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American Airlines (AAL) Inks Deal to Buy 50 Jets From Airbus

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In a bid to modernize its fleet, American Airlines (AAL - Free Report) has agreed to purchase 50 new Airbus A321XLR jets. The deal, announced at the 2019 Paris Air Show, makes American Airlines the first major U.S. carrier to buy the European planes since their recent debut. Notably, Airbus had unveiled the new fuel-efficient, narrow-body jets on Monday.

Following the agreement, American Airlines intends to replace aging planes in its fleet like Boeing 757s with the A321XLR jets. Per the terms of the deal, the Fort Worth, TX-based carrier will order 20 A321XLRs that have the longest range of Airbus’s single-aisle offerings. According to Bloomberg, the value of the order for 20 additional planes, which are capable of flying between Europe and the middle of America, would be approximately $2.84 billion (excluding discounts). Additionally, the deal allows the U.S. carrier to convert 30 of its existing orders for the smaller Airbus A321neo to Airbus’ new offering.

In fact, the 2019 Paris Air Show has been fruitful for European plane-maker Airbus as it has secured a series of orders ever since the launch of A321XLRs. The first order was for 27 such jets, placed by Air Lease AL — a leading aircraft leasing company.

However, American Airlines’ order to Airbus is a setback to U.S. rival The Boeing Company BA as they compete for market share in the midsize jetliner space. Following the order, shares of Boeing declined 1.4% to $368.56 on Jun 19.

Notably, Boeing, which has not yet decided whether to launch a competing model to Airbus’ A321XLR, is currently engulfed in the controversy related to its 737 Max planes.

Zacks Rank & Stock to Consider

American Airlines has a Zacks Rank #5 (Strong Sell).

A better-ranked stock in the broader Transportation sector is GATX Corporation GATX carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

GATX has an impressive earnings history, having outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average being 16%.

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