AMERICAN AIRLINES GET A320NEOS FOR HALF PRICE, AIRBUS DENIES RUMOURS

Dino D'Amore
By Dino D'Amore July 27, 2011 10:30

AMERICAN AIRLINES GET A320NEOS FOR HALF PRICE, AIRBUS DENIES RUMOURS

Wells Fargo analysts Sam Pearlstein and Gary Liebowitz have calculated using American Airlines’ regulatory filings, that the US carrier will pay an average of $40 million for its A320neos from Airbus – that’s more than 50% off list price and a good $3-$5 million below real market value estimates.

Pearlstein and Liebowitz clarified what was contained in the total purchase commitments on firm orders at the end of this quarter quoted as $10.3 billion in AA’s quarterly-earnings filing July 20. “On July 26 we heard from American Airlines regarding our calculation that the average price it is paying for re-engined A320s and 737s is around $30M (ex-escalation: $27M). We now understand that the airline’s $10.3B projected Q3-ending purchase commitment balance excludes the 100 re-engined 737s but includes pre-delivery deposits (PDPs) for 230 aircraft (100 737NGs + 130 A320s) to be leased. Based on this new information, we can estimate an A320neo unit purchase price based on an assumed PDP level. Assuming a 20% PDP rate, the estimated implied unit price per new A320neo would be $40M (ex-escalation: $35M). Assuming a 30% PDP rate, the estimated implied price would be $35M (ex-escalation: $31M).”
The figure does not include any payment for the 100 re-engined 737s the airline also ordered because the re-engined aircraft is still pending the approval of Boeing’s board.

Airbus has denied Wells Fargo’s earlier estimate of $30 million per aircraft, representing a discount of 67% for the A320neo. An EADS spokesman told Reuters: “The deal is profitable and absolutely in line with EADS and Airbus business plans.”

His response to the rumour of a 67% discount was: “The rumors are completely unfounded. The A320 deal is a perfectly normal market deal and the A320neo deal fully acknowledges the value this brings to the customer.”

Securing this order was a coup for Airbus and will help its march into the US market but it may now need to offer similarly low priced deals to AA’s competitors. Indeed it also begs the question how much discount earlier customers received for their A320neo orders and whether such a level can be sustainable going forward. What we really want to know is which engines American is going to choose to power its A320neos and how much it will agree to pay.

Dino D'Amore
By Dino D'Amore July 27, 2011 10:30
Write a comment

No Comments

No Comments Yet!

Let me tell You a sad story ! There are no comments yet, but You can be first one to comment this article.

Write a comment

Only <a href="http://www.aviationnews-online.com/wp-login.php?redirect_to=http%3A%2F%2Fwww.aviationnews-online.com%2Feditorial-comment%2Famerican-airlines-get-a320neos-for-half-price-airbus-denies-rumours%2F"> registered </a> users can comment.