American’s order, as we see it

  • 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:

  1. Split order between Airbus and Boeing, with the split within 60-40, take your pick. It could be narrowly either side of 50-50.
  2. 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.
  3. The 737-800NG continues to be the primary MD-80 replacement airplane.
  4. Airbus gets A321neo orders. We’d be surprised if A320neos are included, but don’t rule it out. The A321neo becomes the 757 replacement.
  5. 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.
  6. 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.
  7. 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…
  8. 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.

40 Comments on “American’s order, as we see it

  1. Even with the split order, Boeing comes out looking pathetic. For all the talk about how customers do not want a 737RE, that there is no hurry to decide between a NSA and RE program and/or the 737NG is still more cost effective than the NEO, Boeing management ends up scrambling to offer a off-the shelf RE. Sad, sad, sad. Where’s the market leadership? In the words of Airbus’ John L. “what is Boeing senior management smoking?”

    • ..but having the B737RE allows other carriers “on the sidelines” to order as well. Also, available slots start becoming a factor as well.

      While it would have been nice to see AA go all Boeing, AA historically has ordered non-Boeing planes.

      I expect the Airbus planes to be mostly NEO’s-especially the A321.

      • I understand. However, my post was directed at Boeing’s lack of market leadership and senior management wavering. Airbus has forced their move.

    • A flip flop on strategy after they’ve been so vocal to the contrary really does make Boeing management look reactionary and inept (especially on the heels of three years of 787 smoke and mirrors). Seems to me that no one at B knows who’s on first. I would guess that until they start missing estimates or posting losses on a regular basis we are in for more of the same. It is sad to watch.

  2. I repeat:
    I changed my mind and now support the re-engined 737, because of ONE
    completely new factor in the equation: i.e. the agreement by P&W and
    GE?, to reduce their NE fan diameter, eliminating the need for a taller
    landing gear and all the other structural changes to the 737, required
    before the existing engine(s) on offer, can be installed on the 737!
    The following is an historic example of the same measure, to reduce fan-
    diameter size, which eventually saved the 737 program, in the early 80′s!
    Lufthansa, the 737 launching customer, needed to replace all their 22
    737-100s and 4 -200s, in the late 70s and Boeing refused to consider
    the CFM engine LH championed, claiming that it was “not cost effective,”
    because the CFM56-5 fan diameter would require an taller landing gear!
    Sounds familiar?
    LH, p….d off at Boeing for not recognizing the fuel efficiency and noise-
    reduction capabilities of the CFM engine, purchase 32+24 option 737-
    200ADV aircraft in March of 1979, for delivery starting in 1981.
    CFM, anxious to find a home for their engine, after loosing the last
    opportunity they had to have the engine on the YC-15 at MDD after
    that program was cancelled, decided in desperation, to reduce the fan
    diameter on the CFM engine, so Boeing could install the engine on the
    737, WITHOUT having to make ANY changes to the 737 structures!
    It is not officially known, but it is fair to believe the rumors that GE/
    SNECMA contributed heavily to the certification/installation costs of
    installing the CFM56-3 engine on the 737-300!
    And guess what, BEFORE LH received their first 737-200ADV aircraft
    in 1981, Boeing launched the 737-300 program, with an order from
    United and RED FACES all around Boeing!
    Fortunately, LH understood and eventually ordered 90 737-300/500s,
    as a result of major traffic increases.
    Hopefully, a re-engined 737 program today, again with reduced fan
    diameter engines, will create the same fortunes for Boeing, the 737-
    300 did 30 years ago and I believe it has all the ingredient to do so!

  3. The problem is that without a larger Fan the engines will not have the efficiency of the larger fan engines. Prop diameter makes a difference and these engines are nothing but a ducted fan (Prop). The 737 is a heavy bird and really needs a bigger wing and larger engine fans to bring real fuel efficiency. Thrush to weight gentlemen with a larger wing brings lower loading per square foot, better climb and cruise with less throttle. It’s just simple aerodynamics unless you would like to get in to Laminar flows and super critical airfoil wings and that brings in other dynamics.

