United Airlines today (Dec. 08) ordered 25 Airbus A350s and 25 Boeing 787s with options for an equal number.
It’s clear why UA did this: the A350 is too big to replace the Boeing 767-300 and the 787 is too small to replace the Boeing 777 and 747-400.
Here is the press release.
A conference call with UA is to begin shortly. We’ll provide a running log.
Glenn Tilton, CEO
Cathy Michaels, CFO
John Tague, Pres/COO
- We will retire 747s and 767s as new deliveries come in 2016-2019. Manufacturers were eager to refill their order books. The A350 and 787 provide right size and range to meet diverse needs of UA’s global network and have capacity discipline. We will be able to serve new markets we weren’t able to cost-effectively serve.
- We got the right aircraft and we got the right financial deals. We ordered at the bottom of the cycle when manufacturers were anxious to fill their books.
- We also stipulated financial objectives that would not inhibit our to build liquidity.
- A350 and 787 will provide UA with step-change improvements, serving very long-haul markets with smaller aircraft.
- Improved fuel efficiency of about 15% gain fuel burn and all-in 33% reduction with capacity adjustments vs current aircraft they will replace, or $400m a year.
- Full life cycle maintenance costs are 40% below existing fleet and greater with maintenance holidays in early years.
- Cash payments to Airbus and Boeing only $60m in next three years and $152m over next five years. Have significant backstop financing from both lenders.
- Will compete future airplane orders (Note: single-aisle competition coming next year).
- Selecting aircraft from both manufacturers gives UA best airplanes for diverse network which clearly “overwhelms” commonality.
- Initial A350 order is for -900; initial 787 is for the -8, which is some 30% better fuel efficiency than 767.
- We have substitution rights on both airplanes.
- Increased range will allow UA to take full advantage of domestic hubs to Africa and elsewhere.
- Holding engine competition on 787. A350 is only offered with RR Trent XWB.
- Company advised by Seabury Group.
- Michaels: Narrow-body, follow-0n order will be next year.
- Michaels: Pilot contract includes these aircraft.
- Tague: No consideration of the long-rumored merger with Continental in ordering the 787, which CO has on order.
- Michaels: We have deferral and substitution rights in the prospect of special events (NOTE: the context of the question related to M&A but Michaels did not address specifically cancellation potential).
- Michaels: concerning backstop financing–declines to tell details, but generally referred to economic details providing flexibility for financing in the future.
- Tilton: Not interested in the 747-8 or A380 because of our view of capacity discipline in order to manage down cycles and downside risks.
- Michaels: we split the order because of an economically driven decision. One the one side the cost savings of one type vs the economics of two types for our route system and route potential.
- Tilton: declined to discuss discounts.
- Michaels: timing for fleet renewal is driven by economics when it makes sense to replace fleet. We are timing the replacements optimally for current average fleet age. Not looking at interim lift.
The indication is for the A350 to take over the super heavy role from the 747 and 777 and unless they propose to ignore their main hub routes the time will come when they will be forced to select a super-heavy design, to suggest capacity issues & down cycles as being barriers is tantamount to them burying their heads in the sand.
One of the worst run airlines…
With an aging fleet…
Constantly teetering on the verge of bankruptcy….
With no financing lined up…
Places an order. I’ll bet Boeing and Airbus are double booking those production slots for sure.
And horses may still learn to sing.
After successful high speed taxi testing yesterday, Airbus A400M is set for first flight until Friday:
As soon as the A400M maiden flight videoclip is available, it will be available there.
This can be viewed as inexpensive future options that will probably be double booked and planes made available only when production can accomodate the call.
It is doubtful wheter this Carrier will be in business in the future unless they find a partner or merge