- Note: It’s impossible to keep up with the changing and leaking information. Just do a Google News search for the latest.
The situation today remains fluid and often contradictory. News stories, and our own information, agree that a split order is coming from American with Airbus and Boeing but contradictory information is flying about as to which company comes out with the majority of the orders.
But here’s the outcome, as we see it:
- Split order between Airbus and Boeing, with the split within 60-40, take your pick. It could be narrowly either side of 50-50.
- Boeing sells the 737NG with conversions rights to the 737RE, a program that has yet to be launched. The 737RE program goes to the Boeing board of directors in August for approval, which validates the AA transaction. It’s unclear if Boeing’s order will be for the 737-800NG/800RE or if -900ERs-REs will be included. We believe Boeing Commercial Airplanes must be pretty confident the directors are already on board and next month will formally approve the RE program.
- The 737-800NG continues to be the primary MD-80 replacement airplane.
- Airbus gets A321neo orders. We’d be surprised if A320neos are included, but don’t rule it out. The A321neo becomes the 757 replacement.
- At least 200 firm orders, coupled with options and purchase rights. Some reports have 400 firm orders and up to 900 all-in, but this seems to us to fall into the category of ” why.” Every firm order has a deposit attached to it, and in the recent past American prefers to do small firm orders and lots of options to keep the deposits and subsequent pre-delivery payments down.
- But, having said that, Airbus and Boeing could adjust their deposit policies and work with lessors to assume the deliveries, thus reducing cash flow required from American. The deal last week between American and AerCap by which AerCap will take 35 737-800s from American’s current order book and lease them back to AA is one mechanism that could be use, and in fact was said to be connected in some fashion to the big order.
- Lessors play a big role, for reasons outlined in #3. This includes GECAS, the leasing arm of GE Corp. and sister company to CFM International, which means…
- CFM gets the engine order for the LEAP, shutting out Pratt & Whitney for the GTF.
It’s a bit hazardous for us to make these predictions because things are so fluid, but there you go. We’ll see how smart or how stupid we look tomorrow.