Things in the Sky

I have concluded that I’m cursed. Really.

Every time I have some kind of big school assignment, an airline has a big announcement. Case in point: I had to study for a management exam yesterday (and that’s why today’s post is late). So, obviously, United decided to announce that instead of sticking with one vendor for its new international aircraft, it would split the order between 25 Boeing 787-8s and 25 A350-900s, with 50 options for each aircraft. I think this an interesting move that makes sense for the carrier – but this deal does raise some interesting questions about United’s future fleet plans.

The decision to replace the 767-300 with the 787-8 is very logical, and I think it gives United a lot of flexibility in terms of its international flying. According to Boeing, the the dash 8 will have a range between 7,650 and 8,200 nautical miles – right in the neighborhood of its 777 and 747 aircraft. So, there certainly could be some markets that might not work with those aircraft but could be perfect for the 787. For example – United’s current nonstop to Beijing from Dulles is operated by a 777 seasonally – perhaps it could go year-round with the 787?

United currently has 21 767-300ERs on international routes, but also has 14 767-300s operating domestic routes. There was no official word from United on if the there would be a domestically-configured 787.

Next, United has ordered the A350-900 to replace the 747 fleet, which is interesting considering that it’s a decent cut in seat count. Airbus’ number for a three-class layout is 314 seats, while United’s newly-configured 747s seat 374 (the old configuration had 347 seats). United says the total order for 50 aircraft will reduce average seat count by about 19%, and a lot of that comes from dumping the 747s. It’s an interesting move – though during yesterdays conference call for media and analysts the company was pushing capacity disciple. The A350-900 does provide a bit more range, though – around an 11% increase, or a bit over 800 miles. But, according to this report, United has some flexibility in terms of selecting aircraft in the same family. I would not be surprised if United became interested in the A350-1000, which seats about 350, and would still have an improvement in range over the 747.

What is is interesting is that the 777 replacement was not mentioned, though that does make sense as those aircraft are a bit younger. But there was an interesting mention in the press release:

Furthermore, our international fleet replacement program will reduce our fleet complexity, and associated operating costs, by eliminating one fleet type as we transition from three widebody aircraft types (Boeing 747, 777, and 767) to two (Airbus A350 and Boeing 787).

So, that’s probably where those options come into play. The larger 787-9 from Boeing and the shorter A350-800 from Airbus would probably be the competitors here. Like the 767, United has domestic and international 777s.

United, I think, has sent a message to the two vendors here, and I completely agree with Jon Ostrower’s thoughts that he expressed in a recent blog entry:

…for Boeing, a split buy is a troublesome sign for the 777….This could hasten the ascent of a next generation 777 or an equivalent option in the 305-365 seat segment. For Airbus, while it has made significant inroads into the 777 market, its flank remains exposed where the 787 excels…the reality is that the 220-270 seat market is extremely vulnerable for Airbus in the long run.

Of course, United isn’t in the best financial shape so they have made moves to help preserve its financial position. Deliveries will be taking place from 2016 to 2019, and that’s still a bit far off. Meanwhile, United reported that they “have also secured considerable backstop financing from both manufacturers, which will protect us in the event of tight credit markets as new aircraft are delivered” and have also “secured deferral rights that provide us with further financial flexibility.” The company said that cash outflows from the deal over the next three years would be $60 million.

Everything on the narrowbody front was quiet, though United did say this summer that it was looking for a 757 replacement. The two offerings from Boeing and Airbus would most likely be the 737-900ER and the A321. Personally, I think the latter has an advantage considering United already operates the A319 and the A320. Winglets on the A321 make it more attractive as well. But, one interesting report today also suggests that United is potentially interested in acquiring some Embraer aircraft, suggesting that they might like an aircraft smaller than the A319, based on Embraer’s current product lineup (unless they have something else coming). E-Jets, of course, would probably bring up some union issues. It was said that the narrowbody search will heat up next year, so we’ll have to see what happens.

But, anyway – this is United’s first order in over a decade, so it’s nice to see the airline make a move to renew its fleet.