American Airlines and Boom Supersonic Agree Possibly, Maybe, Some Day to a Deal For 20 Overtures

In yet another of the splashy press releases devoid of substance so common these days, American Airlines and Boom Supersonic announced a non-binding agreement for the former to purchase 20 yet-to-be-built or certified supersonic airliners from the latter.

The announcement, released on Tuesday, enthuses that “American, the world’s largest airline,” is “poised to have the world’s largest supersonic fleet with new Boom Supersonic aircraft.” When it is poised to debut that fleet, how much it will cost, what the dollar figure for American’s non-refundable deposit for the aircraft is and what passenger configuration the aircraft will fly in are among the many details not specified in the release.

Boom Supersonic is in the early stages of designing and building the Overture, a 65 to 80-seat supersonic airliner designed to cruise at Mach 1.7 over water (twice the speed of today’s fastest commercial aircraft Boom affirms) with a range of 4,250 nautical miles. The company revealed the final production design of Overture last month. Boom says it expects the aircraft to roll out in 2025 and carry its first passengers by 2029.

That timeline is short, shorter still given that Boom has yet to secure an engine partner for its supersonic airliner. While Rolls Royce has done concept studies of an engine with Boom, its CEO, Warren East, recently told The Air Current that Rolls would not commit to a relationship with Boom in which it alone would fund development of a supersonic engine fit for Overture. Nor has Rolls Royce given a firm timeline for how long such development would take.

The lack of an engine partner for Boom (and information on a number of other critical details) did not stop American’s Chief Financial Officer, Derek Kerr, from asserting in the release that, “We are excited about how Boom will shape the future of travel both for our company and our customers.”

Kerr did not specifically mention an American Airlines commitment to acquire the 20 Overtures (with an option for an additional 40) mentioned in the release. Nor did Boom CEO, Blake Scholl, who said that his company is “proud to share our vision of a more connected and sustainable world with American Airlines.”

Receiving that vision came at an undisclosed price given that American has paid a non-refundable deposit on the initial 20 aircraft. I put a series of questions to American Airlines and Boom regarding the agreement and received brief emailed responses.

The first asked whether the agreement constitutes a firm order for 20 Overtures? American Airlines spokesman, Rob Himler, replied that the agreement is “the first phase of our partnership with Boom Supersonic,” noting that it is “still subject to a finalized purchase agreement with future agreed upon milestones and other terms.” As other observers have noted, the lack of a firm order will not trigger an 8K filing with the SEC.

Neither American nor Boom provided a dollar figure for the deposit. However, Laura Wright, speaking for Boom’s strategic communications firm, noted that the Overture is priced at $200 million per aircraft and that, “Neither our orders nor pre-orders include a discount.”

The last tidbit is interesting given that major airlines rarely pay list price for new airliners. In fact, standard discounts, particularly for launch customers, hover around 50% of Airbus or Boeing’sBA
asking price. But in this instance an order for 20 narrowbody Overtures would presumably cost $4 billion. As such a deposit might be hefty.

In reality, American likely paid a tiny, tiny fraction of the theoretical order price for what in-effect represents an opportunity to take a favorable “purchase position” with Boom should the Overture come to fruition. Alternately, one could consider the non-refundable deposit the simple cost of a press release says Richard Aboulafia, managing director of aerospace consultancy, Aerodynamic Advisory.

“For a very small amount of money and no real commitment both American and Boom get free advertising. Considering that [American] can’t get any meaningful technical specifications [for Overture] because there’s no engine, they’d be fools to commit more than a nominal sum as a deposit.”

Any projected performance or operating cost models Boom might provide would logically be loose, forward-looking estimates possibly based on its studies with Rolls Royce. American provided no response to questions about operating cost assumptions, necessary infrastructure or even anticipated aircraft deliveries, merely pointing to the 2029 passenger service date projected in the release. Likewise, no detail was offered on a possible passenger configuration for an American liveried Overture.

On social media, the observation that the release was not accompanied by a published rendering of Overture in American Airlines livery (an earlier agreement with United Airlines included such artwork) prompted speculation that the airline had not paid the requisite deposit for such a privilege.

The purchase agreement announcement as it is does not move the ball for commercial supersonic transport though marketeers will argue its merits. Aboulafia adds that, like any startup aerospace company, Boom depends in part on publicity to maintain a flow of investment capital. “If VC firms are giving them $10 million to $20 million a year, announcements like this increase the odds that more people will write them a check for more.”

In this respect, the airy supersonic/hypersonic transport sector is akin to the nascent urban air mobility scene which, after years of massive private investment, still runs on speculative capital. The nebulous business agreements, potential equipment orders and press releases that accompany them will likely continue until the flood of investment funding slows Aboulafia opines.

“There has been an extraordinary surge in the number of new aerospace startups funded by private equity over the past few years, mostly in urban air mobility but not all. A large crop of failures would put a chill on these kinds of [announcements] I think.”