America’s March 4th order for new narrowbodies from Boeing, Airbus, and Embraer made headlines as a big vote of confidence for the MAX program. The deal further cemented the A321NEO’s position as the narrowbody airliner of choice.
However, under the surface, this order represents no small amount of can-kicking by the airline. The airline issued its 2023 10-K less than two weeks prior, where it disclosed its aircraft purchase commitments (a firm order with a serial number and production slot) for the coming years.
After announcing its 260-plane order, American issued an 8-K with updated purchase commitments, reflecting significant changes in its near-term obligations. While American added to its total backlog with the airframers, it reduced the number of planes it would be obligated to take delivery (same language as above) over 2025 and 2026.
The following table is from two weeks after the above table was published. These changes are not insignificant, and one would want to know why.
This isn’t the first time American has combined a top-up order with an extension of its delivery horizon.
At the end of 2020, the airline had purchase obligations for nine MAX 8s in 2021 and a further 10 for 2022. During 2021, it exercised 30 purchase options for more MAXs but pushed its 2021 and 2022 delivery obligations to 2023. Over the course of 2022, it pushed 10 of its 2023 MAX deliveries to 2025 and 2026.
The A321NEO saw similar deferrals. When the order was initially announced in 2011, deliveries were to begin in 2017. This was delayed by two years during 2014, with 25 airplanes scheduled to be delivered in 2019 and 2020. By the end of 2018, those commitments eroded to 17 in 2019 and 15 in 2020, pushing the delivery backlog even further.
The COVID pandemic and MAX grounding played prominent roles in these delays, but this explanation is incomplete. Orders for MAX (100) and NEO (130, later reduced to 100) were announced in 2011, with deliveries expected to commence in 2017. It is now March 2024, and American has yet to take delivery of those original 200 planes.
The most recent order notably saw 30 MAX 8s converted to MAX 10s.
“Over the past decade, we have invested heavily to modernize and simplify our fleet, which is the largest and youngest among U.S. network carriers,” said American’s CEO Robert Isom. “These orders will continue to fuel our fleet with newer, more efficient aircraft so we can continue to deliver the best network and record-setting operational reliability for our customers.”
So, what does the latest order mean? The airline has a slippery record with deliveries. There seems to be a regular slowing of current deliveries, and the backend keeps growing. The 2011 order – the famous one that birthed the 737 MAX – has still not been delivered. And now we have another order for 260 – when can we reasonably expect deliveries to happen?
Is the financial squeeze tighter than it appears? Lots of squawking, but when does the eagle land?
