AMR Corp. (AMR) recently got $2.9 billion in additional liquidity and new aircraft financing. The parent company of American Airlines and American Eagle plans to strengthen its network by reallocating capacity to hubs in Dallas/Fort Worth, Chicago, Miami and New York, and enhance its fleet to serve customers better.
The $2.9 billion consists of $1.3 billion in new liquidity, including $1 billion in cash from the advance sale of AAdvantage frequent flyer miles to Citigroup Inc. (C) and $280 million in cash under a loan facility from General Electric Co.’s (GE) GE Capital Aviation Services (GECAS) secured by owned aircraft and $1.6 billion in sale-leaseback financing commitments from GECAS for Boeing 737s previously ordered by the company.
American Airlines selected GE’s GEnx-1B 74/75 engine for American’s future 787 deliveries. American Eagle plans add a First Class cabin to its fleet of 25 Bombardier CRJ700 regional jets and has signed a letter of intent with Bombardier Inc. to exercise options for the purchase of 22 additional CRJ700 aircraft for delivery beginning in mid 2010. The new CRJ700 aircraft will be fully financed.
American and Eagle are refocusing their collective network strategy by bolstering areas of strength to meet the needs of customers. This strategy primarily aims at eliminating unprofitable flying and reallocating resources to hubs in Dallas/Fort Worth, Chicago, Miami and New York. These four cities, along with Los Angeles, serve as cornerstones of the company’s network.
The company plans to add 57 daily flights at O’Hare International Airport, Chicago, for a total of 487 daily departures. It aims to expand services to six new destinations from the JFK Airport, three international and three domestic.
Overall, daily departures will grow by seven to 96. At Los Angeles, American and Eagle will add two daily flights, raising the total to 129. The company remains committed to its largest hub at Dallas and will add 19 daily departures for a total of 780. At Miami, American and Eagle will add 23 additional flights for 294 total daily departures. As a result of its network strategy, American and its regional affiliates plan to reduce operations at St. Louis and Raleigh/Durham.
American and Eagle are renewing their respective fleets with more efficient aircraft and other allied improvements. American has received a commitment for $1.6 billion in sale-leaseback financing from GECAS covering previously ordered 737s, as it continues to replace its MD-80 fleet with aircraft that are 35% more fuel efficient per seat.
American plans to take delivery of 84 737s during 2009-2011, 16 of which have already been delivered. This latest financing exercise means American has the ability to finance all of its remaining 737 deliveries through 2011 with traditional financing sources other than its existing backstop financing agreement.
American also named its selection of GE Aviation as the provider of engines for its expected order of Boeing 787-9 Dreamliners. American previously announced plans to acquire 42 787-9s with the right to acquire 58 additional 787s, which Boeing Co. (BA) estimates to be 20% more fuel efficient than the wide-bodied aircraft they would replace.
Eagle’s plans to add First Class cabins to its 25 CRJ700 aircraft, expected to be available by mid-2010, would enhance the effect of planned addition of the 22 new CRJ700 aircraft, which would also offer two-class service.
AMR operates in the airline industry in the United States. The company, through its principal subsidiary, American Airlines provides scheduled jet service to approximately 150 destinations throughout North America, the Caribbean, Latin America, Europe, and Asia.
American Airlines also operates as a scheduled air freight carrier, providing a range of freight and mail services to shippers. AMR’s Eagle Holding Corp. owns and operates two regional airlines, connecting nine of American’s high-traffic cities to smaller markets throughout the United States, Canada, Mexico and the Caribbean under the name American Eagle. The company serves 250 cities in 40 countries with nearly 3,400 daily flights. Its major competitors are Delta Air Lines Inc. (DAL) and UAL Corp. (UAUA).
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