    • ..but it hasn’t stopped the B737NG from being competitive against the A32X over the past few years. I probably wouldn’t be surprised if the same thing happens here.

    • The 737-700 has a big enough wing. All it needs is a smaller new engine with less power and less fuel burn. The heart of the market is 150 seats for 2 to 4 hour flights.

      Can a 737-900ER compete with a 321 with a 50% bigger fan? I doubt it.

    • Jay,

      The B-737NGs with the CFM-56-7B have a 61″ fan, the LEAP engine proposed will have a 66″ fan, not as big as on the A-32X-NEO, but still a bug improvement.

      BTW, all the B-737NGs are already lighter than their A-32X conterparts, and the B-737NG also has a longer wing than the A-32X (including with sharklets). The NEO is some 2+ tonnes heavier than the classics. The B-737NG also has a newer and more modern wing than the A-32X (which is using that same wing, with internal changes for strenghtening on the NEO).

      • The LEAP engine on the A320neo will have a 78″ fan.
        That is a HUGE difference any way you slice it.

      • The heavier plane beating the small/lighter one on longer stretches would indicate that even today engine sfc and aerodynamics on the A320 are better than the on the NG.
        The shortrange NG advantage is due to tighter seating
        and less energy for climb.

      • TB,

        Sounds like you have an inside track with the BusBoys design groupe or you believe to much of what you read? If the 737 was all that great the BusBoys couldn’t sell a plane.

  4. Does not reflect well ,I agree , on Boeing’s top leadership – this means that they had no clue as to what their all Boeing customer AA was looking for!that to me , says a few things about Boeing, talking to customers and listening to them. If they really had , they would have known what was at stake with AA – which would have made them more circumspect on RE vs NSA .
    On the literal scrambling, the less said ,the better on their product planning ;again , the sudden switch in focus from new narrow body to 87-10/77NG and bringing in RE to hold on to their share for the rest of the decade ;unless I donot know something , I cannot believe what is going on at big B.How did they miss this in the first place?
    On the smaller fan engine from Leap – not sure, they are putting their best foot forward; Airbus wins again emphatically this time – till a new narrow body comes up in the middle of the next decade and much water would have flowed under the bridge by then.
    I would think, Airbus and Leahy got it right and sadly Boeing did not defend its turf in the narrow body well enough.
    Will Boeing learn their lesson from the market now?

  5. This order is becoming as appetizing as the sausage making process…

    • LongTimeObserver :
      This order is becoming as appetizing as the sausage making process…

      Depends on your tastes and sensitivities, I guess ;-)
      I was astounded to find Home Sausage Making instructional videos on Youtube, though.

      That said – I don’t think the order and order process is as appetizing as the sausage making process either way. Looks like a clean enough contest to me, although it sounds like there are a lot of people leaking stuff, I have to admit (I would kind of love all the leaks to be wrong, and one of the two just getting the lot, or some other unexpected factor to crop up).
      Admittedly, the implications are huge here – AA being a long-standing Boeing-buyer, and then there are some implications If Boeing finally does go 737RE as part of this order, having beaten the NSA-drum for quite a while. (Some of the Implications will be on John Leahy’s next presentation, public or otherwise, if nothing else ;-) ).

      • Agreed…It would be interesting if all of the leaks were proven wrong. Who knows, maybe tomorrow’s announcement will be for 200 firm CS300 and that AA will be the launch customer of the CS700 stretch with seating for 200 pax and true transcon range.

        I’ll just skip the prognostication and wait for the press conference tomorrow morning. For now…I’m headed out to grill up some sausage.

  6. Seems the cosy AA & Boeing marriage may have finally been identified as both costly & foolhardy, AA needs access to market leading products, tomorrows announcement should confirm a new vision from AA

      • I wouldn’t thing so jacobin777 cause those are operators of just one family and until recently of just one member of that family (WN & FR for737-700, U2 for A319).

      • FR as an example is not sitting on a buch of superanuated fuel guzzling airframes that are noisy to boot.
        FR is flying rather new frames bought at bargain prices.

        Quite the difference.
        Is my impression correct that “old fleets” is a distinct feature
        of US national carriers?

