American deal with Boeing worth $20bn

American Airlines yesterday announced a 103-plane order with the Boeing Corporation, and said it had options for no less than 500 more aircraft. The deal could emerge as the biggest in aviation history.

The announcement, which confirmed Wednesday's stock market speculation, is an unfathomable boost for Boeing as it continues its global competition with Airbus Industries. By contrast, it is miserable news for McDonnell Douglas, which will see some of its own aircraft eased out of the American fleet as a consequence of the deal.

Based on list prices, the firm order for the 103 planes is worth roughly $6bn (pounds 3.55bn), although American is certain to have negotiated a handsome discount. Factor in the additional 500 aircraft, and it will be worth in excess of $20bn.

The deal remains contingent, however, on the ratification of a new labour agreement that has just been negotiated between the carrier and its 9,150- member pilots' union.

American, which hopes to merge transatlantic operations with British Airways next spring, also announced it had agreed to make Boeing its exclusive supplier of aircraft at least until 2018. Currently, the airline has a mixed fleet and is the largest operator of McDonnell Douglas' narrow-body MD-80 passenger liner. It also has some Airbus planes.

The bulk of the order is for new models of the Boeing 737 model, which is the world's most popular airliner. Other planes in the deal include the 757 and the 777. The 777 willreplace American's long-haul MD-11 airliners, which it purchased from McDonnell Douglas and found disappointing.

"Ordering the 737 is a major policy shift for American," said Scott Hamilton, of Commercial Airline Report.

American, which is based in Dallas, Texas, said it would take delivery of the 103 planes over four years, beginning in 1998.