American Airlines is delaying the delivery of 22 Airbus A321neo planes to at least 2024. The carrier said that the move was made due to high fuel prices and a weakening revenue stream.
Under the original delivery schedule, American was supposed to receive 22 A321neos in 2019 and 25 planes in both 2020 and 2021. Now, it will only take 17 planes in 2019 (a reduction of 5); 15 planes in 2020 (a reduction of 10); and 18 planes in 2021 (a reduction of 7). American will still take its first A321neo in 2019.
American Airlines Chairman and CEO Doug Parker said that the shuffle is a result of the current environment at American.
“This is the result of, given the existing environment, making sure that we actually want to take airplanes in those times and we’ve come to the conclusion that we don’t,” Parker said.
The deferral of these aircraft will save American $1.2 billion in aircraft capital expenditures through 2021. Net savings, however, will be less than $900 million due to an order for 30 regional jets placed in May. Those planes will be delivered in 2019 and 2020.
American’s aircraft and engine commitments dropped by $613 million between 2019 and 2021 due to the A321neo deferral. The carrier has commitments worth $2.89 billion in 2019, $1.23 billion in 2020, and $967 million in 2021.
American last deferred an A321neo order in 2015, when it pushed the delivery of its first aircraft of the type back by two years to 2019. The airline pushed back deliveries of 40 Boeing 737 MAX 8s in April. Those planes will now be delivered starting in 2020.
“The push of the A321s is more – we have the capacity already, we have aircraft we can keep around, we’re putting 737s through the Oasis project and modifying those aircraft, so there really wasn’t the need to take on new aircraft at this time,” said Derek Kerr, Chief Financial Officer at American.
American will take delivery of 73 planes in 2019. Deliveries will include 17 A321neos, 20 737-8s, two Boeing 787s, 14 Bombardier CRJ900s, and 20 Embraer E175s.
American’s mainline fuel expenses rose $700 million year-over-year in 2018’s second quarter. Headline revenue growth was calculated at a 3.7% increase during the second quarter, which, as FlightGlobal reported, is 2.2% less than expected when considering first-quarter growth.
“Because fuel expenses are expected to increase by more than $2 billion this year, we expect 2018 earnings to be lower than last year,” Parker said.
In addition to delaying the delivery of some A321neo aircraft, American also cut its full-year capacity growth forecast to 2.2% in response to its second-quarter numbers.
American is making some changes in its products in response to its slow quarter. Starting September 5, American will allow passengers in its basic economy class to bring a carry-on bag onto flights at no extra charge.
American reported a profit of $757 million in the second quarter, which translates to $1.63 per share, which is $0.04 higher than expected. Passenger revenue per available seat mile rose 3.7%. However, total revenue amounted to $11.64 billion while analysts had expected $11.7 billion.
Featured image by Micheal Wass via Flickr