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American A321neo deliveries slide on Airbus delays

American Airlines faces another fleet-related setback to its growth plans this year, as delays at Airbus push delivery of five A321neos into 2020.

The postponed arrivals follow the grounding of the Fort Worth, Texas-based carrier's 24 Boeing 737 Max 8s in March that is expected to last into August, and temporary removal of 14 737-800s due to interior retrofit issues during the first quarter. Together, fleet issues have prompted a 0.5 percentage point reduction to American's full-year 2019 capacity growth, which is now expected to be around 2.5%.

American will now take delivery of 12 A321neos, two of which arrived in the first quarter, in 2019. This has reduced annual aircraft capital expenditures by $300 million to $2.7 billion, said the airline's chief financial officer Derek Kerr during a quarterly earnings call today.

The carrier will take delivery of 20 A321neos in 2020 under its revised plan, a fleet plan shows. It introduced the type, which is outfitted with 196 seats, on flights from Phoenix earlier in April.

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Airbus has faced A320neo-family supply chain issues that have contributed to delays in deliveries to airlines and lessors.

American has financing commitments in place for the balance of its remaining 2019 aircraft deliveries, save three Embraer 175s due in the fourth quarter, says Kerr. Its fleet plan shows 10 A321neos, 16 737-8s, 11 Bombardier CRJ900s and 13 E175s due through year-end, though the Max delivery timeline depends on when US regulators certify the aircraft's updated flight control software.

The financing commitments include "mortgage and sale-and-leaseback transactions", Kerr adds.

Kerr and other American executives are confident the 737 Max's software update will be certified by 19 August, when the airline plans to return the type to regularly scheduled service.

American invested $1.31 billion in capital expenditures during the first quarter, a quarterly financial filing shows. The expenses relate to deliveries of American's first two A321neos, four 737-8s, two 787-9s and seven E175s.

The airline borrowed $400 million in secured aircraft debt, and received $352 million in sale-and-leaseback (SLB) proceeds during the quarter, the filing shows. The debt carries a variable interest rate that averaged 4.07% at the end of March, and matures in 2031.

Long-term debt and finance leases, net current maturities, at American decreased 2.4% to $20.7 billion during the three months ending in March. Debt was down 5.5% year-over-year.

Cash and short-term investments decreased 8.6% to $4.35 billion in the first quarter. Cash was down 17.6% from March 2018.

Liquidity stood at $7.19 billion, including the full $2.84 billion available under American's revolving credit facilities, at the end of March.

American has cut its expected full-year 2019 capital expenditures to $4.4 billion, down from an initial forecast of $4.7 billion, as a result of the A321neo delays, says Kerr.

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