Wednesday, June 03, 2009

United Airlines wants up to 150 new aircraft, asks Boeing and Airbus for bids

United AirlinesUAL Corp., the parent of United Airlines, is seeking to acquire up to 150 new aircraft, an order that could be worth up to $10 billion. The Wall Street Journal (WSJ) is reporting that UAL has asked both Boeing and Airbus to bid for the order.
Unlike some of its largest domestic rivals, United already flies both Airbus and Boeing planes, giving both manufacturers an incentive to try to grab a bigger share of a major airline's business. As part of its order, United is hoping to simplify its fleet by ending up with fewer different types of aircraft, a change that would cut its maintenance and crew-training costs.
Citing 'people familiar with the matter', the WSJ says the focus of the order will be replacement of "many of United's 111-airplane wide-body fleet, as well as some of its 97 aging Boeing 757 narrow-body planes."

Just a year ago, United announced plans to downsize its fleet, a move that would include retiring six Boeing 747-400 aircraft, and all 94 of the Boeing 737 type. The airline also is in the process of reintegrating the 56 Airbus A320 aircraft that have been operating all-economy Ted flights into the mainline fleet, repainting them in the standard United livery, and reconfiguring the seating to include a First Class cabin.

Hundreds of United pilots are furloughed at present, and the elimination of 100 planes from its fleet over the space of a year has meant that many pilots have had to be retrained to fly different types of aircraft in order to keep their jobs. I can't help but wonder how United's pilots will view this intended expansion of the fleet, especially from a single airframer.

The timing of this proposed order for new aircraft is as surprising as its potential dollar value: the WSJ report indicates that United "could sign a major order as early as the fall." But perhaps the timing is more shrewd than it might seem at first glance. Says the WSJ:
It's a notable move amid falling travel demand and a tight lending environment -- on top of UAL's recent heavy losses and poor credit rating. But even in good times aircraft builders will go to considerable lengths to lock in an order, using in-house financing arms and other maneuvers to help airlines buy...
In other words, UAL is in bargain-hunting mode, and the ace up its sleeve is the lure of a winner-take-all deal for either Boeing or Airbus.

Let the bidding war begin.