American Airlines announced yesterday that it has purchased 15 Boeing 727-200 jet aircraft from Braniff International.
The sale enables American to retire some of its less fuel-efficient and noisier Boeing 707 and 727-100 aircraft earlier than expected and gives financially pressed Braniff some needed cash.
Just hours after the sale of the planes are announced, Braniff reported a net loss of $47.7 million ($2.42 a share) in the second quarter, compared with net income of $8.8 million (44 cents) in last year's April-June period. Braniff blamed soaring fuel prices, other costs and the national economy.
The company also said that following the close of the second quarter it had made arrangements for the sale of used aircraft and related parts to more than one buyer for a total sales price of about $180 million. Capital gains from these sales will more than offset the second-quarter loss, Braniff said.
The Texas-based airline said operating revenues were up 8 percent in the second quarter to $373.8 million, while operating expenses -- led by a 70 percent increase in the cost per gallon of jet fuel -- were up 21 percent to $405.9 million.
For the first six months of the year, Braniff reported a net loss of $69.6 million ($3.52) on revenues of $745.9 million (84 cents) on revenues of $629.7 million for the first six months of 1979.
While the purchase price of the American sale was not disclosed -- American would say only that the terms were "favorable" -- a reliable nonairline source said the purchase price was about $120 million, or about $8 million each. The purchase price for brand-new 727-200s ranges from $14.5 million to $17.5 million each.
American will spend about $1 million a plane to refurbish them and redecorate them in American's red, white and blue color scheme.
"The purchase will reduce American's fuel costs, improve our operating margins and accelerate the retirment of old and inefficient planes that do not meet federal noise rules," Albert V. Casey, American's chairman, said yesterday.
Although the 727-200s that American will get are about six or 6 1/2-years-old on the average, they are much newer than the planes American will now put on the market. For Braniff's modern, up-to-date fleet, the planes they are selling are the earlier models they acquired.
After years of substantial profits -- and a record profit of $45.2 million in 1978 -- Braniff in 1979 suffered a record loss of $44.3 million. The loss was a result of the impact of skyrocketing fuel costs, a softening of domestic traffic because of the recession, and a very rapid expansion by Braniff to take advantage of the route opportunities that deregulation opened up.
Despite its difficulties, Braniff Chairman Harding L. Lawrence insists that the airline is well postured for a return to profitability, with its investments in place while other airlines need to make investments with inflated dollars.