Update, July 26: Wells Fargo issued this update today:
American Airlines Pricing Update. On July 26 we heard from American Airlines regarding our calculation that the average price it is paying for reengined A320s and 737s is around $30M (ex-escalation: $27M). We now understand that the airline’s $10.3B projected Q3-ending purchase commitment balance excludes the 100 re-engined 737s but includes pre-delivery deposits (PDPs) for 230 aircraft (100 737NGs + 130 A320s) to be leased. Based on this new information, we can estimate an A320neo unit purchase price based on an assumed PDP level. Assuming a 20% PDP rate, the estimated implied unit price per new A320neo would be $40M (ex-escalation: $35M). Assuming a 30% PDP rate, the estimated implied price would be $35M (ex-escalation: $31M).
We were traveling last week and didn’t pick up on this-but here’s what Commercial Aviation Online reported about the purchase price of the Airbus and Boeing orders by American Airlines.
This is entirely consistent with the pricing we heard in advance of the deal.
|Source:||Commercial Aviation Online|
A regulatory filing suggests American Airlines’ purchase price for the Airbus A320neo and re-engined Boeing 737 could be lower than today’s market value for current generation narrowbody assets, according to Wells Fargo research.
Based on the research firm’s analysis, which relies on American Airlines’ 10-Q filing with the US Securities and Exchange Commission on 20 July- “the average re-engined narrowbody price could be about $30 million”.
Assuming 1.5% annual price escalation, this translates to an “average current-dollar price of less than $27 million, or one-third below today’s market values for current generation 737s and A320s”, adds Wells Fargo.
Airbus, American and Boeing have not confirmed the findings.
Wells Fargo notes launch customers generally get preferential pricing; however should other airline customers “strike agreements with Boeing and Airbus at similarly low pricing”, it may mean the “peak margin potential” the research firm assumes for Boeing Commercial Airplanes “could prove more challenging”.