Tuesday, December 8, 2009

United Airlines buys 25 787s and 25 A350

UPDATE: UA says the 787 order is for the 787-8 model while they'll also buy the A350-900.

United Airlines announced a huge widebody order for 25 787s (type unknown) and 25 A350s (type also unknown). They also have options of 50 of each aircraft and these airplanes are meant to replace the 767 and 747s in United's fleet. The split buy is somewhat surprising as there was a general feeling that United would have gone with one manufacturer for the wide body order and another for the coming narrow body order.

What is also surprising is that United did not place any jumbo orders (747-8 or A380). The fact that they seem to want to replace the 747s with A350s and 787s says they're want to reduce capacity in the future (2016 to 2019 is when the new airplanes will be delivered) while probably offering more frequencies to their main routes.

More of a concern to Boeing is that United didn't select the 777, an aircraft that United had launched in the 1990s. I bet Boeing will now accelerate 777NG plans in order for it to be more competitive vs the A350, in my opinion they have no choice unless they want to cede that market to Airbus.

Here's United's press release:

United Invests in Future, Places Order for Next-Generation Aircraft

CHICAGO, Dec. 8 /PRNewswire-FirstCall/ -- United Airlines today announced a significant investment in the company's future with a widebody aircraft order that will enable the carrier to reduce operating costs and better match aircraft to key markets it serves, while providing its customers with state-of-the-art cabin comfort. The new technology aircraft will reduce fuel burn and environmental impact, while enabling service to a broader array of international destinations. United ordered 25 Airbus A350 XWB aircraft and 25 Boeing 787 Dreamliner aircraft and has future purchase rights for 50 of each aircraft.

The aircraft order follows a rigorous, six-month request for proposal process, which resulted in agreements with both manufacturers, enabling the company to meet its financial and operational objectives and respond to changes in future market conditions. The breadth in size and capabilities of the different aircraft models ensure the company has the right aircraft for the right market throughout the fleet replacement cycle.

Order an investment in the future
"Over the last few years we have made fundamental improvements in United's performance, delivering excellent cost control while improving the quality and reliability of our product. This aircraft order is another significant step on the path to position United for long-term success in a highly competitive global market," said Glenn Tilton, UAL Corporation chairman, president and CEO. "I would like to thank our team for making this order a reality in a manner that is consistent with our disciplined financial strategy. We are investing in our future, and we are well
positioned to take full advantage as the economy recovers in the shorter term."

United expects to take delivery of the aircraft between 2016 and 2019; at the same time it will retire its international Boeing 747s and 767s. These 50 new aircraft will reduce the average seat count by about 19 percent compared to the aircraft they will replace, and by about 10 percent when averaged over the entire international fleet. With the Airbus A350 powered by the Rolls Royce Trent XWB engine, and the Boeing 787 powered by either the Rolls Royce Trent 1000 or the GE GEnx, United estimates it will reduce its fuel costs and carbon emissions from the 50 aircraft by about 33 percent. Additionally, the company expects average lifetime maintenance costs for the new aircraft to be approximately 40 percent lower per available seat mile than the aircraft that will be retired.

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. The A350 has a range 11 percent greater than the current B747, and the B787 has a range 32 percent greater than the current B767.

Both new aircraft offer significant improvements to the customer experience, including larger windows, more overhead bin space and improved lighting, among other features.

United leverages current environment, orders from both manufacturers

This order provides United with the most efficient aircraft for its international network, providing the right range, size and operating costs for United's diverse set of worldwide destinations, said CFO Kathryn Mikells.
"Our decision to move forward aggressively at the bottom of the business cycle clearly benefited us. We secured the right aircraft and the right deal for United," 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

Ordering in a down cycle expected to reap benefits
"We are pleased to be working with United, our longtime customer, and launch customer of the Boeing 777," said Jim McNerney, Boeing chairman, president and CEO. "We think United is making a smart decision placing an order at this point in the cycle and taking delivery years into the future. The 787 Dreamliner will provide United with additional range and unmatched fuel efficiency."

"United Airlines is a global icon, and it's very gratifying that they have chosen the A350 to be a key part of their strategy," said Airbus President and CEO Tom Enders. "It also is fitting that the selection of the eco-efficient A350-900 comes at a
time when the world is focusing on operating as efficiently as possible and minimizing environmental impact. Airbus and United have been partners for two decades, and we look forward to extending that partnership well into the future."

United last took delivery of aircraft in 2002, and last ordered aircraft in 1998.

Here's Boeing's statement on the United Order. Obviously the order is not finalized so it'll be interesting to see which model of each aircraft United will buy.

Boeing Statement on United Airlines Selection of 787 Dreamliner

SEATTLE, Dec. 8, 2009 – Boeing [NYSE: BA] is delighted that United Airlines has selected the Boeing 787 Dreamliner for the replacement and expansion of its twin-aisle fleet.

“United’s selection of the Boeing 787 continues the 80-year partnership between our two companies,” said Jim Albaugh, president and CEO of Boeing Commercial Airplanes. “The 787 is the first new airplane of the 21st century. Its advanced technology and unprecedented improvements in fuel efficiency will help United achieve its business objectives and enhance its leadership position among the world’s top airlines.” Boeing looks forward to working with United to finalize the order at which time it will be posted to the Boeing Orders and Deliveries Web site.

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