By DANIEL MICHAELS, SUSAN CAREY and PETER SANDERS
A potential American Airlines order for more than 250 jetliners holds even higher stakes for the carrier, Airbus and Boeing Co. than the deal's giant size suggests.
Europe's Airbus is pushing hard for American Airlines to buy the A320neo.
Airbus wants to break Boeing's monopoly at American and has assembled a team of lenders and leasing firms to help the European company dangle almost $6 billion in preferential financing, people familiar with the proposal said.
Airbus's offer has a catalog value of almost $23 billion, but that is being heavily discounted, the people said. The unit of European Aeronautics Defence & Space Co., is offering American 130 of the current-generation A320s and 130 of the more fuel-efficient A320neo, the new engine option slated to enter service in 2015.
Boeing wants to keep Airbus out of American hangars but is treading a razor's edge in its offer that won't hurt its bargaining position at other airlines, a person familiar with the talks said. Jim Albaugh, chief executive of Boeing's commercial airplane unit, is expected to meet with American officials on Monday. Boeing is offering 737-800s and 737-900 Extended Range planes, people familiar with the matter said, but the price and financing terms were unclear.
Boeing, meanwhile, also is racing to develop a product strategy for its best-selling 737 model to compete with redesigns of the A320. Boeing faces intense pressure from American and other airlines to decide whether it will update or replace the single-aisle 737, a workhorse of American's short-distance fleet. The carrier already has more than 50 of the 737 on order.
"Right now, Boeing is in a tough situation," said Adam Pilarski, senior vice president at aviation consulting firm Avitas. "They need to try to convince the airline to give them a few more months to announce their intentions for the 737."
The board of American's parent, AMR Corp., might decide the duel as soon as next Wednesday, the people familiar with the matter said.
American must balance its need to replace hundreds of aging planes quickly and inexpensively against the risk of damaging close ties to Boeing, the carrier's sole jet supplier for 15 years. American has "most favored nation" status with Boeing under an exclusivity deal from 1996 that gives American preferential terms in buying planes from the Chicago aerospace company. If American buys Airbus planes, the carrier could lose that status at Boeing.
Adding Airbus A320s, and later A320neos, to American's all-Boeing fleet also would increase the complexity of training and scheduling pilots, handling maintenance tasks and stocking spare parts. But that could be offset by significantly reduced fuel consumption, eventual fleet simplification as American retires older models, and enhanced bargaining power by having two aircraft suppliers vying for orders.
Airbus is willing to offer American sweeter financing than the European company usually offers partly because of a thorny transition at its factories. As Airbus makes the switch to the A320neo, it wants to limit discounting of the final models of the A320, people familiar with the company's thinking said.
Updating jetliner models is dicier than rolling out a new car model or a fancier cellphone because planes are used for decades. Order negotiations for an airliner normally include calculations of its resale value, since aircraft often change hands during their life or are used as collateral for borrowing. But the final units of any model have lower resale value than usual because they will have to compete in the second-hand market with their successors.
Just as retailers mark down discontinued merchandise when a new product line arrives, Airbus is offering American a sweetheart deal to take the A320s, people familiar with the bid said. The package also includes excellent terms on the A320neo, the people said.
That situation presents a dilemma for Boeing because American isn't the only big carrier shopping for single-aisle planes. If American doesn't buy the end-of-line A320s, Airbus could offer them to United Continental Holdings Inc. or Delta Air Lines Inc., both of which already fly A320s and are big Boeing customers. Boeing therefore runs the risk that it could give American—the third-biggest U.S. airline by traffic, behind United Continental and Delta—billions of dollars in financing and discounts and then face the same competitive situation at other large customers.
Losing American's business, or even splitting an order with Airbus, "is not the end of the world for Boeing," said Mr. Pilarski, the Avitas consultant. As financially the weakest of the big U.S. carriers looking to replace their single-aisle fleets in the coming years, American is the least attractive customer, he said. Beyond that, the flip side of losing to Airbus could free Boeing from its exclusivity deal with American, allowing the aircraft maker to charge higher prices and set better terms on American purchases.
Gordon Bethune, a former Boeing executive and retired chief executive of Continental Airlines, said splitting the order "doesn't make sense" because it wouldn't help simplify American's fleet. But he sees American "switching sides for the right deal," said Mr. Bethune, who has no direct knowledge of AMR's bargaining and who once steered Continental into a similar exclusive arrangement with Boeing,
American, based in Fort Worth, Texas, wants to resolve the aircraft order this summer, people familiar with the matter said, and is negotiating intensely with both manufacturers, hoping to get an expedited delivery plan that would allow it to update its single-aisle fleet in about five years. Its directors are expected to meet later this month. It was unclear whether the directors would merely be updated on the aircraft talks or receive an order to approve.
In 1996 American, said it would buy passenger jets exclusively from Boeing until 2018 and began the relationship with an order for 103 jets, a mix of small, narrow-body 737s and 757s and large 767 and 777 long-range wide-body jets. The carrier also secured purchase rights for more than 500 additional jets with as little as 15 months' notice for the narrow-body deliveries and 18 months for the larger planes, a huge concession, as delivery dates typically are assigned to customers years after the order is placed.
1 comment:
Thank you for ssharing this
Post a Comment