American Airlines announced a record-setting order for new aircraft today, and it shows where the airline industry is headed.

The Dallas-based company will buy 460 planes from Airbus and Boeing, with options for another 465. The massive order comes as airlines rush to reduce operating costs by replacing their aging fleets with new, more fuel-efficient aircraft. The order brought with it an announcement from Boeing on the fate of the 737, which will be updated and not replaced.

With the current state of the economy and many airlines still counting pennies, the giant order has raised questions in some quarters. But airline analyst Richard Aboulafia says it’s all about the race toward efficiency.

“It’s fundamentally a defensive move,” he says. “Everybody is looking for a hedge against expensive fuel.”

In the world of single aisle, narrow body airliners, that hedge comes from new, fuel-efficient engines.