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Old Jul 31, 2011, 11:16 pm
  #27  
truthknown
 
Join Date: Jan 2011
Location: New York
Programs: AA Concierge Key, Marriott Titanium Elite, National Executive Elite
Posts: 326
Originally Posted by ESpen36
Okay, so AA is technically leasing, not buying? I looked at the press release on AA.com about the new aircraft orders, and it uses the terms "acquire" and "acquiring," and talks briefly about lease terms for approximately half of the birds. No mention of "buying."

So, then my question is: will AA come out of these Airbus/Boing financing "deals" in a couple of decades with nothing to show for the money expended? (that's why I dislike car leases....you are making payments but not acquiring equity in anything by the end)
TWA884 is correct. The transaction was a sale/lease back transaction. The current generation aircraft on order will be leased so there is no upfront CAPEX, and nothing hits the balance sheet of AA. We will continue to take these planes under lease agreements. The next generation of the aircraft, the A320NEO family and the 737 RE family will be purchased aircraft.

This provides extreme flexibility with very little risk. As the leased aircraft are not owned, there is no balance sheet risk. Once the new generation aircraft begin to be delivered in 2018, AA will have the option of terminating the leases on the current gen aircraft and essentially update our fleet all over again in 5 years with the NEOs and REs. There is also the option of continuing to lease some or all of the current gen aircraft we will recieve through 2017 in order to grow the fleet. Of course all of that will be decided when the time comes.

In the mean time, we will enjoy the cost savings associated with the fuel efficiencies and it will not cost AA a dime upfront. Once the leases begin, the cost savings will far outweigh the lease payments making this a very net positive deal. Actually, it is a genious deal and the first and only one of its kind in the industry. This is yet again another AA first!

So to summarize to answer your question Espen36, AA will be saving more money than it will pay for the leases for aircraft recieved through 2017. AA will be purchasing the NEOs and REs from 2018 onwards which have even more cost savings and will fully offset the financing costs. So there will be a lot to show for it!
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