Exclusive Interview: American Airlines Officials Discuss Boeing, Airbus Deal

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FUEL ECONOMY

Gerard Arpey: Lower fuel burn is a win for all of us including the environment. With oil that’s still $100 a barrel today, that’s good news for our company as we take on more fuel efficient airplanes. But if I were perfectly candid with you in answering your question, today the industry is not recovering that fuel cost burden to any level that it should in terms of producing return on capital. The way I think about fuel is that we need to save all we can by getting more fuel efficient airplanes, and then candidly in the long run our customers are going to have to pay for fuel just like they’ll have to pay for all the costs of delivering our product.

Tim Smith: Here we’re talking about brand new 737s and brand new Airbuses that are roughly 35% more fuel efficient on a seat-mile basis than the MD-80s they’re replacing.

Boeing 737-800 with Sky Interior

Indeed, back in the ’80s when we started getting MD-80s, [they were] 30% more fuel efficient than the 727s we were replacing. In addition, the new aircraft announced today are somewhere in the neighborhood of 12% to 15% more fuel efficient than the Boeing 757s we fly today.

You saw our financial results today: Second quarter year-over-year fuel costs were up 31% which means we spent $524 million more than we spent on jet fuel the same period a year ago. That additional expenditure on fuel was greater than the total loss that we announced.

PREMIUM CABIN

JS: The Flagship Suites in the 777s are hitting close to nine or ten years in terms of the hard product. I happen to be a big fan of the Flagship Suite.  However, I have noticed that some are starting to look a little tired, and while other airlines have updated their first class seats in the past ten years, you’ve kept the Flagship Suites in place.

Flagship Suite

TS: The average age of the current 777s is ten years.  Some of them have had the Flagship Suite since the beginning, others got it in the last 4 to 6 years. But you’re right, that’s something we watch to make sure that we keep things fresh.  You always have to make sure they’re functioning well and they’re not worn out and they do everything they’re designed to do.

JS: Are there any changes coming in first class for the 777ER or are we going to see the Flagship Suite in there?

TS: First of all, we haven’t decided for sure how we’re going to configure that [aircraft], and then some of it will depend on this domino that I’ve talked about. We haven’t formally decided on exactly how we’re going to outfit the 787s as well. We’ve got till late 2014 [to decide].

JS: I’m assuming that the direction of the Boeing Sky Interior with the new 737-800s would continue in the current iteration of the 737-800? 

TS: That’s correct and all of our new deliveries in the pipeline for this year, next year and part of 2013 are getting it as well. Everything coming in is coming in as Boeing Sky Interior. The first aircraft of the new orders announced today, the 2013 and 2017, will be the existing model for sure. That clearly is the state of the art for interior and no reason to change that anytime soon.

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