American's Gearing Up for the Turnaround

Airline passenger traffic has slowed, forcing Boeing(BA) to cut production, but the world's second-largest airline is looking past all that.

AMR(AMR) unit American Airlines on Monday rolled out two new Boeing 737-800s, its first new planes in three years and its first new narrow bodies in nearly eight years, at ceremonies in Chicago and Tulsa, Okla. The planes will begin flying on Tuesday. American is scheduled to take 29 aircraft this year, followed by 39 in 2010 and eight in 2011.

"It is certainly a show of faith in our future as an airline," said Chuck Schubert, American managing director of corporate planning, in an interview. "I'm not a prognosticator on the economy, but we certainly recognize the economy will turn around at some point and we want to be positioned to meet that demand with a competitive product when it does.

"We are fortunate in that, for the vast majority of the 76 deliveries we plan, we lined up financing last year before things really started getting messy in the capital markets," he added.

The timing of announcement is good for Boeing, which last week cut its first-quarter earnings projections and said it will reduce monthly production of the 777 next year and delay previously announced plans to boost output of the 747 and 767.

"By any measure, this is a big deal," says Randy Tinseth, Boeing vice president of marketing, in an interview. "We build about thirty-one 737s a month, and they're in the process of taking 76 airplanes over the next seven quarters."