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United Airlines unveils huge jet order in push for growth

Stock MarketsJun 30, 2021 04:21AM ET
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© Reuters. FILE PHOTO: A United Airlines passenger jet takes off with New York City as a backdrop, at Newark Liberty International Airport, New Jersey, U.S. December 6, 2019. REUTERS/Chris Helgren

By Tracy Rucinski and Eric M. Johnson

(Reuters) -United Airlines unveiled its largest-ever order for Boeing (NYSE:BA) and Airbus jets on Tuesday, lining up 270 planes in a push for post-pandemic growth with bigger jets for domestic flying.

The Boeing-dominated order for 200 Boeing 737 MAX and 70 Airbus A321neo jets, worth over $30 billion at list prices, will boost United's domestic capacity by almost 30%, allowing it to better compete for both premium and low-cost travel.

It builds momentum for planemakers seeking to turn the page on the COVID-19 travel slump, at least in the United States, and signals a strong bet on a recovery in business travel.

Chief Executive Scott Kirby (NYSE:KEX) said it would "accelerate our business to meet a resurgence in air travel."

America's third-largest airline by revenue will replace most of its regional jets and undertake a sweeping cabin overhaul with more premium seats.

"With a number of startups commencing operations or with plans to, United is putting the U.S. travel industry on notice," said Peter McNally, analyst at research firm Third Bridge.

The order, confirming a detailed breakdown reported by Reuters on Monday, includes 50 Boeing 737 MAX 8 and 150 MAX 10, accelerating a recovery in the wake of a two-year MAX safety crisis in what market sources called a partial coup for Boeing.

It especially marks a breakthrough for the 230-seat MAX 10, the largest variant which has begun flight tests but until now has struggled to contain runaway sales of the competing A321neo.

But Boeing's victory over Airbus in the number of units sold was tempered by Europe's continued grip on a strategically vital segment for single-aisle missions that need the most range.

That allowed Airbus to secure a quarter of the deal in a high-margin niche where Boeing faces a gap in its portfolio, forcing it to ponder a new jet to replace the longer-range 757.

Boeing appears to be calculating that the United deal will demonstrate that the MAX 10 fits the bill for some three-quarters of missions while it weighs options for a larger new model, analysts said, amid thin post-pandemic demand.

Airbus, meanwhile, continues to pitch the A321neo as a "premium" product.

COST IMPROVEMENT

"This is a great time to acquire capacity cheaply - the aircraft market remains depressed - and this will offer lasting structural cost improvement," said Carlos Ozores, vice-president at aviation consultancy ICF.

After initial gains, Boeing shares ended down 1.8%, resuming losses triggered by delays in certifying the larger 777X. United and Airbus both eased 0.6%.

Combined with existing orders, United will receive 500 new narrowbody aircraft including 40 in 2022 and 138 in 2023. It said it has flexibility on deliveries between 2024 and 2026 and the option to convert some MAX 10 orders to other variants.

United, which unlike major rivals did not retire jets during the pandemic, said it plans to fly the first MAX 8 with the new interior this summer and the MAX 10 and A321neo in early 2023.

The order includes 25 737 MAX "white tails" - jets canceled by other buyers during a 22-month grounding.

The airline, which received $10.5 billion in government aid during the pandemic, devoted a large part of its release to a pledge to create 25,000 unionized jobs through the purchase.

United said it expected to earn a pretax profit in July, its first since January 2020.

Boeing, required to add MAX simulator training for pilots of earlier 737 models after software problems contributed to fatal MAX crashes, said the United deal includes simulator data.

Airbus said a significant number of newly ordered A321neos would be assembled at its plant in Alabama.

United Airlines unveils huge jet order in push for growth
 

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