American’s 787 order: Big win – with challenges – for Boeing

American Airlines used a 5pm Friday news dump to announce a major aircraft order last week. The carrier shed its previously deferred Airbus A350 order that came with the US Airways merger in favor of adding 47 new Boeing 787 Dreamliner aircraft to the fleet. The order is split between 22x 787-8s and 25x 787-9s. The 788s will begin delivery in 2020, allowing American to retire its aging 767-300 fleet. The 789 delivery cycle begins in 2023, with the A330-300 and older 777-200s slated for replacement.

Today’s announcement is influenced by our goal to simplify our fleet and reduce the number of aircraft types we operate. Our prior plan would have had us operating five widebody aircraft types, and with today’s announcement we will soon reduce that to three. These new replacement aircraft are consistent with our previous plans for the size of our widebody fleet. We see significant advantages to carrying common fleet types, including creating less friction in our operation when aircraft swaps are necessary, reducing inventory needs, and creating a more consistent service for customers and team members. – American Airlines CFO Officer Derek Kerr

The fleet simplification justification and type commonality is hard to argue, though not necessarily as compelling as the carrier might want it to be.

This was a difficult decision between the Boeing 787 and the Airbus A350 and A330neo and we thank both manufacturers for their aggressive efforts to earn more of American’s business. In the end, our goal to simplify our fleet made the 787 a more compelling choice. – AA President Robert Isom



While some passengers lament the tighter squeeze the 787 layout, particularly in economy class, American suggests that passengers love it, at least compared to the other aircraft the company operates, “[T]he 787 earns American’s highest overall customer satisfaction scores among widebodies, as well as in the areas of seat comfort, carry-on storage space and in-flight entertainment.” That the 767s and older 777s it competes against haven’t been updated in a while certainly doesn’t hurt that ranking.

Winners and losers (and more losers than you’d expect)

The hit to Airbus is obvious. Losing the 22 A350s off the order book is not good, but also not particularly awful. The company positions the A350 as more of a 777 or 747 replacement than a 767/A330 shift, and American does not have as many of the larger planes to swap in the next 10 years. The bigger hit is arguably to the A330neo line. While the –900 series is accumulating orders the smaller –800 sits with a goose egg on the order book. The –800 is squarely aimed at the A330-200 and 767-300ER markets given its smaller passenger capacity and Airbus has repeatedly stated it expects the upcoming aircraft replacement cycle to net orders for the type. This was a good opportunity from an existing Airbus twin-aisle operator to score that order and it did not come through.



Boeing comes out as the winner in this announcement, of course, with a larger order than the A350s that were scrubbed and extending production of the 787 at the current pace for a few more years. It also potentially erodes the 797/NMA/MoM market, and the carrier still has not truly committed to that space. While American’s commitment to Boeing here is solid for the company it also takes some potential NMA aircraft orders off the table.

Much like the A330neo, Boeing expects the NMA aircraft to sell mostly as replacements for the 757 and 767 (and A330) fleets airlines are replacing in the coming decades. Boeing’s NMA is expected to come in two versions, seating either 225 or 275 passengers and with a range of 5000 nmi or 4500 nmi, respectively. Those spec’s make it larger and longer than the 757-200s and smaller/shorter than the 767-300ERs it would be replacing. The good news is that it then sits squarely between the 737 MAX and the 787s in the market. The bad news is that Boeing’s prediction of 4,000 frames sold over the next 20 years seem something of a stretch (many other analysts suggest something closer to 2,000). And the multi-billion dollar development costs for the new type are going to be hard to recoup on that small a market segment.

There is little doubt the NMA will fly – Boeing has a gap in its product lineup that needs to be filled with a lower-cost aircraft than the 787s – but the profitability of that segment remains less clear. American’s choice to pick up these 787s pulls 50 potential NMA frames out of the sales funnel. That’s not a ton of aircraft necessarily, but with such a narrow target market every frame counts. It also opens the door for other airlines to consider the 788s as a 763/A330 replacement, particularly if Boeing keeps the acquisition costs low. And given the motivation to kill the A330neo those price points might not be too hard to maintain.

Eroding the 767 end of the NMA market is not great news for the 757 replacement funnel; arguably it pushes those airlines to the A321LR rather than a Boeing product. But the 767/A330 end of NMA represents far more potential aircraft sales. Capturing that segment without a massive capital investment and development timeline would be a huge win for Boeing.

The deal also includes deferral of 40 new 737 MAX aircraft previously slated for 2020-2022 delivery. The new delivery dates will allow American to better use the planes as replacements for existing 737s rather than to grow the fleet. Those are easier for Boeing to deal with given higher general demand and flexibility in deliveries for 737s, but still a delay in completing that order.

I'm Seth, also known as the Wandering Aramean. I was bit by the travel bug 30 years ago and there's no sign of a cure. I've been covering inflight connectivity, loyalty and the passenger experience for more than a decade with hands-on experience to deliver unbiased analysis. You can connect with me on Twitter, Facebook, LinkedIn and .