  7. Jay.
    The sudden availability of a reduced fan diameter engine for the 737RE, will
    make all the difference, because the 737 is about 120 lbs. per seat lighter
    compared with the A320 in each catagory, because of it’s wider cabin and
    heavier structures, required because of newer certification requirements
    when the A320 was developed in the late ’80s, requiring the larger and
    heavier CFM56-5 engine, compared with the smaller and lighter CFM56-3
    engines on the 737s.

    That is why, I believe, the 737NG was able to compete effectively with A320
    family for all these years and also the reason why the 737RE, with a smaller
    fan diameter and corresponding lower thrust AND fuel burn, will continue to
    be able to compete favorably with the A320NEO!

  8. Rudy Hillinga :
    Jay.
    The sudden availability of a reduced fan diameter engine for the 737RE, will
    make all the difference, because the 737 is about 120 lbs. per seat lighter
    compared with the A320 in each catagory, because of it’s wider cabin and
    heavier structures, required because of newer certification requirements
    when the A320 was developed in the late ’80s, requiring the larger and
    heavier CFM56-5 engine, compared with the smaller and lighter CFM56-3
    engines on the 737s.

    Are we sure that Boeing is going to be able to grandfather the 737 against all of the new certification requirements again? There surely has to be a limit to grandfathering at some point. Also the small fan is just as efficient as a big fan argument doesn’t pass the smell test.

    I will be interested to see if Airbus has more information about the A321NEO, they have been a little coy about its spec I suspect because they were working with customers like AA to discover what would work for them as a 757 replacement, maybe it is more different than we expect?

  9. Pingback: Boeing may have changed 737 strategy to win American order | Plane Talking

  10. People should remember that AA A300 fleet, no need to cry fool here.

    Scott, regardless of the outcome of the procurement, I am certain that you won’t look stupid tomorrow. Good post ;)

  11. flapjack:
    I cannot answer your first question about grandfathering certification,
    but it worked so far and I do not see why that could not continue with
    the 737RE, because nothing changes, except the engine!
    With regard to the effect on efficiency of a smaller fan, don’t forget
    that the 737RE requires less thrust than A320NEO, again because
    the 737RE will be much lighter per seat, compared with the A230NEO,
    as the 737NG is compared to its comparable A320 model today!

    That is the big and only reason, why I switched from championing the
    737NE to the 737RE, as soon as I became aware of the offer from
    Pratt to reduce the fan diameter of their geared-fan NE last night,
    because the latter will continue to do better than the A320NEO, by
    burning less fuel with its lighter structure and reduced-fan-diameter
    engine.
    Boeing now does NOT have to incorporate the major structural
    changes required to be made to the existing 737NG airplane, while
    Airbus was forced to apply the heavier and larger-fan-engined
    A320NEO, because of its heavier weight and this is THE ANSWER
    AT BOING TO THE WHOLE QUESTION of RE or NE on the next
    737 airplane, as it was 30 years ago with the 737ADV airplane, which
    stood up very well against the A320 for all of these years!

    For the record, the 737 has one of the most efficient structures of
    any other airplane in the world and strongly I believe, that barring any
    un-forseen certification requirements, the 737RE with the reduced-
    fan-diameter NE AND very possibly a lower price, will therefore be
    able to stand up to the A320NEO very well, for many years to come!

    • Rudy Hillinga :
      flapjack:
      I cannot answer your first question about grandfathering certification,
      but it worked so far and I do not see why that could not continue with
      the 737RE, because nothing changes, except the engine!

      A quick googling of the grandfather issues reveals that one of Airbusses complaints regards thinking time at V1 being grandfathered at 1s for the 737 but modern standard of 2s for the A320, this is easily considered to be engine related. This has an effect on take off weight hence seats and revenue per flight etc. I’d expect airbus to put up a fight on this.

      Scott could probably confirm this but as I have read the fan size /LG leg extension was not the only issue preventing the go ahead of the 737RE, grandfathering certification was considered by Boeing to be a serious issue

      • Potential systems upgrades is indeed an issue Boeing has been talking to the FAA about for a 737RE. We do not believe Boeing has received an answer yet from FAA, but there appears to be a presumption that at least some upgrade will be required.

