Thursday, December 10, 2009

United Announces Long-Haul Aircraft Order

United Airlines yesterday announced an order for 50 long-haul aircraft evenly split between the A350-900 and 787, along with purchase rights for 50 of each type, claiming that the "breadth in size and capabilities of the different aircraft models ensure the company has the right aircraft for the right market through the fleet replacement cycle."

The order was United's first for new aircraft since 1998. Boeing said the deal was not yet finalized and that it has not added the Dreamliners to its Orders and Deliveries'list.

UA issued requests for proposals to Boeing and Airbus six months ago (ATWOnline, June 12) and plans to take delivery of the aircraft in the 2016-19 timeframe, when it plans to retire its 747 and 767 fleets. The new aircraft will have about 19% fewer seats than the ones they replace and will contribute to a 10% reduction in seats across the entire international fleet, the airline said. Aircraft secured through the purchase rights eventually will substitute for its 777s.

"Our decision to move forward aggressively at the bottom of the business cycle clearly benefited us," CFO Kathryn Mikells said. "The orders require minimal capital over the next few years but ensure we will have the right planes to strengthen our global network over the next decade."

The firm orders will require a cash outflow of $60 million over the next three years. United said it secured "important deferral and substitution rights" from both Boeing and Airbus, along with "considerable backstop financing."

Rolls-Royce said the accompanying Trent XWB order, along with a long-term TotalCare service contract, is worth $2 billion at list prices. UA has not chosen between the GEnx and Trent 1000 for the 787s.

Regarding the reasoning behind ordering from both manufacturers rather than benefitting from the economies of scale that would accompany a larger commitment to a single type, UA said: "Neither manufacturer offers next-generation aircraft sized to optimally serve all of the current and future markets in United's network. The mix. . .give[s] us the right range of aircraft sizes needed to replace both our Boeing 747 and 767 aircraft. The economic benefit of placing the right size aircraft into each market overwhelms any benefit from ordering from one manufacturer."

It added: "The new aircraft will open up new revenue opportunities for United as the smaller size, longer range and lower operating costs of these aircraft allow the company to profitably serve a broader range of international destinations."

In a communication to employees, Chairman, President and CEO Glenn Tilton said that UA "will consider narrowbody re-fleeting next year."

(Brian Straus - ATWOnline News)

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