NEW YORK: United Airlines announced on Tuesday (Jun 29) a huge new plane order with Boeing and Airbus in the biggest bet thus far by a major carrier on a travel industry recovery from COVID-19.
The US carrier plans to acquire 270 new planes consisting of 200 Boeing aircraft and 70 Airbus jets. The order would be valued at US$35.4 billion based on the listed price of the jets, although airlines often end up paying much less than the list price.
United executives described the order - the biggest in the airline's history - as a landmark moment symbolizing the radically improved outlook for travel due to coronavirus vaccines.
Still, United and other major airlines are expected to report another quarterly loss for the April to June period when they release their earnings reports in July, reflecting the continued drag of a travel crisis that has devastated travel revenue for more than a year.
United's business travel volumes are still down 60 per cent, with international travel off even more, said United Chief Executive Scott Kirby.
"We're not back to 100 per cent," Kirby said on a conference call with reporters in which he outlined how the company leaders had strategized on its needs early in the pandemic.
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"Because we accurately mapped out the trajectory of the crisis in March and April of last year, it's really allowed us to be prepared and make the right short- and long-term decisions," he said.
Company officials were not asked about the so-called Delta virus variant - which is spreading rapidly in many parts of the world - during the hour-long conference call, but the announcement illustrates broad confidence in the industry's prospects even as the pandemic evolves.
NARROW BODY FOCUS
The biggest component of the order will be 150 of Boeing's new 737 MAX 10, which is still undergoing tests in a process closely monitored by US regulators. The announcement is a victory for Boeing's jet, which was grounded for 20 months following two deadly crashes.
The other two components are 50 Boeing 737 MAX 8 and 70 Airbus A321neo.
All three models are narrow-body jets, making them well-suited for domestic and shorter-distance trips that have been among the first to see passenger numbers recover from the Covid-19 pandemic.
Both the Airbus model and the next-generation 737 MAX are bigger than earlier versions of the same aircraft, a feature especially beneficial for increasing capacity in New York, San Francisco and other markets where adding more flights is difficult or impossible, United officials said.
United officials made clear during the conference call that they have seen very recent signs of an acceleration in business travel bookings, with firms eager to resume client visits as they see their competitors returning to the skies.
Executives also said they were bullish about international travel, speaking of the summer of 2022 as being a "record breaker" as US consumers make up for lost opportunities during the pandemic to visit Europe and Asia.
The new planes will include enhanced in-flight entertainment options aiming to delight consumers with access to games and thousands of shows and movies. In another step to please consumers, the company plans to upgrade its existing fleet of narrow-body planes to add more compartment space for luggage.
Richard Aboulafia, an aviation expert at Teal Group, said purchases of the A321 and the 737 MAX - both single-aisle planes - make sense for the airline in the current market.
"The domestic markets are coming back pretty fast and fuel prices are coming back fast too," Aboulafia said.
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Airlines must make long-term bets to remain competitive, even if current market conditions still present significant problems, Aboulafia said, adding that current low interest rates also encourage making purchases now.
Scott Hamilton of Leeham News, an aviation website, said he was surprised at the size of the order. Boeing likely provided United an appealing discount because the company "has to rebuild its order book" after the MAX crisis, he said.