American Airlines has said that its estimated expenditures for aircraft purchase commitments between 2020 and 2024 would be around $8.4 billion. Regarding how it was going to raise the money, American Airlines says it expects to obtain a binding commitment for a loan under the CARES Act.
American is also hoping to raise $1.5 billion by selling shares and convertible notes as it continues to battle travel restrictions brought on by the coronavirus. In a statement, the airline said that it expects to use a part of the cash raised from the offering for corporate purposes and to enhance its liquidity.
The daily cash burn has started to slow down
In some long-awaited good news, both American Airlines and Delta have said that they have seen a slight uptick in demand for air travel. While still nowhere near the level we were at before the coronavirus pandemic, the modest recovery is managing to slow down the daily cash burn.
While now would seem like a wrong time to be spending billions of dollars on new aircraft, American Airlines must look at the overall picture. Commitments were made to Boeing and Airbus long before anyone had heard about COVID-19. Some of them can be delayed, but American Airlines still needs new aircraft to replace planes scheduled for retirement.
Of the big three United States carriers, American Airlines is leading the way with its fleet renewal and has 53 planes due to be delivered this year. American is expecting the following aircraft deliveries:
- One used Airbus A319
- 18 Airbus A321neos
- 12 Boeing 787-8s
- 22 Boeing 737 MAXs
Last summer American Airlines ordered 50 Airbus A321XLRs
Of the new orders, the one for 22 Boeing 737 MAX aircraft looks like it is up in the air as the plane remains grounded while awaiting recertification after two fatal crashes. American Airlines has already said that it will not take delivery of any MAX aircraft until Boeing has a working fix for the Manoeuvring Characteristics Augmentation System (MCAS) and that the FAA has signed off on it.
In a further blow to Boeing, American Airlines became the first US airline to order new Airbus A321XLR.
American Airlines and Airbus announced at last year’s Paris Air Show that the Fort Worth-based airline placed an order for 50 A321XLRs.
The Airbus A321XLR is the longest-range single-aisle aircraft that Airbus makes and is ideally suited to put on routes where American Airlines uses Boeing 757s.
American Airlines is thinking long term
While American Airlines plans to spend $8.4 billion on new planes, other airlines will look at the coronavirus as a way to trim staff and expenses. American though appears to be taking a long-term approach by replacing older planes with new more fuel-efficient jets.
Of the big three Americans fleet has an average age of 10.8 years, whereas Delta’s fleet has an average age of 14.5 years and Uniteds at 15.9 years.
What do you think about American Airlines buying new aircraft even though it might take some time to get back to normal? Please tell us your thoughts in the comments.