American Airlines, the U.S. major aviation player, may be the world’s largest airline but has been facing serious challenges in competing with rivals. The carrier has reported that the second quarter of 2018 has been the most challenging for the company for the past five years.
The financial situation within the airline is worsening due to the continuous increase in fuel prices. American reported that it is expecting to earn from $4.05 to $5 per share throughout 2018, which is a drastic drop from the $6 per share forecast announced in April. The earnings outlook of the company has severely been cut and as a result, fleet amendments will be necessary in order to maintain stability.
A Change of Direction
The dramatic growth plans of the carrier have been amended. The past year has seen a 50% increase in the price of fuel and the airline will need to show flexibility in reorganizing its existing fleet to meet the demands and new conditions of the markets it operates in. A cost-cutting plan has been prepared and announced by the executives of American Airlines. Compared to its rivals, the carrier has been underperforming and changes must be quickly implemented.
As a result, new aircraft plans have been announced for execution. For example, a number of operating flights are no longer profitable for the airline as their expenses have drastically increased. Capacity plans have also been reviewed and investors are pushing for a slow-down in capacity mainly due to the inevitable consequence of lowering fares if capacity increases. American Airlines has also placed orders for the acquisition of new aircraft that it will not need as soon as expected. Therefore, a number of American Airlines fleet deliveries will be delayed.
Capacity plans have also been reviewed and investors are pushing for a slow-down in capacity mainly due to the inevitable consequence of lowering fares if capacity increases
American Airlines’ Fleet Restructure
Executives have announced that a number of changes will be taking place regarding the existing and future fleet of the company. The carrier had placed an order for 100 Airbus A321neos earlier in the year and has now announced a change in the delivery schedule of the planes. According to the new schedule, American will receive 17 A321neos in 2019, 15 in 2020, and 18 in 2021. The remaining aircraft will be taken by the airline in 2024.
American Airline’s plane retirements are also undergoing changes. Originally, American planned to retire its 10 Hawaii 757s in 2020 but instead will be putting the airplane out of use in 2019. The decision has been made after selecting the Airbus A321neo as a replacement for the 757. On the other hand, the carrier intended to retire its 14 Embraer E190 airplanes in 2019 but will rather continue using them until 2020.
Boeing’s 737-800 are also included in the retirement list of aircraft to no longer serve the company. However, originally, American Airlines intended to retire a larger number of 737-800s than it has now announced. According to recent statements, American will retire 30 737-800s instead or the originally stated 45 737-800s for retirement.
Finally, 8 Airbus 319s will be added to the carrier’s fleet on a lease.