“The plan was to replace those MD-80s over seven or eight years,” said Mike Boyd, an aviation consultant who studied American’s fleet for its pilots’ union. “Well, American can’t wait that long, not with fuel over $3 a gallon. They’ve got to unload those MD-80s.”
In a statement, AMR Chairman and CEO Gerard Arpey said American “expects to have the youngest and most fuel-efficient fleet among our peers in the U.S. industry within five years.”
The need for fuel-efficiency was evident in AMR’s second-quarter results. Revenue rose to $6.11 billion from $5.67 billion a year ago, thanks to higher fares and fees. But American’s fuel bill rose 33 percent — an increase of $547 million from the same period last year, outstripping the gain in revenue. Fuel has overtaken labor as the airline’s biggest expense.
American said it got $13 billion in financing commitments from Airbus and Boeing to help buy the new planes. But AMR already has $17.1 billion in debt, and analysts wonder about the wisdom of borrowing more while the company is still posting huge losses.
“We understand that American’s fleet (and brand) are tired,” UBS analyst Kevin Crissey said in a note to clients, “but this announcement represents a ton of new capital being put into a failing business model.”
Airlines writer Joshua Freed in Minneapolis contributed to this report.
By Douglas Holtz-Eakin
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