American's Gearing Up for the Turnaround

Counting the 737s, as well as McDonnell-Douglas airplanes, American will have taken delivery of nearly 1,000 Boeing aircraft in its history, making it one of the planemaker's top customers, Tinseth says. While the current environment is difficult for Boeing and its customers, he says, U.S. carriers "over the last six to 12 months have done a very good job managing their business, reducing capacity in light of the passenger decline [and] in the case of American and Southwest(LUV), replacing older less fuel efficient aircraft with more efficient aircraft."

Nevertheless, Boeing will likely cut 737 production, said Macquarie Research analyst Rob Stallard in a report issued Monday. The 777 reduction is "just the first of the cuts that Boeing will have to make to its aircraft production rates as it moves through this down cycle," Stallard wrote. "Next up is the 737, which has shorter lead times, where we are forecasting a reduction from 31 a month in 2009 to 25 a month in 2010." Tinseth declined to comment on whether 737 production may decline.

For American, the order begins the process of replacing the fleet of 279 McDonnell-Douglas Super 80 aircraft, which average 19 years in age. The new airplanes have 160 seats, compared with 144 in the MD-80s, and are about 35% more efficient on a seat-mile basis. American already flies 77 Boeing 737-800s.

For passengers, the new aircraft mean cabin improvements, including drop-down LCD video entertainment monitors, larger overhead bins and better seats in both first class and coach. "Instead of the standard recline, the seat has a bit of a cradling motion, which is more comfortable," Schubert says. The seats also have more power ports for computers.

In October, American announced what could become the biggest aircraft order in its history, saying it wanted 42 Boeing 787s with options for 58 more. That order is contingent on American and its pilots negotiating a pay rate for the aircraft.

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