What does American's Bankruptcy Protection Spell for Airbus, Boeing

[East New York]

Posted by Robert Wall at 11/29/2011 7:45 AM CST - Even though it may take some time to sort out exactly what today’s bankruptcy protection filing by American Airlines parent AMR means for the airline's future, it is unlikely the airline’s recent commitment to new narrowbodies will be a victim.

 

In July, American committed to buying 460 single-aisle aircraft – a mix of Airbus A320s and reengined A320NEOs, as well as Boeing 737s and reenginged 737MAXs. The deal was a particular breakthrough for Airbus, landing a large share of a large Boeing customer.

 

But did the champagne corks in Toulouse pop too early? Probably not.

 

The standard 737s and A320s offer a big fuel burn advantage over the more than 200 MD80s being phased out. The NEO and MAX also likely are safe; given the large share of operating costs linked to fuel, the need to field the more fuel efficient aircraft is likely to keep the types part of AMR's future plans.

 

AMR signals the same, noting that "in view of the large number of aircraft we have on order from Airbus and Boeing, we also seek to accelerate our fleet renewal strategy and, as a result, we do not require the use of all aircraft currently in the fleets."

 

The exact business model to be rolled out for the revived American is likely to shape capacity needs, but -- at first blush -- it would seem that is more likely to impact what portion of the 465 options and purchase rights the company exercises, rather than affect the firm order portion of the July deal.

 

Whereas Airbus and Boeing may do fine, lessors will have to brace for what is to come.

 

AMR notes that "to conserve our liquidity, subject to the requirements of the U.S. Bankruptcy Code, during the 60-day Section 1110 period, we plan to make payments when due of aircraft rent and mortgage principal and interest payments only on certain aircraft in our fleets." And, it adds, "we have been developing a comprehensive plan which re-values aircraft based on current values, taking into account required maintenance, the need to phase out older types and desired fleet efficiencies. We will be sending proposals to many of our aircraft lessors, lenders and trustees soon."

 

What does American's Bankruptcy Protection Spell for Airbus, Boeing