HOW FAR WOULD BOEING GO TO KEEP AMERICAN AIRLINES? AA DELVES INTO THE A320NEO BARGAIN BASEMENT

Dino D'Amore
By Dino D'Amore July 20, 2011 07:58

HOW FAR WOULD BOEING GO TO KEEP AMERICAN AIRLINES? AA DELVES INTO THE A320NEO BARGAIN BASEMENT

Both the Wall Street Journal and Reuters have reported that Boeing has offered American Airlines (AA) a re-engined version of the 737 which has led to a rush of last minute talks before todays expected aircraft order.
We can logically assume that if AA does not make a large aircraft order announcement today then the delay is due to consideration of Boeing’s last minute cave-in and offer of new engines on its 737s. It is however expected that AA will now announce a split order (as reported here last week) between the A320/A320neo and a re-engined 737 as yet to be announced.

Buying any aircraft from Airbus marks a major reversal for the airline, which an exclusive agreement with Boeing in 1996 signed to supply all its aircraft.

Sources close to the deal confirm that AA plans to buy 250 Airbus A320′s and A320neos and 150 Boeing 737′s. There is also an option to buy 220 additional aircraft.

Until just a few weeks ago the order was solely for Airbus aircraft after the European manufacturer offered AA what insiders agree was a crazy deal which heavily de-valued the A320 and A320neo. It is this “bargain basement” offer by Airbus and its engine manufacturers which seems to be forcing the hand of Boeing. Boeing has Delta Air Lines looking for 200 aircraft, while Southwest Airlines and United Continental Holdings are also talking about potential orders. Boeing cannot afford to stand back and watch AA go with Airbus.

The big joke is this: the US airlines simply cannot wait for A320s or 737NGs as the backlog is too great, in reality they have to turn to the lessors for gains pre-2020 and so they are forcing Airbus and Boeing to spend fortunes creating new production lines to deliver aircraft more quickly. While they are at it they might as well stick some modifications on the old aircraft. This does leave all those with 737NG and A320 classic orders due for late delivery in the mire. They could most likely cancel their orders and go for the new aircraft as at the moment they would get CFM Leap X engines for next to nothing, source suggest.

The 2011 Paris Air Show was all about market share; forget the large orders for A320neos as they all had massive reductions with AirAsia all but getting their CFM engines free of charge. The show was all about market share for aftermarket business and this is the reality of aircraft orders at this time. We know of some airlines that were offered incentives to take new aircraft/engines over the past eight months.

There are liable to be mixed views on any re-engine move by Boeing. Some will say that they should have done it sooner while others will argue that an all new aircraft launch was the way to go. If the reports are wrong and Boeing has stuck to its guns with the 737NG then all credit to them.  However it is reported from multiple sources that the new version of the 737 is expected to enter service in 2017, two years after the A320 Neo. This means that Boeing would have cobbled together a re-engined 737 in little over ten days, which of course means that they have been dusting down those shelved plans for raising the 737 landing gear. The same plans marked “only open in an emergency”.

Dino D'Amore
By Dino D'Amore July 20, 2011 07:58
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