In a groundbreaking move, American Airlines Group Inc. confirmed its agreement to purchase 260 short-haul aircraft that includes a hefty deal for Boeing Co. 737 Max jets. This deal comes as a significant endorsement for Boeing as it navigates reestablishing its reputation following a near-fatal accident in January.
American Airlines’ Major Purchase
The deal includes a diverse portfolio of airplanes. American Airlines will be acquiring 85 Boeing Max 10 aircraft, 85 A321neo planes from Airbus SE, and 90 Embraer SA E175 regional jets. The airline has also left an option open to purchase an additional 193 planes. This strategic move aligns with American’s plans to augment its service in North America and nearby international markets, along with increasing the number of premium seats it offers.
This transaction signifies the first significant deal for Boeing’s flagship 737 Max since an issue arose with an airborne Alaska Airlines jet earlier this year. The crisis left Boeing grappling for support. However, orders from high-profile buyers like American Airlines often sway other customers and can help in rebuilding confidence.
American Airlines’ Trust in Boeing’s 737 Max
For American Airlines, the deal is a gamble that the yet-unreleased Max 10, the largest-ever 737 model, will clear final regulatory obstacles and begin flights within the next two years. Additionally, the airline adjusted 30 existing orders for Max 8 aircraft to the larger Max 10. This move stands in contrast to United Airlines Holdings Inc., who has removed the Max 10 from its near-term plans, citing uncertainty about its delivery timeline.
Despite the concerns, American Airlines’ CEO, Robert Isom, expressed confidence in Boeing’s ability to deliver a certified Max 10 by 2028, when the airline is scheduled to begin receiving the planes.
Beneficial Aspects of the Agreement
The agreement secures valuable production slots in a constrained market for new aircraft, as both Boeing and Airbus have mostly sold out of single-aisle jets through the end of the decade. This acquisition will enable American Airlines to replace some of its oldest, fuel-inefficient single-aisle aircraft with more proficient models that offer more premium seats.
With the new agreement, American Airlines will have a steady influx of new aircraft over the next decade, which aligns with a balanced level of capital investment, according to CFO Devon May.
The agreement also includes options and purchase rights for an additional 75 A321s, 75 Max 10s, and 43 Embraer E175s. American Airlines’ existing fleets of A319s and A320s averaged 19.7 and 22.7 years, respectively, at the end of 2023. Its 303 Boeing 737-800s averaged 14 years. Including the new order and existing wide-body deals, the airline now has 440 aircraft on order with deliveries extending into the next decade.
While American Airlines is managing its industry-leading debt, this agreement will help reduce it to $41 billion by the end of this year and to $39 billion by December 2025. The carrier is 75% on its way to achieving its goal to reduce debt by $15 billion, primarily accrued due to aircraft purchases committed to in a colossal 2011 order.
For more in-depth information on this topic, visit the Airlines for America website.
