American’s 787 deal

American Airlines revealed the following in its 10Q quarterly report about the provisional order with Boeing for the 787:

In 2008, the Company entered into a new purchase agreement with Boeing for the acquisition of 42 Boeing 787-9 aircraft.  Per the purchase agreement, and before delays due to the recent Boeing strike as discussed below, the first such aircraft is scheduled to be delivered in 2012, and the last is scheduled to be delivered in 2018. The agreement also includes purchase rights to acquire up to 58 additional Boeing 787 aircraft, with deliveries between 2015 and 2020.  Based on preliminary information received from Boeing on the impact of the overall Boeing 787 program delay to American’s delivery positions due to the strike in 2008, the Company

now believes the first of the initial 42 aircraft will be delivered during the second half of 2013.  The first of the 58 optional purchase rights aircraft would be delivered in the second half of 2016 based on the same preliminary information. Under the 787-9 purchase agreement, except as described below, American will not be obligated to purchase a 787-9 aircraft unless it gives Boeing notice confirming its election to do so at least 18 months prior to the scheduled delivery date for that aircraft.  If American does not give that notice with respect to an aircraft, the aircraft will be no longer subject to the 787-9 purchase agreement.  These confirmation rights may be exercised until May 1, 2013, provided that those rights will terminate earlier if American reaches a collective bargaining agreement with its pilot union that includes provisions enabling American to utilize the 787-9 to American’s satisfaction in the operations desired by American, or if American confirms its election to purchase any of the initial 42 787-9 aircraft.  While there can be no assurances, American expects to have reached an agreement as described above with its pilots union prior to the first notification date.  In either of those events, American would become obligated to purchase all of the initial 42 aircraft then subject to the purchase agreement.  If neither of those events occur prior to May 1, 2013, then on that date American may elect to purchase all of the initial 42 aircraft then subject to the purchase agreement, and if it does not elect to do so, the purchase agreement will terminate in its entirety.

4 Comments on “American’s 787 deal

  1. Not a mention of down payments?
    For a programme with such a huge backlog of orders, I fail to understand why any manufacturer would enter into such a deal.
    Surely Boeing are not that desperate for orders.
    I guess I could understand such a deal for 748I which seriously needs some shot in the arm, but even in the downturn, the 787 is in no way in a buyers market.

  2. If we are living in a normal world, it will be to AA’s advantage to exercise ithese options.

    AA’s fleet is in great need of refurbishment and these planes will serve them well. AA is also purchasing other models from Boeing and needs its relationship with Boeing to stay competitive.

  3. “For a programme with such a huge backlog of orders, I fail to understand why any manufacturer would enter into such a deal”

    Boeing makes this sort of deal as an accomodation to a prior deal, wherein AA made an all Boeing fleet decision, and negotiated a pretty substantial order back when Crandall was still in charge.

    As part of that deal, AA recieves front of the line priority should it order 787’s. I beleive the deal was to begin delivery 18 months frome the exercise of that clause.

Leave a Reply

Your email address will not be published.