ANALYSIS: American cites economics in split CRJ and E-Jet deal

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American Airlines took advantage of attractive economics in its split order for up to 220 Bombardier and Embraer regional jet aircraft.

“It was fairly straight forward, both deals we’re very attractive economically,” says Peter Warlick, vice-president of fleet planning at the Fort Worth, Texas-based carrier, in an interview with Flightglobal. “We think we have a very attractive transaction.”

American announced the order for 30 firm Bombardier CRJ900s and 60 firm Embraer 175s, as well as options for another 40 CRJ900s and 90 E-175s, on 9 December. Flightglobal first reported the deal the day before.

The firm orders are valued at $3.92 billion at list prices, which is split $1.42 billion for the CRJ900s and $2.5 billion for the E-175s.

American has yet to make a decision on financing for the aircraft, says Warlick. Export Development Canada (EDC) and the Brazilian development bank BNDES are expected to offer export credit financing for the orders, he says.

BNDES told Flightglobal earlier in 2013 that it would offer secured financing to American for an Embraer order if the carrier selected the aircraft.

The airline has financing from the Brazilian lender for its fleet of 219 Embraer ERJ-140 and ERJ-145 aircraft, which are operated by its subsidiary American Eagle Airlines.

Bombardier and Embraer are understood to have offered American backstop financing for the orders, sources tell Flightglobal.

Warlick says that no decision has been made on whether to take backstop financing.

The CRJ900s and E-175s, which will both be configured with 76 seats, will replace 50-seat and smaller regional jets on a one-for-one basis, Warlick says.

Bombardier deliveries are scheduled to begin in the second quarter of 2014 and Embraer deliveries in the first quarter of 2015.

The scope clause in the memorandum of understanding between American and its pilots as well as those at US Airways “narrows” the airline’s ability to expand its regional fleet with the new aircraft, says Warlick.

American and US Airways merged to form American Airlines Group on 9 December.

The MOU allows for a 66- to 76-seat regional aircraft fleet that totals 40% of the combined American and US Airways mainline narrowbody fleet. This would allow for 322 large regional aircraft, based on a projected 805 aircraft narrowbody mainline fleet at the end of 2013.

The carriers will operate 125 large regional jets at the end of 2013, not including 79 CRJ900s and E-175s in the US Airways regional fleet that are exempt from the restrictions. In addition to the recent order, American will add 31 E-175s operated by Republic Airlines to its regional fleet through 2015.

American and US Airways regional fleet is capped at 75% of the combined mainline narrowbody fleet, or about 603 aircraft.

American Airlines Group-owned PSA Airlines will operate at least 30 of the new CRJ900s while the decision on the operator of the new E-175s still up in the air.

The Dayton, Ohio-based regional carrier plans to hire about 1,100 new employees to service the new aircraft, including 400 pilots and 400 flight attendants. The additional crews will also help it meet new duty and rest regulations that go into force in January 2014.

“We are very excited about this growth opportunity which will bring new employment to the Dayton area which has supported us for the past twenty-five years,” says Keith Houk, president of PSA, in a statement.

SkyWorks Capital advised American on the regional jet order, which was dubbed “project Panama” in bankruptcy court documents.

“[SkyWorks] did a very good job,” says Warlick.

Debevoise & Plimpton was legal council to American on the order.