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    Wednesday, October 4, 2023

    United Airlines Orders 110 Airbus, Boeing Jets in a Bet on Travel Demand

    United Airlines on Tuesday announced an order for 110 aircraft from Boeing  and Airbus for delivery beginning in 2028 as it seeks to expand its international network.

    The Chicago-based carrier said its order is also intended to mitigate the persistent supply-chain logjam that has delayed aircraft deliveries as well as infrastructure bottlenecks that have forced it to cut its flights.

    United will convert previous options and purchase rights into firm orders for 50 Boeing 787-9s for delivery between 2028 through 2031 and 60 Airbus A321neos for delivery between 2028 and 2030, it said, confirming details Reuters first reported earlier on Tuesday.

    It has also secured new options for up to 50 more 787s and purchase rights for an additional 40 A321neo aircraft at the end of the decade.

    Orders for long-distance widebody jets rebounded to meet international travel demands. Air Canada last month purchased 18 Dreamliners and Air France-KLM ordered 50 Airbus A350s. Since the pandemic, there has also been a rise in demand for narrowbody jets, especially larger models such as the A321, which has dominated the single-aisle market.

    Among U.S. airlines, higher-margin international travel is the most important to United, accounting for about 39% of its passenger revenue this year - up from before the pandemic.

    United Chief Commercial Officer Andrew Nocella said the company expects a disproportionate part of its growth in the second half of this decade to come from global long-haul flying.

    "In the future, United will increasingly turn to global growth to expand," he told reporters on a conference call.

    The latest order is the second major aircraft purchase by United over the past year. It unveiled a huge order of 100 Boeing 787 Dreamliners and 100 737 MAXs in December.

    “United’s unprecedented commitment to the 787 Dreamliner family is a testament to the market-leading operating economics and reliability of Boeing’s widebody jets,” said Stan Deal, head of Boeing Commercial Airplanes.

    Airbus Chief Commercial Officer Christian Scherer said the A321's fuel efficiency, smaller carbon footprint and lower maintenance and operating costs will be a "game changer" for United.

    Carriers have been placing orders with urgency as Boeing and Airbus backlogs have grown and as jet deliveries have been pushed out toward the end of the decade.

    Nocella called the situation "a bit frustrating" as the planes ordered by the company are "significantly" behind schedule.

    Meanwhile, limitations on runways, airspace and gate capacity at the nation's largest airports have compelled airlines to cut departures.

    United aims to get around the problem by flying larger planes with more seats. It expects average seats per departure in North America to increase by 40% in 2027 from the pre-pandemic period.

    The large 787 order is likely to raise further questions about the future of outstanding United orders for 45 Airbus A350s which have already been deferred to at least 2030.

    Nocella said that while the A350 is a "great machine" and there is no change in the company's order, United is focused on its 787 fleet in the short run. It plans to deploy the 787 jets on the routes that Boeing's 767 is flying today, he said.

    "It's doing great for United around the globe," he said.

    The latest order comes at a time when weakening pricing power in the U.S. market has sparked concerns about the strength of travel demand. Analysts are not sure consumers will continue to splurge on travel if the economy slips into a recession.

    Nocella downplayed those concerns.

    "United's investors can have confidence we remain focused on achieving our long-term profit margin goals," he said. -Reuters

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