American Airlines, in a bid to take advantage of the renewed interest in premium travel, made its most substantial plane order since 2011 on Monday, securing a deal for 260 new jets from Airbus, Boeing, and Embraer, according to a Reuters report.
The comprehensive order comprises 85 Airbus A321neo jets, 85 Boeing 737 MAX 10s, and 90 Embraer E175 aircraft, with options and purchase rights for an additional 193 planes. CEO Robert Isom expressed optimism, stating that “(Travel) demand is back.”
This order represents a significant boost for Boeing, which has encountered hurdles, notably following the January 5 incident where a door plug blew off a 737 MAX plane mid-flight, raising certification concerns. Notably, it includes the MAX 10, marking American Airlines’ maiden order for this variant.
Devon May, American’s chief financial officer, expressed confidence in Boeing, emphasizing the airline’s trust in the manufacturer. The delivery of MAX 10s is slated for 2028, with the flexibility for conversion into MAX 8 or MAX 9 if required. May also confirmed negotiations with Airbus regarding options in the event of delays.
Despite American Airlines shares witnessing a 5.4 percent decline to close at $14.81 on Monday, the new plane order is expected to enhance the airline’s capacity for high-margin premium seats on domestic and short-haul international routes. This strategic move aligns with industry trends, as major carriers such as American, United, and Delta Air Lines report increased demand for premium travel post-pandemic.
The order not only aims to expand the fleet but also strategically boost revenue from co-branded credit cards. American Airlines intends to utilize these programs as cash generators through the sale of miles to third-party partners. The company anticipates a significant increase in profit margin, targeting 15-18 percent by 2026, up from the estimated 14 percent for the current year, resulting in a free cash flow exceeding $3 billion.
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