American Airlines has made its largest plane order in over 10 years, purchasing 260 new jets from Airbus, Boeing, and Embraer. This move comes as the airline aims to capitalize on the growing demand for premium travel and increase its earnings. The order includes 85 Airbus A321neo jets, 85 Boeing 737 MAX 10s, and 90 Embraer E175 aircraft, with options and purchase rights for an additional 193 planes.
American Airlines’ CEO, Robert Isom, stated that travel demand is back, reflecting the recovery of the aviation industry after the impact of the COVID-19 pandemic. This significant order is seen as a positive boost for Boeing, which has faced scrutiny following a recent incident where a door plug blew off a 737 MAX plane in mid-flight. However, questions have been raised about the certification of the MAX 10 variant, as it has yet to receive approval from the Federal Aviation Administration (FAA).
Devon May, American Airlines’ chief financial officer, expressed confidence in Boeing’s ability to address these concerns and stated that the order reflects the airline’s trust in the company. He also highlighted that the MAX 10 offers fleet flexibility and serves as an alternative to the airline’s current Airbus A321 planes. The first delivery of the MAX 10 is expected in 2028, but American Airlines has negotiated options with Airbus in case of any delays.
Reuters reported that rival United Airlines is in talks with Airbus for a potential mega order to replace its existing orders for the MAX 10. This reflects the competition between airlines for limited production slots from Airbus. Despite these discussions, May remains optimistic about Boeing’s ability to rectify any issues with the MAX 10 and deliver it on time.
The new plane order will allow American Airlines to add more high-margin premium seats on its domestic and short-haul international routes. This aligns with the increased demand for premium travel experienced by American, United, and Delta Air Lines in the post-pandemic era. Additionally, American Airlines aims to boost revenue from its co-branded credit cards, which have become a lucrative source of income for airlines through the sale of miles to third-party partners.
American Airlines expects this significant investment to result in a profit margin increase of 15% to 18% by 2026, up from the estimated 14% for this year. This projection indicates a positive outlook for the airline’s financial performance, with a projected free cash flow of over $3 billion.
Overall, American Airlines’ large plane order signifies its commitment to capitalizing on the recovering travel demand and increasing its profitability. With a diverse selection of aircraft from Airbus, Boeing, and Embraer, the airline aims to provide greater flexibility and cater to the growing demand for premium travel. While concerns regarding the certification of the MAX 10 persist, American Airlines remains confident in Boeing’s ability to address these issues and deliver the planes on time.
