FlightGlobal.com
Home
Premium
Archive
Video
Images
Forum
Atlas
Blogs
Jobs
Shop
RSS
Email Newsletters
You are in:
Home
Aviation History
1984
1984 - 0394.PDF
AIR TRANSPORT American puts its future in the MD-80 LOS ANGELES American Airlines has firmly pinned its medium-term future to the McDonnell Douglas MD-80 by making the type the object of what may eventually be the largest airliner order in history. American has ordered 67 MD-82s and has taken options on another 100. It is already operating 20 of the type under an operating lease agreement, and is due to take delivery of a further 13 this year, so it could eventually have 200 in its fleet. If American decides to exer cise its options, the order will represent the biggest airliner purchase in history in terms of both money involved and aircraft numbers. Unlike the first MD-80 deal American struck with the manufacturer, the new order is an outright buy direct from Douglas Aircraft. No financial details have formally been released; but US airline industry analysts believe that the deal contains big price concessions for American. They say that the airline is paying between $18 million and $20 million per aircraft, whereas recent MD-80 sales have been concluded at $24 million to $26 million an aircraft. American has not denied reports saying that the terms of the agreement include attractive pre-delivery payments, modest cancel lation penalties, and improved terms on the exist ing leasing agreement covering its first 20 MD-80s. At a price of $20 million in 1984 dollars a firm order for all 167 new aircraft would be worth some $3,300 million. The carrier will receive 25 aircraft in 1985, 25 in 1986, and 17 in 1987. Its first option if exercised would cover the delivery of eight more in 1987. Otherwise the options are generally due for exercising in groups of ten aircraft from 1987 until 1991. Decision date for each group option is 24 months before delivery. An entire 167-aircraft order would be worth some $764 million to engine manu facturer Pratt & Whitney, as American would want a total of 382 JT8D-200 series power- plants including spares, and each engine costs $2 million. 616 American operates 20 MD-80s now, but could have as many as 200 by 1991. It is due to receive 13 this year, has just ordered another 67, and has taken options on another 100. If all the options are taken up, it could be the biggest airliner deal ever The American order takes MDC's MD-80 delivery back log to 150 aircraft. It seems that American will not use the MD-80s merely to replace Boeing 727s. On the contrary, it looks like Ameri can is planning to use most of its 727-200s for some time to come. Airline president Robert Crandall says that new MD-80s will increase Ameri can's seat capacity by a third between now and 1987, making it, he claims, the second fastest-growing large US airline after People Express. The capacity increase is interesting in view of Ameri can's traffic performance in recent months. Load factors have been slipping heavily, with traffic seemingly mainly lost to United. United's traffic figures have recently been the best of all US major carriers. TWA has lost even more traf fic than American. Will it also go for a big MD-80 order soon? TWA says it does not expect to decide imminently on any new aircraft purchase; any decision would depend to some extent on a successful outcome to negotiations with unions over work-rule conces sions. American will use its new MD-80s (each fitted with 142 seats in dual first- and economy-class layout) to expand its Dallas/Fort Worth and Chicago hub operations, and to increase its presence in transcontinental and strong business markets. According to Crandall, the new aircraft (together with new labour agreements) will cut operating costs by 19 per cent. American now flies to 108 US airports with 244 aircraft; United serves 120 with 329. Crandall says that United will still dominate Chicago O'Hare, the world's busiest airport, but notes: "There is nothing wrong with being second". Although Boeing says it did not offer the 757 as a competitor for the American deal, the airline says it did consider the type: "We evalu ated the 757, but MDC had the best price and was the most serious". Neither Boeing nor McDonnell Douglas see another order on the scale of the American Airlines deal for some time to come, but MDC reports it is currently nego tiating several smaller orders. MDC also claims that the much-reported idea of a joint order deal involving several US airlines is still alive and feasible, and would be welcomed. This consortium- buying concept was Robert Crandall's brainchild before American decided to go it alone. Boeing says it is not discussing such a deal with anybody. Douglas Aircraft will increase staff at Long Beach by 1,000 in 1985, and will raise its production rate there by more than 40 per cent. Current employment at Long Beach is 12,000, with 6,500 working on the MD-80 programme. Division presi dent James Worsham says that production will increase from less than one aircraft a week now to 1-43 a week by January 1985, and to 1-67 if other orders keep coming in. The division believes that the Long Beach operation could be profitable in 1984, but is not predicting whether it will be or hot. One aero space analyst with the First Boston group estimated that the 17-week strike at Long Beach by members of the United Auto workers union would cut MD-80 production this year to 40 aircraft, instead of the 60 previously scheduled. If the division does make a profit this year, it will be the first in seven years. Since McDonnell took over Douglas in 1967, commercial aircraft sales have made an overall loss, but some individ ual years have shown profits. McDonnell Douglas is unable to quantify the overall loss on airliner sales since 1967, but some US industry analysts have calculated it at $450 million on revenues of $7,400 million prior to the American Airlines order. McDonnell Douglas re ceived some more good MD- 80 news last week. Finnish flag carrier Finnair ordered two aircraft, specifying the increased gross weight MD- 83. This is the first European order for the new variant. The new aircraft will augment three MD-82s already operated by the airline. They will be delivered in the spring and autumn of 1985. One will be dedicated to long European scheduled flights, while the other will mainly operate inclusive tour charter flights to destinations in the Mediterranean and North Africa. The MD-83 is especially suited to Finnair's operation because the country is so far north of the main European landmass. The new variant has a 2,525 n.m. range with full payload, 500 n.m. greater than that of the MD-82. MD-80 orders now total 302, with 144 options in place. FLIGHT International, 10 March 1984'
Sign up to
Flight Digital Magazine
Flight Print Magazine
Airline Business Magazine
E-newsletters
RSS
Events
