American Airlines' Blockbuster Plane News: What You Need to Know
On Monday, AMR Corporation subsidiary American Airlines announced significant revisions to its past agreements to purchase new aircraft from both Boeing and Airbus.
In a short but nonetheless convoluted SEC filing, the airline described amendments being made to no fewer than four separate -- and previously reported -- airplane purchase agreements, the upshot of which appears to be that American is now slated to buy:
- 42 Boeing 787-8 and 787-9 Dreamliners. These include as many as 20 787-8 aircraft, deliveries of which are "scheduled to commence in November 2014 and to continue in each calendar year through September 2018." Also, American has an option to purchase up to 58 more Dreamliners.
- 111 older model Boeing 737-8 aircraft, with an option to purchase 40 more.
- 18 Boeing 777 aircraft, with options on 13 more.
- 100 new model 737 MAX aircraft "equipped with new, more fuel efficient engines" built by the General Electric joint venture known as CFM International. These planes are scheduled for delivery between 2018 and 2022. Additionally, American took out options on 60 more 737 MAXes to be delivered, potentially, between 2022 and 2025.
American's bankruptcy court must still approve these restructurings, of course. A hearing on that is scheduled for Jan. 23, 2013.
What you need to know
There are two key takeaways from yesterday's news. First, despite being deeply in debt, and indeed stuck in bankruptcy court at present, American is "still committed to having the youngest mainline fleet among U.S. network carriers by 2017," according to company spokesman Sean Collins. Whether the company will ever make enough money to pay for all these planes, however... is an excellent question.
Second, part of the understanding reached between Boeing and American is an agreement that both parties will drop most claims they could potentially have filed against each other for contract breach. This suggests that in the case of American Airlines, at least, Boeing will have no liability for delayed delivery of 787 Dreamliners, owing to the several year long delay in development of the aircraft.
In a side note, American's SEC filing mentions that it is making similar changes to its multi-hundred-airplane order from Airbus for the delivery of A320 aircraft, which was announced back in July 2011. Specifics on these changes were not included in American's SEC filing.
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The article American Airlines' Blockbuster Plane News: What You Need to Know originally appeared on Fool.com.Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of General Electric Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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