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American buys new aircraft

By Staff | Jul 21, 2011

FORT WORTH, Texas – American Airlines announced Wednesday that it will purchase 460 new aircraft in the next decade, which it called the largest jet order in aviation history.

The Fort Worth-based carrier said it plans to buy 260 Airbus aircraft – half will be A320s and the other half will be A320neos – and will have 365 options and purchase rights for additional aircraft. It will also buy another 200 Boeing 737 series aircraft, with half existing 737 next-generation aircraft and the other half a re-engined 737 aircraft.

The aircraft deliveries will start in 2013. American said it will receive $13 billion in financing from the manufacturers through lease transactions that cover the first 230 delivered aircraft. The agreement also includes purchase rights and options for an additional 365 Airbus aircraft and another 100 Boeing 737 aircraft, allowing American to buy up to 925 aircraft in the next twelve years.

“With today’s news, we expect to have the youngest and most fuel-efficient fleet among our peers in the U.S. industry within five years,” said Chief Executive Gerard Arpey. “This new fleet will dramatically improve our fuel and operating costs, while enhancing our financial flexibility.”

American said the two types of new planes will replace its aging MD-80, 757 and 767 fleet as well as its newer 737-800 fleet. The carrier added that the 737 and A320 aircraft reduce fuel costs per seat by 35 percent compared to the twenty-year-old MD-80s.

AMR Corp., the parent company of American Airlines, also reported a $286 million second-quarter loss and announced its intent to spin off its regional carrier, American Eagle, to its shareholders.

The company’s second-quarter loss widened from the same period last year, when it lost $11 million. Revenues were $6.1 billion, up 7.8 percent in the same period last year.w 31 percent in the quarter as AMR paid an average of $3.12 per gallon of jet fuel in the second quarter compared to $2.37 per gallon in the second quarter of 2010. AMR said it paid $524 million more for fuel in the second quarter.

The 85 cents per share loss was larger than Wall Street analysts had expected. According to Thomson Financial, analysts predicted AMR would post a 75 cents-per-share loss.

Not including Wednesday’s fleet announcement, AMR ended the second quarter with $17.1 billion in total debt and had about $5.6 billion in cash and short-term investments.

AMR did not announce a timetable for its divestiture of American Eagle and said it is still open to other options, including a sale of Eagle to a third-party firm.

“Strategically for AMR, it would be beneficial, as we could, over time, diversify our regional feed with additional regional airlines to ensure we have access to the most competitive rates and service,” Arpey said. “A divestiture could provide Eagle an opportunity to vie for business of other mainline carriers and allow the carrier to grow.”

The company also slightly reduced its capacity forecasts for 2011, saying that mainline capacity will be up 1.9 percent compared to last year with its domestic network down 0.1 percent and international capacity up 5.0 percent. Consolidated full-year capacity will now be up 2.6 percent instead of the previously announced 2.2 percent.

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