American Airlines announced a record setting airplane order today. The Dallas based company is buying 460 new airplanes split between Airbus and Boeing, and options for another 465. The massive order comes at a time when the airlines are rushing to reduce operating costs by buying new, more fuel efficient airplanes. The order also included an announcement from Boeing on its long awaited decision on whether or not it will replace the 737 with an all new model or simply update its best selling airplane.
With the current state of the economy, and many airlines far from prospering, the giant order has raised some questions, but airline analyst Richard Aboulafia says it’s all about a race towards efficiency.
“It’s fundamentally a defensive move” he says, “everybody is looking for a hedge against expensive fuel.”
And in the world of single aisle, narrow body airliners, that hedge is thanks to new, fuel efficient engines.
New technology and designs in the jet engine industry is driving the push towards more efficient airplanes at the smaller end of the model lineups for both Boeing and Airbus. There are some improvements being made with the airframes themselves including weight savings and aerodynamic improvements. Both companies are claiming around 15 percent improvements in efficiency for the newest narrow body models expected to fly in the next several years.
The technology is available now to dramatically cut fuel costs with new, re-engined airplanes compared to airplanes currently in many airline fleets that are 20 years old or older. This gives the industry the motivation to justify the purchase of new airplanes says Aboulafia. The key is there money available to buy the jets, about $13 billion for this deal.
“You’ve got access to jet finance” Aboulafia says, “coupled with high fuel prices and that shifted the cost burden away from capital costs and towards operating costs.”
Airbus appears to be the winner in the American Airlines order with 260 airplanes. That part of the order will begin with current A320 series airplanes beginning in 2013, with 130 orders for the fuel efficient new A320neo (new engine option) beginning in 2017. The A320neo was the big hit of the Paris Air Show last month. Options to purchase another 365 airplanes was placed with the European company.
On the Boeing side, the order includes 200 airplanes. Half of these will be from the existing line up of 737s known as the 737NG (Next Generation). But the big news from Boeing was the announcement that it will not replace the 737 with an all new model, but instead re-engine the current 737 along with some other improvements to the airframe. This is similar to Airbus’ move with the A320neo. Though no word on the new name for the 737, maybe Next Next Generation, or NGSquared?
Boeing CEO Jim Albaugh says the decision was largely driven by a need for airplanes sooner, rather than later.
“Our customers wanted more efficiency now and certainty of delivery.”
With the first delivery of the 787 expected in the next month or two, the delayed airplane has left many airlines waiting years beyond the date they had hoped to put the Dreamliner into service. American placed options to buy an additional 100 airplanes from Boeing’s 737 family in the announcement today.
Image: Airbus
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