American Airlines and Boeing have reached an agreement to delay the purchase and delivery of Boeing aircraft. The deal means American will now defer delivery of 19 787 Dreamliners and 18 737 MAX planes, as the airline is set to report large financial losses for the first quarter of 2021.
American and Boeing agree to defer deliveries
American Airlines and Boeing will defer delivery of billions of dollars worth of Boeing planes. The two companies have agreed to defer the delivery of 19 787 Dreamliners and 18 737 MAX jets. The airline revealed the deal in a securities filing this week, which also hinted at first-quarter 2021 losses of up to $1.3 billion.
The 18 deferred 737 MAX jets were initially scheduled for delivery in 2021 and 2022. With the latest agreement, the MAXs will now be delivered through 2023 and 2024. American and Boeing had previously agreed on deferral rights for the 18 MAXs in October before making it official this week. The 18 MAX jets are part of a larger order of 76 MAXs, all of which are still on order.
American has also altered its order book for the 787 Dreamliner. Of the 19 Dreamliners affected, the airline has converted five orders for the 787-8 model to the larger 787-9. These jets will now be delivered from 2023 onwards. 14 orders for the 787-8 have also been deferred, with delivery rescheduled to the first quarter of 2022.
Boeing has reportedly refunded $248 million in pre-delivery deposits to American as part of the agreement. The sum was paid out for outstanding loans as part of the airline’s deal for the 18 MAX jets. The MAXs will not be expected at American until 2023 at the earliest.
First-quarter losses in the billions
American is set to report net losses of up to $1.3 billion for the first quarter of 2021. The airline’s revenues are down by 62% compared with the first quarter of 2019. American’s large operating losses, coupled with a lack of passenger demand, played a significant role in its decision to defer the 37 Boeing jet deliveries. According to American Airlines spokesman Matt Miller, the airline “is making the move because of a lack of demand.”
However, the airline did turn a positive adjusted cash flow in March and recently revised its first-quarter guidance to a more optimistic outlook. The company announced it was burning around $4 million per day throughout March, down from $30 million per day for the previous quarter. Its quarterly net losses, set to stand at around $1.3 billion, would have been at $2.8 billion without the financial assistance of the U.S payroll support program.
In other good news, American Airlines repaid $2.8 billion worth of credit earlier this month. By the end of 2020, American had accumulated debts of $41 billion, a 23% increase due to the impact of the pandemic. According to its most recent filing, the airline expects to have $17.3 billion available in liquidity by the end of the quarter.
Do you agree with AA’s decision to defer delivery of the Boeing 737 MAX and 787 Dreamliner? Let us know what you think in the comments.
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