  12. If Scott is right, that the 321 neos will replace AAs 752s, then this loss for B is yet another one arising from its inability to build the NSA because they still do not have the 787 program under control. How would the 739RE compare with the 321 neo? Perhaps well enough to win when coupled with the commonality advantages. Why should A accept the 737RE when it can get the GTF with the neo? I understand that the neo may be heavier than
    the 737NG but isn’t the GTF substantially more efficient than the LEAP X? Can AA feel confident in B’s ability to build the 737 RE on time given their on-going failure to deliver even one 787? AA has yet fo firm up its 789 order, but B will in any case be late. Can AA feel an more confidence in A? In the end, the most important factor after financing may be delivery dates, which AA is supposed to have preference for under their exclusive contract with B. Can A match those with the A320 or even the neo?

  13. Thinking about it, from memory you do see more 738 over-runs than A320 don’t you? I will try to look for for the stats to see if they back this up.

  14. Some 737 vs Airbus questions
    When the 737NG was certified in 1998, the seat tracks and floor structure were updated to be compatible with the then-new 16G dynamic testing for passenger seats; since then every new 737 has had 16G seats installed. Does anyone know if current single-aisle Airbuses use 16G seats or are they still using 9G static-load seats? If the latter, the Airbus NEO’s will have to be updated.

    737NG’s also have quick-release flip-up overwing escape hatches, installed curiously enough at Airbus’s instigation since Airbus was alleging that the 737NG could not meet the 189-passenger evac requirements without them. What kind of overwing hatches do A320’s and A319’s use?.

    Winglets – not a cert requirement, but it is interesting to note that every 737NG that does not already have winglets installed can have them retrofit in less than a week. It is my understanding that only recent A320-family airplanes can have “Sharklets” [!!??] installed in production; retrofit for earlier airplanes is not being offered. Is that correct? Does anyone know why?

  15. m301c60, all A320 cabins have been been 16g certified from aircraft #1. Contrary to 737NG, which are 16g “compatible”but not certified. If Boeing will have to certify on 16g now too is a interesting question.

    Winglets, I know early 737NG have to be modified to be able to take winglets. Seperate Sharklets are under development for existing A320s. A bit like the Sharklets retrofitted on 737-300 and 500s by SW.

  16. flapjack :Thinking about it, from memory you do see more 738 over-runs than A320 don’t you? I will try to look for for the stats to see if they back this up.

    You do see that in the US, where the B-738 outnumbers the A-320 by better than a 2:1 margin. In parts of the world where the A-320 has the number advantage the overrun incident numbers are reversed. But for almost all overrun incidents, weather is a much bigger factor than the airplane design. The WN B-73G overrun in MDW a few years ago happened on an icy runway. The tragic JJ A-320 accident at CGH a few years ago happened during heavy rains.

    keesje, you do know the existing A-32X winglet program needs significantly more outer wing structure and strenghting than the early B-737NGs or the B-737CLASSICs did. That makes those airplanes even heavier again. Also the sharklets can only be added to the A-32X-200 series and not the -100 series (which is still offered in the A-319).

  17. As I read it the 737RE is a very highly qualified commitment by AA.
    They really have to put up or shut up.

  18. IMHO- based partly on some conversations about 8 years ago regarding ‘ sharklets’ on 737 series, ( which started on the 737 BBJ) , there were/are some other versions in the pipeline regarding both efficiency and the rarely discussed trailing vorticies. Since the sharklets remove and ‘ use” some of the typical ‘lost’ energy off of the wingtips, they can also allow significantly closer spacing of trailing aircraft during approach and landing then current FAA minimum standards. Which means an increased thruput for many airports. The ‘ improved’ sharklets along with new engines on the 737 might – repeat *might* well be a hole card in the net gain game. I have heard the improved sharklets sometimes referred to as spiral – lets or similar. Hmmmmmmm

    • The word is “Spiroids”,
      looped back to the wing winglets.

      Anyway, there is an abundance of possible forms around
      to fix the aerodynamic imperfection of a limited span wing.
      And if your wing already is less imperfect the gain is more
      limited than on a more compromised one.

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