CEO Parker on DL.. "The Way to Beat Delta is New Aircraft"

American CEO Doug Parker said his airline has a revenue gap with Delta and is on the way to making it up -- thanks largely to its modern fleet.

In 2016, American's 2016 revenue per available seat mile was 6.2% behind Delta's, according to a chart Parker displayed at last week's JPMorgan transportation conference.


For American, "all the leverage is in closing this gap," Parker said. "It can be done and it's happening.

"You only do that with the most aggressive fleet modernization in the history of the industry," he said.
"We are outspending Delta and we can catch them," he said. "American had the second-oldest fleet in the industry; now we have the youngest."
At the end of 2017, the average age of American's aircraft will be 9.8 years, down from nearly 14 years in 2012. (American has nearly 950 aircraft). The average fleet age is 10.4 years at Southwest, 14.4 years at United and 16.6 years at Delta.


This year, American will take delivery of 57 new aircraft. By the end of 2017, it will have taken delivery of 395 new aircraft since the 2013 merger with US Airways, while retiring 391 old aircraft. New aircraft are more fuel-efficient and can be more appealing to passengers.

Buying aircraft costs money. Between 2014 and 2017, American's capital expenditures, mainly for aircraft, totaled $22.7 billion, while Delta spent $12.3 billion and United spent $12.2 billion.

But Parker's point was that airline investors should try long-term thinking.