NEW aircraft decision soon

[MiAAmi]

AMR CEO says will decide soon on new aircraft orders



CHICAGO (MarketWatch) -- American Airlines, a unit of AMR Corp. is close to making a decision on buying new aircraft to replace the aging MD-80 aircraft in its fleet, Gerard Arpey, chairman and chief executive of the world's largest airline, said during JPMorgan's Aviation and Transportation Conference Wednesday.
American, along with most major U.S. carriers, in recent years hasn't had the money to upgrade its aircraft fleet. Arpey noted that MD-80's burn a lot more fuel than more modern narrow-body aircraft. He said American will decide "in the near future" on a strategy for replacing MD-80's, based on discussions with aircraft and aircraft engine makers. American must decide how many orders to place for aircraft currently in production, or to wait for next-generation planes which save even more fuel.
Arpey said American has a "flexible" arrangement with Boeing Co. for ordering new planes. Boeing made the MD-80's, which are no longer in production.
Overall, American has more than 700 aircraft in its fleet.

 

[FWAAA]

Two weeks ago, Horton was widely quoted as saying that American couldn't wait for the Next Generation Single Aisle aircraft - now Arpey is hinting that maybe AA can wait after all.

 

[BuffaloJoe]

Two weeks ago, Horton was widely quoted as saying that American couldn't wait for the Next Generation Single Aisle aircraft - now Arpey is hinting that maybe AA can wait after all.

I used to like the MD80's. The last few times that I flew on them, it seems to me that the seat cushion was like a rock. The little pillows had little padding. Also on the 737-800's the E-Row window seats, are they getting rid of the armrest on the side of the window?

 

[flyhigh]

FWAAA,

I didn't read it that way at all from either. It seems both are saying they have to replace the M80's first. Makes sense. The big question is what percentage of that fleet do you replace? Do you just buy 300+ 738s to replace the M80's or maybe just 200 and then the remaining 100+ will be the first to be replaced by the next generation of narrow bodies. I don't think it will be a simple M80 for 738 swap out either. I would hope that AA gets some 73G's (700 series). The 738 is great but offers and even larger differential between the largest RJ (70 seats) and itself at ~150 seats. If they could bring in the -700's with ~125-ish seats, you can offer a better supply mix to the market.

 

[eolesen]

Two weeks ago, Horton was widely quoted as saying that American couldn't wait for the Next Generation Single Aisle aircraft - now Arpey is hinting that maybe AA can wait after all.

AA could probably do both.

Assuming a 18 month lead time and a delivery rate of two a/c per month, it would take about 7 years to replace the fleet on a 100% basis.

On an 80% replacement basis, it would take 6 years, and be done by 2014 or so, about the time that a potential -1000 might be available to replace the remaining 20%.

AA could go with a more aggressive delivery rate, but there's a practical limit as to just how many current MD80 pilots can be pushed thru the schoolhouse without really screwing up the operation or forcing AA to use outside contractors for sim time.

 

[FWAAA]

FWAAA,

I didn't read it that way at all from either. It seems both are saying they have to replace the M80's first. Makes sense. The big question is what percentage of that fleet do you replace? Do you just buy 300+ 738s to replace the M80's or maybe just 200 and then the remaining 100+ will be the first to be replaced by the next generation of narrow bodies. I don't think it will be a simple M80 for 738 swap out either. I would hope that AA gets some 73G's (700 series). The 738 is great but offers and even larger differential between the largest RJ (70 seats) and itself at ~150 seats. If they could bring in the -700's with ~125-ish seats, you can offer a better supply mix to the market.

I agree with your point but here's what Horton said two weeks ago:

An MD-80 replacement is vital because the jets burn at least 20 percent more jet fuel than new 737s, Horton said.

The airline also can't wait until next decade for a new generation of narrow-body planes before starting to retire the aging MD-80s, its most-numerous aircraft type, he said.

http://seattletimes.nwsource.com/html/busi...0933_amr10.html

Which is consistent with your post and eolesen's post. Replacement will take years, and today's high fuel prices are increasing pressure to begin the process sooner rather than later.

My comment focused on this from today's news:

He said American will decide "in the near future" on a strategy for replacing MD-80's, based on discussions with aircraft and aircraft engine makers. American must decide how many orders to place for aircraft currently in production, or to wait for next-generation planes which save even more fuel.

Different from Horton's "we can't wait" pronouncement two weeks ago. Looks like someone's been muzzled.

And even if AA orders 200 or 300 737s, the contract will no doubt allow unfilled orders to be converted to the NGSA once that program is up and running.

