American Airlines and United Airlines are eagerly awaiting deliveries of new Boeing 787 aircraft. With deliveries paused since early 2021 as a result of some manufacturing issues that Boeing is working to fix with regulators, both airlines have been making plans for their schedules, though both made different public statements today as to when they expect to receive Dreamliners, with American confirming payments from Boeing due to the delays.
American states Boeing is paying for delayed 787s
American Airlines made a lot of headlines in December when it announced that Boeing 787 delivery delays were causing the airline to pull down its schedules for summer 2022 long-haul flying. Speaking on the airline’s fourth-quarter earnings call, American’s executives described how the airline is approaching its schedule with regards to 787 deliveries. Chief Financial Officer Derek Kerr stated the following when asked about the delivery timeline:
“Mid-April is what we’re talking about for our first delivery. That has been locked in on those dates for probably the last couple months, and we’re still planning on that happening. We haven’t gotten any different information in the past couple months where I think we’re still on target for those, and that we would take all 13 throughout the year but we have been conservative and only put four in the schedule for the summer.”
As a result of the delay in deliveries, where these jets were expected to arrive at the airline in 2021, Mr. Kerr stated that Boeing was paying out to the airline some delay compensation:
“We’re in discussions with Boeing…there are delay penalties that are paid and Boeing is paying the delay penalties and everything is happening as we speak today. If there are further delays, and it really does impact the summer much more than what we think it is, we’ve had good discussions with Boeing that they will they will compensate us for the losses that we’ve had for the delay of those aircraft.”
Delay penalties are common in contracts between airlines and manufacturers. They typically kick in when an issue on the side of the manufacturer leads to a change in delivery schedules. In this case, issues that Boeing is working on with regulatory agencies is leading to the delay.
Deliveries of the 787 have been suspended since early 2021. The American manufacturer only delivered 14 787s in 2021. American alone had been expecting to receive most of the 787-8s now scheduled to arrive this year last year and use them in the schedule next year. American only flies the 787-8 and 787-9 from the Dreamliner family. This was part of the reason why American retired widebodies like the Airbus A330 and Boeing 767.
United Airlines awaits more Dreamliners
Gerald Laderman, Chief Financial Officer of United Airlines, stated the following on its Boeing 787 delivery schedule:
“We currently expect to take delivery of 53 737 Max aircraft and eight 787 aircraft during the year. As we noted on our previous earnings calls, the 787 aircraft were originally expected to deliver in the first half of 2021. We now no longer expect to take these 787 aircraft until after the summer of 2022, contributing to about 1.5 points less capacity versus our original planning.”
This puts United on track to take 787s in the fall and beyond. However, United is in less of a crunch for these new aircraft than American. United did not retire any widebody aircraft during the crisis and actually ended up growing its fleet over 2019 levels. Its Boeing 777s are also expected to come back as demand improves through the year.
United was not explicit in revealing whether or not it has received delay penalties from Boeing. It would not be surprising if Boeing is paying delay penalties to United, given the continued slip in schedules.
Delays impact schedule planning
As both American and United Airlines noted, delivery delays impact schedule planning. United is in less of a crunch than American over delays to Dreamliner deliveries because of the number of widebodies it has. In addition, United has done less of the tweaking to its summer 2022 schedules than other airlines.
Some United routes, like San Francisco to Chengdu are unlikely to operate through the summer. Others, like San Francisco to Hong Kong, are expected to either come out of the schedule entirely or reduce frequencies (United is currently selling twice-daily San Francisco to Hong Kong service), which will help free up widebodies to cover for some of the gaps that 787 delays cause.
For American, the situation is a little more severe. For example, American has cut back significantly in Europe next year, with no flights to leisure destinations like Prague, Budapest, or Dubrovnik. As Vasu Raja, American’s Chief Revenue Officer explained:
“We anticipate that with the 787 [delivery delays], we’ll be a materially smaller international airline than what we would otherwise like to be, operating something which is probably – call it 75 to 85% of the scale we had in 2019.”
American will compensate some of its reductions in flying to spoke points like Prague with flights to partner hubs like London or Doha, where passengers can still connect to various destinations American is not serving with its own metal.
The question now will be whether the delay timelines that both airlines have put forward hold. If American does not get more Dreamliners by April, it could lead to a further cut in summer schedules. Alternatively, it is possible American could try and slot some 787s, if it gets more of them than anticipated in time for summer, into the schedule to do some more international flying, or else, if it does not get the heads up in time, perhaps put the planes into the domestic schedule.
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