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United Airlines poised for major order of Boeing Dreamliners - report

Dec. 08, 2022 7:08 PM ETUnited Airlines Holdings, Inc. (UAL), BABy: Carl Surran, SA News Editor103 Comments

Boeing 787 Dreamliner

nycshooter/iStock Unreleased via Getty Images

United Airlines (NASDAQ:UAL) plans to announce a major order next week for Boeing (NYSE:BA) 787 Dreamliners, likely worth tens of billions of dollars at list prices, Reuters reported Thursday.

United (UAL) reportedly has

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Craig69 profile picture
Exclusive-Air India nears historic order for up to 500 jets -sources

BY Reuters
— 7:13 AM ET 12/11/2022

By Tim Hepher and Aditi Shah

PARIS/NEW DELHI (Reuters) - Air India is close to placing landmark orders for as many as 500 jetliners worth tens of billions of dollars from both Airbus and Boeing (BA) as it carves out an ambitious renaissance under the Tata Group conglomerate, industry sources said on Sunday.

The orders include as many as 400 narrow-body jets and 100 or more wide-bodies, including dozens of Airbus A350s and Boeing 787s and 777s, they said, speaking on condition of anonymity as finishing touches are placed on the mammoth deal in coming days.
US airlines have old, dilapidated planes. They all need major upgrades, which are more passenger centric.
Somehow all the discussion of United's debt totally missed that United's plane orders go out to 2030. From the 10Q: "The aircraft listed in the table above are scheduled for delivery through 2030." United has a total of 525 planes on firm order according to the latest 10Q, for an average of 60-65 per year through 2030.
The numbers sound big, but over an 8 year delivery period, the issue is not an issue.
United burns about $12-14 billion in fuel expense per year, so the new planes are generally 10-20% more efficient than previous generation planes, offsetting the investment.
As for targeting the comments at "wide bodies" overlooks simple facts that airlines like Delta have major fleets that are in desperate need of replacement, with their A320 fleet of 61 planes at 27.3 years old, their 757 fleet, 127 planes at 25.3 years and their 767 fleet, 66 wide body planes at at 25.3 years. Even Delta is pressed to replace planes quickly and has 338 planes on firm order and has the same 737 Max 10 problem that could preclude it from replacing those old A320s on a timely basis without the extension.
All the "hair on fire" comments here are unjustified. If you are afraid of this issue, readers should not be investing in airlines at all, as they all have he same issues.

United has traditionally done a poor job of fleet planning.Generally speaking, this has left them with the difficult choice of high opex or high capex.
Specifically, this has them ordering new B787s while simultaneously deferring a 12 year old order for comparable A350s.

No matter how you slice it, United is playing catch up.
I usually like your thoughtful posts, but this one places responsibility on "fleet planning", yet you do not understand that the order for A350s was made in 2010, under the OLD pre-Continental United organization that had different objectives of adopting more Airbus planes.
If you had looked, you would then have found that United can cancel the order for "little penalty" and swap the order for the A321s it will want from Airbus, so hanging on to the order and pushing the A-350 delivery dates is a strategy that is working with the delays on that plane.

That "more than 100 widebody aircraft that need to be replaced" Tim talks about are are already on order with 353 737 max firm orders, that indicate United's plan to grow, with 148 planned to arrive by the end of 2023 according to their financials, the rest arriving as far out as 2030, so the new, more efficient planes will be replacing less efficient planes ready to retire anyway, for a DECREASE in fuel expense per ASM.

Again, the " the discussion of United's debt totally missed that United's plane orders go out to 2030." and that the decrease in fuel expense is major as the new planes arrive.
Tim Dunn profile picture
the MAX order will replace UAL's aging narrowbody fleet and small contracted regional jets as well as allow some growth.
The MAX order is NOT a replacement for widebody aircraft - that is why UAL is placing this massive order tomorrow - in all likelihood.
the issue with UAL's massive narrowbody and widebody orders is not the planes themselves but the massive capex that UAL will have to make in order to replace its fleet which is now the oldest among US airlines as well as grow as I noted in my recent SA article.
Yes, likely UAL can substitute A321NEOs for A350s but they will still pay a penalty to Rolls-Royce since they are the engine supplier for the A350 but do not offer an engine on the A321NEO.
Either the Boeing or Airbus narrowbody and widebody choices can work well for United or any other airline - but UAL's disadvantage will be in the large widebody category. The A350 even as a -900 is larger than the B787-9 and the two have comparable range. UAL will still have their fleet of 777-300ERs and have a 20% plus percentage cost disadvantage in the 300+ seat long range market for at least another decade.
Tim Dunn profile picture
United has more than 100 widebody aircraft that need to be replaced so they are spending alot of money to buy replacement aircraft that other airlines have been doing all along.
They may grow their international network using some of the capacity they buy but United already has twice the amount of aircraft commitments that American or Delta have. They will have by far the highest fleet costs in the industry.
And specific to Boeing, Congress still is nowhere near passing a bill that includes an exemption for Boeing's two remaining MAX models - the MAX 7 and MAX 10.
Boeing might benefit from a 787 order but they have a mountain of problems w/ the MAX program. UAL is undoubtedly using Boeing "credits" from the MAX and delayed 787s to order more 787s.
United's financial health will deteriorate by adding tens of billions more in aircraft orders
Jacobin777 profile picture
@Tim Dunn They have a very aged widebody fleet. As you said, UA might even have "credits" with Boeing so it will help save money.

Earnings are good and so far they haven't had the need to pay 30% raises that DL pilots are getting, which apropos, will add billions of dollars of expenses the next few years.

DL also has a lot of planes on order as well - to the tune of >300 single-isle planes.
Tim Dunn profile picture
I'm glad you weighed in.
10Ks show that UAL has almost twice the amount of aircraft commitments as DAL and more than twice what AAL has.

Adding on ten billion more in widebody orders is an enormous addition of debt and lease costs regardless of what kinds of discounts they get from Boeing.
And none of it changes that UAL desperately needs to update its narrowbody fleet which includes hundreds of 50 seat regional jets and Boeing can't even get the MAXs that UAL has on order delivered.
UAL and BA are simply diverting attention from one area that hasn't really been fixed to focus on another.
Jacobin777 profile picture
@Tim Dunn The bulk (250) is for the MAX10. I expect revenues and cash flow will be good enough for United to be able to pay for their planes w/out too much of a problem.

They must be pretty confident to order so many planes even in this high interest rate environment. Once interest rates go down in a couple of years, United will be able to refinance their purchases.

To be honest, I haven't compared financials (revenues, expenses, etc.) of the 3(4) majors in a long time. I would like to get back into it however I simply don't have the time anymore. I stick with ETF's and go with it. I buy very few stocks now anyway so sitting down and reading financials, etc. of carriers is not really necessary for me now. I used to do it for fun anyway however now I'm simply too busy. I don't post on any other aviation website anymore.
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