American Airlines Said to Review Splitting Order Between Airbus, Boeing
AMR Corp. (AMR)’s American Airlines may split a narrow-body jet order between Airbus SAS and Boeing Co. (BA), which made last-minute pitches before a board meeting that starts tonight, three people familiar with the matter said.
American executives haven’t settled on a recommendation to directors, said one of the people, who wasn’t authorized to speak publicly. Talks continued today, two people said, as teams from the planemakers worked from hotels near AMR headquarters in Fort Worth, Texas.
The order under study would be for at least 200 single- aisle planes, with the total still being negotiated, one person said today. A transaction of that size would be at least $16.2 billion at list prices, based on the $80.8 million retail value of Boeing’s 737-800. Airbus’s A320 jets cost more.
Buying new fuel-efficient planes would help AMR as it struggles to end two straight annual losses. A shift from American’s all-Boeing main jet fleet also would be a boost for Toulouse, France-based Airbus by expanding the planemaker’s U.S. foothold in the narrow-body jet market.
American is leaving open a possible winner-take-all decision for either planemaker or dividing the deal, one of the people said. Management also hasn’t made a recommendation on the future of the Eagle regional airline, one person said.
Mike Tull, a spokesman for Chicago-based Boeing; Ryan Mikolasik, an outside spokesman for American, and Airbus’s Mary Anne Greczyn declined to comment.
Role of FinancingBoeing’s ability to win a piece of the plane order from American, the third-largest U.S. airline, may rest on whether it can provide financing that matches Airbus’s offer, one of the people said.
American and Airbus have discussed having the planemaker lease some of the jets to the carrier instead of selling them, cutting American’s up-front costs, two people familiar with the matter said. Airbus would then get the planes off its books by selling them to leasing companies, the people said.
An Airbus sales team worked from a hotel in the Dallas suburb of Irving to press its case with American, one person said, as negotiations continued ahead of an AMR board meeting beginning tonight. Boeing’s commercial airplanes chief, Jim Albaugh, visited American last week, saying he had a “good meeting” with Chief Executive Officer Gerard Arpey.
Options OpenWhile one person said that Airbus had a tentative agreement with American for the full order last month, another said talks never got that far, with the airline keeping all its options open.
The 737 is the world’s most widely flown airliner and competes with the A320 family. The A320 has a list price of $85 million, with the A320neo model with upgraded engines costing about $6.2 million more, according to the planemaker.
Airbus plans a 2015 start for shipments of the neo, a plane that has become the company’s fastest seller since its unveiling in December. Airlines crave fuel economy because jet fuel is, with labor, one of their biggest costs.
AMR fell 11 cents, or 2.2 percent, to $4.80 at 12:34 p.m. in New York Stock Exchange composite trading. The shares tumbled 37 percent this year before today. AMR may post an adjusted second-quarter loss tomorrow of 75 cents a share, the average of 13 estimates compiled by Bloomberg.
New 737s or A320s would help American retire its 216 Boeing MD-80s, the most-numerous type among the carrier’s 613-plane main jet fleet. The MD-80s are among the oldest models at major U.S. airlines, with many flying for more than 20 years, and burn more fuel than the 737s American has on order.
American’s last flight with an Airbus plane came in August 2009, with an A300, which is no longer in production. At the end of March, American had 10 of the twin-engine, wide-body planes on its books as leased or owned but not in operation.