In a move to capitalise on the resurgent demand for premium travel, American Airlines announced its most substantial plane order since 2011 on Monday, securing a deal for 260 new jets from Airbus, Boeing, and Embraer.
This is based on a Reuters report.
The ambitious order includes 85 Airbus A321neo jets, 85 Boeing 737 MAX 10s, and 90 Embraer E175 aircraft, accompanied by options and purchase rights for an additional 193 planes.
American Airlines’ CEO, Robert Isom, optimistically noted, “(Travel) demand is back.”
The order is a significant boost for Boeing, which has faced challenges, notably after the Jan 5 incident where a door plug blew off a 737 MAX plane mid-flight, raising concerns about its certification.
The order includes the MAX 10, American Airlines’ first-ever order for this variant.
American’s chief financial officer, Devon May, expressed confidence in Boeing, saying that the airline has trust in the aircraft manufacturer.
The MAX 10 delivery is scheduled for 2028, with flexibility for conversion into MAX 8 or MAX 9 if necessary.
May also confirmed negotiations with Airbus for options in case of delays.
While American Airlines shares experienced a 5.4 per cent decline to close at $14.81 on Monday, the new plane order is anticipated to enhance the airline’s capacity for high-margin premium seats on domestic and short-haul international routes.
The move aligns with industry trends, as major carriers like American, United, and Delta Air Lines have witnessed increased demand for premium travel post-pandemic.
The order is not only about expanding the fleet but is a strategic play to boost revenue from co-branded credit cards.
American Airlines plans to leverage these programs as cash generators through the sale of miles to third-party partners.
The company anticipates a significant jump in profit margin, aiming for 15-18 per cent in 2026, up from the estimated 14 per cent for the current year, resulting in a free cash flow exceeding $3 billion.
(With inputs from Reuters)
