United Bets on Travel Revival With Biggest Ever Plane Order

Tuesday - 29/06/2021 11:53
The airline will purchase 200 Boeing 737 MAX jets and 70 larger Airbus A321neos to fuel its post-pandemic growth plans.

United Airlines Holdings Inc. UAL +0.42% is making its largest ever plane order, adding Boeing and Airbus jets to fuel its post-pandemic growth plans.

The Chicago-based airline said Tuesday that it will purchase 200 of Boeing Co. BA -0.09% ’s 737 MAX jets and 70 larger Airbus EADSY -1.74% SE A321neos, a deal valued at more than $30 billion at list prices before customary discounts. United is looking to replace most of its 50-seat jets and other smaller, older aircraft with these larger planes that can carry more passengers and allow it to sell more premium seats.

The order—the largest by a U.S. airline since American Airlines Group Inc. AAL -0.75% ordered 460 new aircraft from Boeing and Airbus in 2011—is the latest sign of U.S. airlines’ growing confidence that travel is on course to snap back after being decimated by the coronavirus pandemic last year.

United lost more than $7 billion last year and accepted billions of dollars in government aid to continue paying workers. Now the airline expects to make money in July on an adjusted pretax basis, which would be its first profitable month since January 2020, the airline said in a separate filing Monday.

A year ago, airlines were parking planes in deserts and hunkering down for protracted pullback in travel. While many business travelers have yet to return and many lucrative international routes have yet to reopen, airline executives have said in recent months that the fast rebound in domestic leisure travel has given them confidence to restart hiring plans and start adding to their fleets.
 


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United began laying the groundwork for its order last summer, when executives met in a United Club at Chicago’s O’Hare International Airport, according to United Chief Executive Scott Kirby. Though the airport was still largely empty at the time, the executives began discussing how to position United to emerge from the pandemic. They decided, for example, not to permanently retire any aircraft types as some rivals had done.

“In a way, my what a difference a year makes. But in another way, this is about where we expected to be,” Mr. Kirby said.

 
A pilot waved from the flight deck of a United Airlines plane at an airport in Renton., Wash., on Dec. 11, 2019. PHOTO: TED S. WARREN/ASSOCIATED PRESS
A pilot waved from the flight deck of a United Airlines plane at an airport in Renton., Wash., on Dec. 11, 2019.
PHOTO: TED S. WARREN/ASSOCIATED PRESS


Combined with orders already on its books, United has 500 new narrow-body planes set to arrive in the coming years—a rapid influx of jets that will help it increase flying by 4% to 6% annually, Chief Commercial Officer Andrew Nocella said. United said that about 200 of the new planes will represent new growth while 300 will replace aircraft that are due to retire, including about two-thirds of its 50-seat jets.

United’s move follows recent jet orders from carriers including Southwest Airlines Co. and Alaska Air Group Inc. The recovery has helped Boeing clear most of its inventory of unclaimed MAX jets. United had previously unveiled plans to buy an additional 25 MAX jets and to accelerate delivery of dozens more to meet near-term demand, but the carrier said the orders unveiled Tuesday are part of a more detailed post-pandemic strategy.

United said Tuesday that all of the planes will be outfitted with such amenities as larger overhead bins and screens in seat backs. Some airlines had been shifting away from those entertainment systems in favor of allowing passengers to stream movies and TV shows only on their own devices, but United said it now believes the screens will be a selling point with customers. United also plans to retrofit all of its mainline narrow-body aircraft with matching interiors, including screens, by 2025.

United said the new planes would help it add almost 30% more seats per domestic flight and 75% more premium seats in first class or with extra legroom.

The airline’s plans to expand domestic hubs in Chicago, Houston and Denver and to boost international flying are a bet on travel at a time when the outlook is still uncertain. The business travelers who would typically fill the more expensive premium seats have yet to return and travel patterns could remain in flux for years, analysts say.

“Everything we see every week makes us even more certain that business travel and international travel are ultimately going to come back,” Mr. Kirby said. “Some of them will be different, but they are ultimately going to come back at 100%.”

Analysts have long expected United to detail its plans to refresh its fleet. “The company has significant chunks of aircraft in its fleet that are old enough to legally drink,” Evercore ISI analyst Duane Pfennigwerth wrote Monday.

Though United split its order among the two major plane makers, the company’s move is a boost for Boeing’s 737 MAX. The aircraft had been grounded for nearly two years following a pair of fatal crashes, in late 2018 and early 2019, that took 346 lives. Boeing at one time halted production of the plane and some customers walked away from their orders as the pandemic worsened, providing an opening for rival Airbus to take market share.

United’s deal to purchase 150 Boeing 737 MAX 10 jets as part of the order announced Tuesday also bolsters that model, the largest variant of the single-aisle workhorse aircraft. Orders for MAX 10 jets have lagged behind the smaller MAX 8. The 737 MAX 10 recently took its maiden flight as Boeing conducts tests and works toward regulatory approval for the new jet.

—Andrew Tangel and Doug Cameron contributed to this article.

Write to Alison Sider at alison.sider@wsj.com

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