American Airlines is buying a sixth Boeing 777-300ER

American Airlines continues to buy more of the Boeing 777-300ER, which will be the largest airplane in its fleet when the aircraft begins arriving late next year.

American confirmed last week that it has ordered a sixth 777-300ER. I got the usual “stay tuned” when I asked American president Tom Horton if American was going to just keep on adding 777-300ERs. Maybe American will buy some more at the Paris Air Show. We’ll see.

But Horton is very high on the airplane.

“It’s going to be a very, very good airplane, very good operating economics and range capability, so it’ll allow us to do some interesting things in Asia and deep South America,” he said.

In a report Friday, analyst Hunter Keay of Wolfe Trahan frowned on American’s decision to buy 777-300ERs:

“AMR’s widebody fleet expansion and associated cash burn is at the crux of our bearishness on the stock, as we believe these large planes are representative of a strategy that appears to prioritize sustaining market share at the expense of shareholder return.

“We understand the need to replace aging narrowbody MD-80 aircraft with more efficient B737-800 models, but the addition of widebody B777-300ER aircraft for growth is indicative of an airline that we think feels marginalized by larger competitors in its key markets, particularly New York City.”

Keay said he previously estimated that AMR would burn $2.5 billion in free cash between April 1, 2011, and Dec. 31, 2012. Now, he’s upping that estimate by $175 million to $200 million.

However, American thinks the airplanes are a very good investment. Here’s some Q&A with Horton on American’s fleet plans and the 777-300ER in particular:

Q. You’re making some progress in the talks with the Allied Pilots Association. Are you perhaps talking about the APA flying some smaller airplanes?

Horton: “There’s really not much I can say about that at this point, neither confirm nor deny. We’re just having a very robust and active dialogue with the APA. The objective of both sides, which is good, is to assure that the company is strong and successful for the long term. That’s a shared and mutual objective, because it’s best for all parties.”

Q. Do you have any interest in picking up early delivery positions on Boeing 787s if Air India doesn’t take the aircraft it’s scheduled to receive late this year?

Horton: “I would presume that would be 787-8s, and ours are 787-9s, and we think the -9 is the better airplane in terms of unit costs and capability, so that’s the plane we’re taking. We get either the first or among the first of those, but they don’t come until fourth quarter ’14.

“That’s one of the reasons why we’re taking the 777-300ER. The 777-300ER is really just a fantastic airplane from an operating economics standpoint. But It gives us near-term flexibility. So we’ve got some long-haul birds that we can use before we get the 787-9s. We’ll get the first of those fourth quarter next year, so that’s going to be here before we know it.”

Q. I’ve heard a rule of thumb that you need at least 25 airplanes of a certain type to justify buying and operating them. Are you going to get 25 777-300ERs or should we consider your 777-200ERs and -300ERs as essentially the same fleet?

Horton: “The 777-300ER has a common cockpit with the -200, so there’s a lot of commonality. In a lot of ways, you can think of it as the same fleet. Engines are different. That is true.

“We have a lot of option flexibility on that airplane. Under the right circumstances, under the right operating cost structure of the company, we could go a lot longer on 777-300ERs if we chose to.”

Q. Will you continue to exercise options to buy more 777-300ERs?

Horton: “You’ll have to stay tuned for that. We have flexibility. But it depends on the economics of the industry, obviously, and it depends on how we’re feeling about the ability to operate those planes profitably.”

Q. What types of routes would 777-300ERs fly?

Horton: “It has really good long-range capability. It has more range than a -200ER. It’s got more seats. The fact that it carries more people, you could think of as a good airplane for a slot constrained airport like Heathrow.

“The fact that it has great range means that it could be a really good airplane for Asia or deep South America. In Asia, it’d be a great airplane for India. It would be a great airplane for China. If we had a long-haul deal with pilots, we could fly Miami-Narita. We could fly Hong Kong.

“You could think of a lot of opportunities, particularly where you can put it in a partner’s hub, from one of our hubs to a partner hub. That’s a formula to make money.”

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