 

[Boomer]

All of this is from the outside of APA, as I'm a wrench, but given frequent discussions with APA Members as compared to what I read from the APA-PDP: I think most of this talk can be chalked up to politics with the APA Negotiations.

 

[formeraa]

All of this is from the outside of APA, as I'm a wrench, but given frequent discussions with APA Members as compared to what I read from the APA-PDP: I think most of this talk can be chalked up to politics with the APA Negotiations.

And negotiations with Boeing, too!

 

[flyhigh]

Boomer,

I think everyone would agree that it is somewhat tied to negotiations. First and foremost, if the APA wants to jack their pay rates back to what they were pre-concessions for example, AA will maybe plan to replace 70% of the M80's and just shrink the airline. Go back to the Crandall days when he figured he'd just let the airline retire itself to death. If they ask for a modest raise that is within peer levels, you could see them replace 110% of the M80's. That's reality.

FWAAA,

Not to belabor the point, I would focus on Horton's word "starting". He seems to be saying much the same as Arpey...we start now and decide what % of the fleet to replace based on costs, timeline until the next generation of narrow bodies, etc. Anyway, it's neither here nor there...looks like they will be getting new aircraft...that's good news.

 

[eolesen]

Go back to the Crandall days when he figured he'd just let the airline retire itself to death.

That's happened twice that I know of...

I don't recall the timing of pilot negotiations with regard to when the first couple batches of MD80s were ordered back in the early 80's, but at one point, Crandall started parking a 707 for every MD80 delivered. Once negotiations came to an agreement (including B scale, IIRC), the MD80 order turned into a growth order.

The second time was in 1997; once there was an agreement that members could live with, the 777 and 737 order hit the books.

 

[formeraa]

That's happened twice that I know of...

I don't recall the timing of pilot negotiations with regard to when the first couple batches of MD80s were ordered back in the early 80's, but at one point, Crandall started parking a 707 for every MD80 delivered. Once negotiations came to an agreement (including B scale, IIRC), the MD80 order turned into a growth order.

The second time was in 1997; once there was an agreement that members could live with, the 777 and 737 order hit the books.

Correct. It's interesting to note that Crandall was right. I wonder what he would do today...

 

[FWAAA]

The second time was in 1997; once there was an agreement that members could live with, the 777 and 737 order hit the books.

That was a classic. First there was this November, 2006 press release:

http://www.boeing.com/commercial/news/1996...ase.961121.html

which contained this contingency:

The agreement is contingent on ratification of the tentative agreement between American and the Allied Pilots Association.

Oops.

Then there was a strike. And finally, a ratified agreement.

 

[mga707]

but at one point, Crandall started parking a 707 for every MD80 delivered.

Could not have happened. Last AA 707 revenue service was in late summer 1981.
First AA MD-82 revenue service was in spring 1983.

 

[ILS2MINIMUMS]

looks like they will be getting new aircraft...that's good news.

In my opinion, getting new aircraft is really only a good thing if they're either much more fuel-efficient (thus saving money on fuel) or for GROWTH. If the airline stays with the same number of aircraft, it's really only adding to the debt side of the balance sheet.

It's not just the pilot's contract that should be talked about. All three major unions on the property are coming up for renewal soon. The company will try to dangle the new airplane order carrot over each of our heads. They'll basically say, "if you work for crap, we'll go out and replace the MD-80's with some sleek new airplanes"... Imagine how that would go over in the "real world"... Tell a landscaper that if he takes a 30% cut in pay, you'll buy him a new shovel so he can dig the same holes he's digging now...

 

[777 fixer]

In my opinion, getting new aircraft is really only a good thing if they're either much more fuel-efficient (thus saving money on fuel) or for GROWTH. If the airline stays with the same number of aircraft, it's really only adding to the debt side of the balance sheet.

It's not just the pilot's contract that should be talked about. All three major unions on the property are coming up for renewal soon. The company will try to dangle the new airplane order carrot over each of our heads. They'll basically say, "if you work for crap, we'll go out and replace the MD-80's with some sleek new airplanes"... Imagine how that would go over in the "real world"... Tell a landscaper that if he takes a 30% cut in pay, you'll buy him a new shovel so he can dig the same holes he's digging now...

TWU represented AMT's get paid the same whether they are working on a twenty year old MD-80 or a brand new 737-800. TWU rampers get paid the same whether they are unloading a 767 delivered in 1988 or at some future time a 787. So I really don't see dangling aircraft orders over our heads being able to work in their favor.