American’s CFO Explains the Decision to Buy More 787s, Kill the A350, and Defer Delivery of 737 MAXs

American Airlines has ordered 47 Boeing 787s. 22 Boeing 787-8s will replace their 24 Boeing 767s, and 25 Boeing 787-9s will replace their 15 Airbus A330-300s and older 777-200s.

Can we please stop calling this a $12.3 billion order since airlines do not pay ‘list prices’ it would be closer to say they pay about half of that.

American has also officially terminated their order for 22 Airbus A350s and deferred delivery of 40 Boeing 737 MAXs.

American does more, I think, than other airlines to educate their employees about the decisions they’re making — whether through regular off the record town halls (which have fortunately survived my leaks) or through videos and podcasts that are published both on their internet ‘Jetnet’ system and made publicly available through iTunes and Soundcloud.

American’s CFO recorded a podcast to talk about the reasons for the big Boeing order.

Derek Kerr explains why they terminated their Airbus A350 order. It would have been a new aircraft type for their fleet, and American is on a strong push to simplify the fleet with fewer types of planes and fewer subfleets. So the A350 just didn’t make sense.


Boeing 787-9

They needed to decide whether to invest $15 million into each Boeing 767 and keep it around another 6-7 years or replace them sooner.

Overall though this means keeping 767s in their current ratty state longer rather than investing in them. That’s bad for passenger experience in terms of the condition of the planes. And replacing them is bad for passenger experience in that there’s just more room in coach than on American’s other widebodies. The 767s will be gone by 2022.

American has 76 Boeing 737-800 ‘Classics’ that were delivered between 1999 and 2001. Last month we learned that American planned to retire 45 of them over the next two years. Deferring 40 737 MAX deliveries to 2025 – 2026 means that 737 classics will fly longer in the fleet, that they’ll go through the interior conversion program to get the same densified seating (project ‘Oasis’) and smushed lavatories as the 737 MAX.

Overall by removing orders off their books and deferring delivery of some planes they’re substantially reducing and putting off planned capital outlays that offset some of the cost of these new 787s which help them simplify their fleet. Of course since no one expected they’d actually ever take delivery of the A350s in the first place I’m not sure it’s fair to call terminating that order an offset.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. I didn’t know Boeing made 787’s with no wifi, no IFE and 12 across seating in coach with 24 inch pitch but it sounds like a great fit for AA.

  2. UA should have been so smart to try and keep their fleet with fewer types of planes as well. But
    instead of cancelling their A350 order, they even increased it. The A350 just didn’t make any sense with AA as it doesn’t with UA. Go figure.

  3. At American Airlines the 787-8 and 787-9 are configured 9 across and that can’t and won’t change. Boeing.com lists the seating capacity for the 787-8 at 242, and the 787-9 at 290, AA has 228 seats on the -8 and 285 on the -9. The FAA limit for evacuation also limits the number of seats. Going back to the 1960’s there have been 6 across seating in main cabin on all Boeing narrow bodies. Today 6 across seating is still in place on all Boeing narrow bodies. Passengers have a choice not only of the airline that they fly but the class of travel. At AA passengers typically have the choice of first class, business class, main cabin extra, main cabin, and basic economy. I don’t hear much complaining about restaurants that serve steak and cheeseburgers. Customers have a choice $$$ steak or $ burger. The only thing that has changed about width of the standard 6 across seats on the Boeing narrow bodies is the width of the passengers. Maybe just maybe too many cheeseburgers?

  4. All 787 aircraft at American Airlines have seat back entertainment and wifi. All aircraft at AA will soon have enhanced wifi.

  5. Why are the 737-800’s being referred to as “classics?” Boeing’s nomenclature for this generation of 737 is “next generation.” The “classics” are a generation before the “NG.”

  6. @ jeff AA seems so focused on the passenger experience with the old A321s and new 737 MAX ! LOL

  7. Since flying ultra long flights isn’t part of AA, cancelling the A350 does make sense. The B787 is great replacement for the B767. AA should be able sell the old B767s, as it is a desirable used aircraft. The redo of the A737-800s is just an example of AA greed.

  8. Not a fan of Doug Parker or the 787 its ok
    Most of the ones I have been on don’t feel premium and don’t have enough restrooms
    Including Americans version
    Ill take the a380 ,a 350 old Boeings like the 747s etc happily instead

  9. As I said in my earlier post, passengers have a choice on seating and leg room on AA. There are at least 3 options on most of the narrow bodies. Seat width is the same as it has always been on the narrow bodies. Leg room of course has shrunk, but if you are willing to pay a bit more for main cabin extra there is plenty of legroom. It is all about what the flying public is willing to pay. Unless we go back to a totally regulated industry such as it was before October of 1978 and maybe some of the manners and civility of those times, there will never be the leg room for all seats or the service for that matter.

  10. I would be interested in knowing what type of penalty AA pays (if any) for canceling the order for 22 A350″s.

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