Bloomberg News

Boeing’s Albaugh Expects Long-Term Benefits From AMR Bankruptcy

November 29, 2011

(See {EXT2 <GO>} for full coverage of AMR’s bankruptcy filing)

Nov. 29 (Bloomberg) -- Boeing Co.’s commercial jet chief expects both planemakers and American Airlines to benefit from parent AMR Corp.’s bankruptcy reorganization, which may hone the carrier’s competitive edge.

American’s parent, AMR Corp., sought court protection from creditors today after grappling with soaring fuel expenses while failing to secure cost-cutting labor agreements. The Fort Worth, Texas-based carrier was on track for its fourth consecutive yearly loss.

“I’m really confident that American’s going to come through this restructuring a better company, a more competitive company, and if they’re more competitive and making more money, they’re going to buy more airplanes,” Jim Albaugh, president of Boeing Commercial Airplanes, said in an interview at Bloomberg’s headquarters in New York. “Longer term, it’s going to be good for them and good for us.”

The airline’s fleet of older, gas-guzzling planes left it at a disadvantage as fuel prices increased 19 percent this year. American took steps to remedy that this summer with a record contract for more efficient aircraft, and Chief Executive Officer Thomas Horton said today those orders are “rock solid.”

AMR announced plans to buy 460 single-aisle jets in July, with 200 from Chicago-based Boeing and 260 from Toulouse, France-based Airbus SAS. The planes had a list value of $38.5 billion based on average prices, and the deal included options and future purchase rights for 465 more.

“If they’re going to be cost-competitive going forward, they’re going to do it with new equipment,” Albaugh said. “We are very much part of their long-term plan for turning around American Airlines.”

American Jet Leases

American expects to continue regular operations during the restructuring, which is positive for the approximately $350 million in jets leased from Boeing Capital Corp., Albaugh said

“I anticipate they’ll continue to fly those airplanes,” which make up about 10 percent of Boeing Capital’s portfolio by value, he said. “I also anticipate they’ll probably come back and want to renegotiate some terms, and we’ll work with them on that.”

The carrier has 184 firm orders for Boeing jets, Albaugh said.

“We’re assuming that we’ll deliver all of those,” he said. “They’ve been a great customer, and we want to work with them and make them successful.”

Boeing has experience dealing with airline companies in bankruptcy, Albaugh said. “It’s not like it’s the first time.”

The planemaker was still working with American on financing for its planned purchase of 100 737 MAX jets, an upgrade of the single-aisle plane with more fuel-efficient engines that will compete with the revamped A320neo from Airbus. The arrangements for those jets, included in the July announcement, had not been completed.

“They think their future is tied to the neo and the MAX order,” Albaugh said. “So I’m assuming that they will go through this and they will emerge and sign the deal and take the planes.”

--Editors: James Langford, Romaine Bostick

To contact the reporter on this story: Susanna Ray in Seattle at sray7@bloomberg.net.

To contact the editor on this story: Ed Dufner in Dallas at edufner@bloomberg.net


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