AA: getting early delivery positions

With Boeing’s 787 line sold out to 2017 or 2020 (depending on which aerospace analyst you believe), how did America get early positions? Here’s what we wrote for Commercial Aviation Online (paid subscription only) yesterday. We had to wait 24 hours before we could post this on a free site.

Commercial Aviation Online, October 16:

American Airlines’ previously held purchase rights for the Boeing 787 provide the airline with favourable delivery slots beginning in 2012.

American declined to comment directly on the 787 contract, but reminded CAO of its previously announced 787 purchase rights.

A CAO source says the delivery positions had been reserved for American, and with American’s reminder of its previously stated purchase rights, this is the probable explanation for the early delivery positions.

The positions do not come from another customer, either by deferral or cancellation, nor do they further delay the program deliveries.

Also, American’s early delivery positions shouldn’t come as a surprise to those familiar with the airline’s over-arching contract with Boeing, signed shortly before the 1997 merger between McDonnell Douglas and Boeing.

The contract called for Boeing to be the exclusive aircraft provider to American for 20 years. As a condition to the merger in order to gain approval from the EU, Boeing agreed not to enforce its side of this contract provision, enabling American to order from Airbus should it choose.

However, from American’s perspective, the contract provides most favored nation pricing as well as what is described as the “mechanism” to ensure American gets aircraft in the future when it wants them. This mechanism is how American gets early deliveries even though the 787 is otherwise sold out to the end of the next decade.

IAG/AirInsight has this podcast about the American order.

Since writing this piece, we confirmed that the purchase rights dating to the 1996 contract are indeed the key and that American’s delivery slots had been reserved all along. Delta and Continental have similar exclusive supplier contracts with Boeing and have similar purchase rights.

We also reconfirmed that for any other customer, 787 delivery positions are unavailable.

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