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American orders Airbus, Boeing jets

| Thursday, July 21, 2011

FORT WORTH -- American Airlines is buying at least 460 new planes during the next five years from Airbus and Boeing in a record order that breaks Boeing's exclusive grip on American's fleet.

American said on Wednesday that it will buy 260 planes from Airbus and 200 from rival Boeing Co. and will take options to buy hundreds more. It expects the new jets to provide much-needed savings in fuel costs. American's fleet is among the least fuel-efficient in the industry.

The deal is a major boost for Airbus, which had not won an order from American since the 1980s. Boeing did salvage one of its biggest sales ever -- a huge consolation considering that it was in danger of losing the whole order to its European rival.

The jets carry a sticker price of more than $38 billion.

Analysts said American's bold strike would put more pressure on other airlines with aging fleets to buy new planes, too.

Gerard Arpey, chairman and CEO of American's parent, AMR Corp., sat between the leaders of Airbus and Boeing as he discussed the unusual deal at an airport news conference. He called it "a watershed event certainly for our company and indeed for the airline industry."

American's order covers models in the Airbus A320 family, which seat from 100 to 185 or more passengers, and Boeing's workhorse 737 jet. The airline's current 737s have 148 or 160 seats. Both planes are twin-engine models with a single aisle in the cabin, and are used heavily on routes within the United States.

AMR also announced that it plans to spin off regional carrier American Eagle as a separate company in another cost-cutting move.

The twin announcements overshadowed the news that AMR lost $286 million in the second quarter as rising fuel prices wiped out an increase in revenue. The loss equaled 85 cents per share. Wall Street was expecting a loss of 77 cents, according to FactSet. Still, AMR shares rose 9 cents to $5.01 in afternoon trading.

In recent weeks, the airline industry was riveted by the drama of Airbus and Boeing competing to overhaul American's fleet, which consists of all Boeing aircraft.

In discussions on Tuesday, American decided to buy 200 of the Boeing 737s, with deliveries starting in 2013. Half are expected to be equipped with updated, more fuel-efficient engines. The airline said it will take options for another 100 of the 737s.

American also will buy 260 planes from Airbus' A320 series with deliveries starting in 2013, and take options and purchase rights for 365 more. Beginning in 2017, American will get the first of 130 of a new Airbus plane called the A320neo -- for new engine option -- which is scheduled to go into service in late 2015.

Airbus claims the neo will burn 15 percent less fuel than current A320s and 30 to 35 percent less fuel than the McDonnell Douglas MD-80s that it will replace in American's fleet.

"This is just a no-brainer economic home run from day one when the airplanes show up," Arpey said.

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