm pretty sure that the deal with Boeing required a certain amount of advance notice in order to make any changes such as deferrals and cancellations. AA was able to defer a substantial number of deliveries that were scheduled beyond a certain date, but I imagine it was too late to do anything about these aircraft. Unfortunately, in this economy, Boeing isn't in a position to be generous any more than AA is. It's not a matter of "chicanery" on either side. It's just a desperate situation all around. However, I'm sure AA will find the financing sooner or later.

Good point about Chapter 11, though. Yes, it would probably enable AA to walk away from its firm orders with Boeing. On the one hand, there are many cases where a debtor in possession might choose to assume pre-petition contracts, for a variety of reasons--not least of which is the prospect of having to do business with that particular creditor again in the future. In other words, people have a long memory when it comes to getting screwed over. On the other hand, this is probably not one of those cases--competition with Airbus is fierce enough that Boeing can't really afford to stay angry with a customer like AA for too long.
 
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On 1/24/2003 9:23:07 AM eolesen wrote:

Also, there were deposits and progress payments paid on all 9 deliveries, so if AA walks away from the aircraft, even in Ch.11, they would be foregoing those payments as well.
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In that case it probably wouldn't make sense for AA to reject the contracts in bankruptcy. They could recover only those payments made within 90 days before filing, but I imagine the deposits and progress payments were made more than 90 days ago (and AA is obviously not going to file today).

It will be interesting to see what AA ends up doing with the planes. Unless they find some airline looking to lease a few widebodies for a few years, I hope they can "turn lemons into lemonade" with at least a few new (and profitable!) international routes...instead of just parking them in the desert.
 
LOL![BR][BR]Actually, speaking of aircraft reposessions, here's an interesting article I came across recently: [BR][A href="http://http://www.coudert.com/publications/?action=displayarticle&id=7"]http://http://www.coudert.com/publications/?action=displayarticle&id=7[/A][BR][BR]There's some dry legal stuff, but the seizure of the second aircraft is actually pretty exciting...for the world of aircraft finance, at least...
 
I've just come up with a great new business idea.

It looks like there's plenty to be made in the jet airliner reposession business. I wonder what it would take to start up a business like that?

Maybe AA could start a new subsidiary--AJR--American Jet Reposession, and repo their own aircraft for Boeing and other lenders. They should be able to turn a buck doing that.
 
AA's purchase of these airplanes is wise. Domestic sucks right now and looses lots of money. AA recently added a third daily from BOS to LHR, a profitable and 777 market. In April AA goes from LAX to NRT, if they don't buy these planes where are the planes going to come from?

There are only so many 777's flying to Buenos Aires, Sao Paulo and Santiago that can be replaced by 767's. Most AA 777's go to NRT or LHR, the more 777's AA get the more profitable or(less unprofitable) AA will be. WHO knows there could be ORD to HKG soon. With AA's code share with Cathay Pacific AA does have aspiration to fly to Hong Kong, the most important market in Asia after Tokyo. Buying these "cheap" 777's now is wise, with LAX to Tokyo here.
AA has always had vision, this purchase is visionary.
 
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On 1/26/2003 8:07:06 AM JFK777 wrote:

AA's purchase of these airplanes is wise. Domestic sucks right now and looses lots of money. AA recently added a third daily from BOS to LHR, a profitable and 777 market. In April AA goes from LAX to NRT, if they don't buy these planes where are the planes going to come from?

There are only so many 777's flying to Buenos Aires, Sao Paulo and Santiago that can be replaced by 767's. Most AA 777's go to NRT or LHR, the more 777's AA get the more profitable or(less unprofitable) AA will be----------------
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The third daily BOS-LHR will not survive past October, I guarantee it. As profitable a market it is, it is over saturated as Delta and United have found out in the past year. There are no 777s going to Santiago de Chile, but the extra 777s can easily be put on to change the second MIA-EZE/GRU frequencies from 763s. Despite the harsh situations down there, those flights still do well up front. With UA suspending MIA-GIG non-stop (now MIA-GRU-GIG), putting a 777 on MIA-GIG may not be such a bad idea. Despite the typical low-yields, Rio attracts a lot of elite tourists, and AA can offer a great advantage.
 
Your 777-worshipping rivals that of Capacity Planning. I have never been more beaten in my career than when I have listened to the argument that 777s have some sort of magical power to increase yield and traffic. The truth is that they are a very expensive aircraft to buy and operate relative to the 763. Furthermore, they tend to be a bit too heavy in the F/J department. That's why we throw them on our best premium markets - not because 777s drive premium traffic, but because they are a better method of serving high levels of premium demand.
 
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On 1/23/2003 9:15:59 PM AA763 wrote:

Does anyone know if any of these aircraft will be based in STL?
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yes all 9 767-300's are going to STL to replace the parked 9 Pratt's.
 
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[BLOCKQUOTE][BR]----------------[BR]On 1/26/2003 2:44:52 PM pilotbob3 wrote:
[P][/P]yes all 9 767-300's are going to STL to replace the parked 9 Pratt's.
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[P][SPAN style="FONT-SIZE: 10pt; FONT-FAMILY: Tahoma"]Those may be destined to fly STL routes which previously were flown by the now parked ragtag collection of the TWA LLC Pratt & Whitney powered 767-300s; however, no one from LLC is being trained to operate them under the AA operating certificate, thus they will be flown by nAAtive crews based elsewhere.[?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:eek:ffice:eek:ffice" /][o:p][/o:p][/SPAN][/P]
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