American frustrated over sluggish narrowbody development

Washington DC
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(corrects amount of fourth quarter loss)

Management at American Airlines is hinting the carrier might have to use current Boeing narrowbodies to replace its MD-80 aircraft as a result of slow movement by manufacturers in offering a next-generation narrowbody design.

CEO Gerard Arpey tells analysts and investors the carrier “continues to be a little discouraged” by the timing of the next generation narrowbody. He believes American might be pushed “in the direction of more 737-800s” to replace its MD-80s. Flight’s ACAS database shows American flies 211 MD-82s and 89 MD-83s.

The carrier has already accelerated the number of aircraft delivered in 2009 by 10 aircraft, which will result in 23 deliveries of Boeing 737-800s that year. American has no aircraft deliveries planned for 2008.

During an earnings discussion today CFO Tom Horton said $300 million of the $800 million the carrier has allotted to capital expenditures this year will be used for pre-delivery deposit payments for 18 of the 47 -800s the company has on order.

American continues to give its widebody replacement evaluation “careful consideration” says Arpey, noting they’re spending a “good deal of time” with the carrier’s planning and engineering departments looking at the 787 and the Airbus A350. “They’re both compelling airplanes,” according to American’s CEO. But he cautions that the airline is not commenting on when it expects to make a decision.

As that analysis continues American is pushing to equip its current Boeing fleet with winglets. All of the carrier’s 737s now feature winglets. More than 40% of the airline’s 133 757s have winglets, and Horton says American plans to finish equipping its 757 fleet by yearend.

The winglets should help American combat some of the “inflationary headwinds” Horton foresees American experiencing this year. He notes the airline has targeted $150 million in cost savings.

Recent legislation approved by Congress raising the pilot retirement age to 65 could help the carrier reach that target. Horton notes that the airline’s pension cost will fall if a pilot’s time as an active employee is extended.

Earlier this week management told pilots that focusing on executing that law extended the deadline of its consideration of a proposal the Allied Pilots Association submitted to carrier late last year in early contract discussions. Pilots are seeking formal mediation from the US National Mediation Board.

Although American parent AMR posted a $69 million loss for the fourth quarter, the company logged a $504 million profit in 2007, up from $231 million in the previous year.