At a time when passenger traffic has reached an all-time high, the airline industry is facing turbulence from the soaring fuel prices. And, American Airlines (AAL) is no exception. What makes the situation more taxing for the company is the high maintenance costs and low fuel efficiency of its aging fleet, with the main culprits being the older models of Boeing and Airbus.
According to reports, American is seeing a potential solution in the CRJ900 series jets of Bombardier. If everything goes as planned, 15 new aircraft will be added to the American fleet soon. The companies will likely announce a contract valued around $700 million this week, with an option for more orders in the future.
American, which last acquired CRJ900 jets about three years ago by adding 24 units, has bought a total of around 200 aircraft – with two passenger classes – since 2014 as part of its shift to larger flights. The fleet expansion is expected to continue in the coming years when the company is planning to retire flights which are not airworthy.
The Texas-based aviation firm, which recorded a sharp fall in its first quarter earnings owing to higher fuel costs, has hinted at a broad-based hike in airfares by next year to combat the spiraling gasoline costs. However, a substantial hike would result in fare disparity in the highly competitive airline industry, where a number of regional carriers offer low-cost airfares.
The deal will with American be a major boost to Bombardier’s CRJ program, which the company had put on the backburner to make room for the development its latest C-series jetliner and ensure timely delivery. Moreover, the order will help Bombardier better handle the increasing competition from Brazilian aerospace company Embraer in the regional jet segment.
The companies will likely announce the deal this week, with an option for more orders in future
Since the launch of the CRJ series nearly three decades ago, Bombardier sold around 1,000 units. The company is aggressively pushing its regional jet program, eying the huge demand the sector is expected to witness in the next 20 years when operators retire a major chunk of their fleet. Shares of American, which traded nearly flat for more than a week, lost 1% in Wednesday’s regular session.