American Air orders regional jets worth about $4 billion
(Reuters) - American Airlines Group Inc (AAL.O) said on Thursday it ordered 90 regional jets from Embraer SA (EMBR3.SA) and Bombardier Inc (BBDb.TO) in deals worth about $4 billion at list prices as it upgrades to a more efficient fleet to lower operating costs.
The new carrier, formed when AMR Corp and US Airways completed a merger this week, is buying 60 Embraer E175 planes valued at $2.5 billion, and 30 Bombardier CRJ900 NextGen planes worth about $1.42 billion.
American has options for an additional 40 Bombardier jets and another 90 Embraer planes.
If all of the options are exercised, the total deal value could top $9 billion.
Shares of Brazil's Embraer were up 1.2 percent, while Canada's Bombardier was about flat in Toronto trading. American Airlines fell 1 percent to $25.75 in Nasdaq trading.
After the American announcement, Embraer said it expected a "good year" for commercial jet sales in 2014, with Eastern Europe and Russia among the most promising regions for new business.
Paulo Cesar de Souza e Silva, Embraer's head of commercial aviation, said he expects commercial jet deliveries in the coming years to be in line with or even better than in 2013. This year was an especially strong year as the company secured more than 300 firm orders for its regional E-Jets.
"We have the challenge of delivering the planes (sold this year). We've really filled up our production line for the coming years," Silva said in a telephone interview.
Embraer's next-generation investments and aggressive sales efforts have helped it dominate the market this year for regional jets that seat about 75 passengers, while Bombardier has bet the future of its civil aviation unit on the larger CSeries.
The Bombardier order was the Canadian manufacturer's biggest deal with a major airline since one from Delta Air Lines Inc (DAL.N) a year ago.
The Bombardier CRJ900 has a range of 1,048 to 1,515 nautical miles, while the Embraer E175 has a range of up to 2,000 nautical miles, according to the websites of the manufacturers.
American's new regional jet orders come on top of hundreds of other airplanes that the carrier plans to add over the next few years as part of a major fleet upgrade.
The company is taking delivery of at least 59 new planes this year, including the Boeing (BA.N) widebody 777-300ER, narrowbody Boeing 737-800 as well as the Airbus EAD.PA A319 and A321. American also expects to take delivery of the new Boeing 787 Dreamliner late next year.
American is "going to go from having one of the oldest fleets to one of the relatively newest," said George Hamlin, an aviation consultant in Fairfax, Virginia. "It's a game of leapfrog."
The carrier said the 76-seat regional jets it ordered will replace smaller 50-seat aircraft that are being retired. The Bombardier CRJ900s, which will be delivered starting in the second quarter of 2014, will be operated by regional carrier PSA Airlines, a unit of US Airways.
American said it will decide which of its regional carriers will operate the Embraer planes at a later time. Deliveries will begin in 2015.
American Airlines Group Chief Executive Doug Parker, former CEO of US Airways, said earlier this week that American and US Airways didn't anticipate placing additional sizeable jet orders for mainline operations in the near future.
"We have enough aircraft on order," Parker told Reuters in an interview from Dallas on Tuesday.
US Airways and American must operate separately until they obtain a single operating certificate from the U.S. government.
An agreement with its pilots union, reached while American was restructuring in bankruptcy, gives the carrier flexibility to order large regional jets and to contract with regional airline partners.
Earlier this year, American unveiled an updated look for its planes as well as a new logo - the first overhaul of the exterior in more than 40 years. The planes are a silver mica color, and the tail has red, white and blue stripes.