A new 737 costs around $80 million,(show me where they get them for half price) they are getting one every eight days.
Not all answers are published on the internet in a convenient, easy to read format. Sometimes you actually have to analyze the available data to figure out the answer. Such is the case with new airplane prices. Neither Boeing nor AA will release the actual purchase price paid by AA, but if you read the documents filed with the SEC and pay attention to periodic releases by AA, it's not that hard to figure out.
In the quarterly earnings release conference call, AA revealed that its aircraft capex (capital expenditures) for full year 2010 will total about $1.8 billion, and that's for 45 new 738s and about 11 new CRJ-700s:
We continue to take a measured approach to our capital spending. Our capital expenditures for the third quarter totaled about $675 million including approximately $75 million of non-aircraft CapEx. For the full year 2010 we continue to expect about $2.1 billion dollars of total CapEx including approximately $1.8 billion in aircraft capital expenditures all of which are financed. Next year we expect that our aircraft CapEx will be reduced significantly to approximately $900 million.
At 737-800 delivery are expected to be reduced from 45 this year to 15 in 2011. We have arranged financing for all of these aircrafts subject to certain terms and conditions.
http://seekingalpha.com/article/231219-amr-corporation-ceo-discusses-q3-2010-results-earnings-call-transcript
Assuming that the new CRJs are about $20 million each, that leaves about $1.58 billion for 45 new 738s, or about $35 million each. There are other clues to the actual purchase price, but this is the easiest to explain to you. You can quibble with my numbers if you like - I don't care if the actual price is $30 million or $35 million or even $40 million. The point is that the actual price is probably less than half of $80 million that you alleged. $80 million each? The company must rejoice every time it reads such ignorance.
If a new 737 is 10% more efficient then it would burn 31.5 million gallons per year or $7 million a year in fuel, it would take 80 years for the fuel savings to pay off the aircraft. Even if they only pay $40 million it would take 40 years.
No, Bob. The new 738s burn 25% less fuel than an MD-80 and are 35% more fuel efficient per seat mile, since the 738s now hold 160 seats compared to the ~140 in the MD-80s. So instead of burning about 3.5 million gallons each per year (as the MD-80s do), the new 738s burn only about 2.6 million gallons each per year, saving about $2 million each in annual fuel costs. When fuel goes up (as it certainly will), then AA saves even more per new 738.
Since AA is financing nearly 100% of the purchase price, the only thing that matters right now are the annual lease payments on the planes and whether the fuel savings is enough to pay those lease payments. AA's current average interest rate on its $16.2 billion of long-term debt is 5% annually. Assuming that AA is paying roughly 5% on the new 738s, that would make the annual interest amount about $1.75 million, or less than the average fuel savings. Add in the reduced maintenance expenses (during the new plane maintenance "holiday") and the savings are probably closer to $3 million per plane per year.
Exactly. So what you are saying is I should continue to agree to work for less so AA can buy more new aircraft and get rid of more mechanics, which in turn would create a surpluss of mechanics and drive my wages down even more. Sure buying new aircraft makes sense for the company, but buying all these new aircraft makes it look like the companys debt and expenses are way out of control. What doesnt make sense is for mechanics to agree to fund these purchases by continuing to work for less. They can buy all they want, just dont try and use the expense and debt that decision causes, and their BS insinuation that we are already paid too much, as an excuse as to why they cant pay us what SWA or UPS pays.
I didn't say that at all. All I said is that AA will never pay the guys in Tulsa the same high wages as WN, UPS and FedEx pays their line mechanics - after all, the guys in Tulsa are an in-house MRO and what they do can be done in any city in the world with a runway. It's not AA's new 738s that's holding you back - it's those thousands of employees in Tulsa who already make a lot more than you do (on a regionally adjusted basis). There's not a chance in hell that AA will agree to pay them $45/hr or $47/hr just because you and the other line mechanics in high-cost cities are worth those wages. Your problem is the lockstep arrangement you have with AA's inhouse MRO in Tulsa. What they do is probably worth no more than their current pay, given the worldwide competition in MRO services.
Tulsa workers dont have to compete with MRO wages because they dont work for an MRO, they work for an Airline. If AA got mechanics at MRO wages they would have a huge cost adavantage over competotors who pay MROs a huge markup on the labor they sell to carriers.
You're right - the Tulsa workers don't
have to compete with MROs on wages. But since it's obvious to me (and probably to most of the guys in Tulsa) that they aren't going to be paid $47/hr to do what can be done in SIN, HKG, PVG or SAL, what choice do they have?
WN makes do with about 2,500 maintenance personnel plus undisclosed numbers of management. UPS has just over 1,000 mechanics. Dunno how many FedEx has but I'm certain you know. None of them disassemble airplanes in heavy C (or D) checks the way AA does in Tulsa. No airline in the United States pays its mechanics $47/hr to overhaul airframes the way the TUL guys do. I'm skeptical that you have any magic up your sleeve to convince AA to become the first. UA and DL and CO and US don't disassemble their own airplanes anymore, either.
Bottom line is that the new 738s don't have anything to do with AA refusing to overpay its Tulsa employees. On the contrary, new 738s generate substantial fuel and maintenance savings that can be used to increase wages.