AMR to vote on Boeing/Airbus split order -sources


American Airlines’ board of directors was to vote overnight on an aircraft order potentially worth more than US$20 billion and split between Boeing Co and Airbus , said sources

The vote comes after tense haggling that saw Boeing agree to update its best-selling 737 with a new engine, sources said.

The airline, a unit of AMR Corp, could unveil the order for 737s and A320neos as early as Wednesday morning. If the deal were approved, it would mark the triumphant return of Airbus planes to the American Airlines fleet, Reuters reports.

It also would represent the retreat of Boeing from an ambitious plan to completely redesign the 737 to make a new narrowbody that some aviation experts say could have crushed the competing Airbus A320 in the marketplace.

Analysts say the concession was the only way Boeing could rescue the order as Dallas-based AMR played the US plane-maker and Europe’s Airbus against each other. The pressure on Boeing was compounded by the fact that other U.S. airlines also are gearing up for narrowbody orders in the near future.
“Given the time requirements for the US majors, I don’t think Boeing has much of a choice here besides new engines,” Richard Aboulafia, an aerospace analyst at The Teal Group. “There’s not that much else worth paying for.”

If American Airlines buys the re-engined 737, the carrier would be the launch customer for the plane, which has yet to receive the official green light from Boeing’s directors, two sources with knowledge of the negotiations told Reuters.

AMR, Boeing and Airbus declined to comment on the talks.

Two knowledgeable sources said the order could be for at least 200 narrowbodies, but the exact number is unclear, and there could be be last-minute changes. Meanwhile, top aircraft leasing companies are said to be jockeying for position to help facilitate a transaction.
“I think the order will be split 60-40 between Airbus and Boeing. Boeing’s share will include current-generation 737s and the future re-engined 737 as well as conversion rights to the later model. Airbus will sell mostly A321neos,” aviation analyst Scott Hamilton said.

He said reports that the order could amount to 400 or more firm orders may be ambitious but that the plane-makers could adjust their policy on aircraft deposits to make it possible. An industry source familiar with the talks said an order for that many planes was “within the realm of possibility.”

Hamilton also predicted on his Leeham News blog that General Electric (GE.N) would win a sweeping engine order for the combined fleet.

The Wall Street Journal reported that the airline had asked Boeing to counter an Airbus offer that included a generous US$6 billion financing package, and that Boeing had responded by offering to re-engine the 737.

American Airlines last ordered Airbus planes in the late 1980s but declared in 1996 that Boeing would be its exclusive airplane provider through 2018. If Airbus wins all or even part of a big order from the carrier, it would be a coup.


If American Airlines places an order with Boeing or Airbus, or both companies, pressure will be on rival U.S. carriers to follow with their own orders to blunt the advantage American Airlines would gain from flying more fuel-efficient planes.

Delta Air Lines also is in talks with plane makers and says it aims to decide on an order by the end of the year. Southwest Airlines and United Continental Holdings are also talking about potential orders.

The market for narrowbody jet sales is estimated at $1.7 trillion over the next 20 years and is split between Boeing and Airbus, whose A320 has made substantial U.S. inroads.

The European company said last year it would put a more fuel-efficient engine in its A320 and call it “neo.” The A320neo aircraft is scheduled to enter service in late 2015.

Airbus dominated the Paris Air Show last month as it basked in orders for the A320neo while Boeing asked airlines for six months to make a decision on the 737. Airbus has firm orders or provisional commitments for 1,029 neos.

For more than a year, Boeing has debated whether to redesign its 737 narrowbody, a workhorse for airlines around the world, or put a new engine in it.

Experts say re-engining should deliver cost savings of as much as 15 percent. Savings of up to 25 percent could be achieved by an all-new plane. A re-engined plane could be brought to market around 2016. Boeing says it could deliver an all-new 737 around 2020.

The option to re-engine the 737 has remained under consideration, although Boeing has long said it would prefer to redesign the aircraft with new technology showcased in its upcoming 787 Dreamliner.

The 787 is a wildly popular airplane that has attracted more than 800 orders, but it is three years behind schedule due to snags in development.