American Airlines press release regarding Boeing order

Date:         22 Nov 96 05:48:04 
From:         kls@ohare.Chicago.COM (Karl Swartz)
Organization: Chicago Software Works, Menlo Park, California
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For release: 11/21/96

DFW AIRPORT, Texas -- At a press conference at the Dallas/Fort Worth
International Airport today, American Airlines and Boeing Commercial
Airplane Group announced an innovative, long-term partnering relationship.
Under the terms of the agreement, Boeing will become the exclusive supplier
of jet aircraft to American, in sizes ranging from the Boeing 737 to the
777, through the year 2018. American has placed firm orders for 103
aircraft, and has obtained "purchase rights" for 527 additional jets during
the more than 20 year period, thus providing it with a very cost-effective
means of replacing virtually its entire current fleet during the term of
the agreement. The agreement includes the following aircraft:

Aircraft Model   Firm     Order      Purchase Rights   Total
                 Order   Delivery      (1998-2018)
--------------   -----   --------    ---------------   -----
777                12    1998-2001          38            50
767-300ER           4    1998               26            30
757-200            12    1998-1999          38            50
737-600/700/800    75    1998-2001         425           500
Total             103                      527           630

The arrangement with Boeing is contingent on ratification of the tentative
agreement between American and the Allied Pilots Association, whose members
will vote on the matter in December.  "Our new partnership with Boeing is
a completely new way of doing business," said American Chairman and CEO
Robert L. Crandall. "It gives American a unique way to replace its existing
fleet with great flexibility and at fully competitive prices. In return,
Boeing, the world's premier manufacturer of commercial aircraft, obtains
a major long-term agreement. It's an arrangement that will be enormously
beneficial to both companies." Crandall laid out six principal benefits
of the new agreement:

1.  The relatively small number of firm orders and the introduction
    of highly flexible "purchase rights," rather than traditional
    delivery options, will enable American to carefully pace its
    acquisition of aircraft -- thus allowing it to match replacement
    and growth orders with the industry's notoriously cyclical
    nature, without weakening its balance sheet.

2.  The length of the commitment will help Boeing optimize its planning
    and engineering processes, and will encourage its continuing
    efforts to reduce manufacturing costs.

3.  Over the long term, the arrangement will give American unparalleled
    fleet commonality, which will result in substantially lower
    training, maintenance, and other operating costs.

4.  The agreement gives American the ability to plan carefully for
    both aircraft replacement and fleet growth, and to optimize the
    mix of aircraft by size and range in accordance with changing
    competitive requirements and the industry's cyclicality.

5.  The arrangement will help American maintain fleet leadership with
    respect to both noise and emissions. American has one of the
    youngest fleets in the U.S.  airline industry, and its new
    arrangement with Boeing will ensure that American will have
    continuous access to state-of-the-art aircraft at attractive

6.  The agreement provides American with broad price protection
    provisions, which will ensure that American will not be commercially
    disadvantaged as to aircraft prices for more than two decades.

Crandall emphasized that the arrangement is focused on providing American
with a mechanism for systematically and carefully replacing its current
fleet, while also providing it with the ability, at its option, to grow
modestly. Crandall noted that the concept of "purchase rights" is a novel
approach that will give American enormous flexibility with its future
fleet plans. Traditional options had to be exercised 24 to 36 months prior
to delivery, and once this advance time had passed, the options expired.

"Purchase rights" work differently: subject to the availability of delivery
positions, some of which are guaranteed, American will have the right to
acquire, at specified prices, new standard-body aircraft with as little
as 15 months' prior notice; wide-bodied acquisitions will require 18
months' notice. Moreover, American will be able to choose which planes in
each category -- 777, 767, 757, and 737 -- best meets its needs. "This
flexibility is a key element of the agreement," said Crandall. "Boeing
has come forward with a uniquely creative solution, which directly
addresses the many uncertainties that exist in fleet planning. The
agreement will enable us to acquire the aircraft we need while avoiding
the need to make larger firm commitments, thus preserving the strength of
our balance sheet."

American is currently negotiating with manufacturers for engines to power
the 777s. The 757s and 767s, which are already an important part of
American's fleet, will have Rolls Royce and General Electric engines,
respectively. The 737s will have engines from CFM, a joint venture between
General Electric and Snecma of France. "We are delighted with American's
decision to select us as their airplane supplier for the next 20 years,"
said Ron Woodard, president of Boeing Commercial Airplane Group. "This
partnership is based on a 40-year-long relationship and is a tremendous
vote of confidence from an airline that is recognized around the world as
a premier carrier. This decision is particularly meaningful for us because
American has had the opportunity to operate our competitors' airplanes,
and ultimately the airline chose Boeing airplanes for the value they
provide." "This new agreement reflects our confidence that American's
employees will use these new aircraft to produce the best customer service
in the industry, thus validating this investment," said Crandall.

Karl Swartz	|Home
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