United Airlines placed a massive order for at least 200 Boeing planes on Tuesday, divided between two models affected by recent problems: the 737 Max and the 787 Dreamliner.
It’s a crucial vote of confidence for Boeing, which suffered financial losses of tens of billions of dollars due to problems with the two planes. The Federal Aviation Administration grounded the 737 Max for 20 months starting in March 2019, halting deliveries of the planes, following two fatal crashes that killed 346 people. The 787 was not grounded, but the FAA halted deliveries for about a year due to quality control issues.
Even beyond those problems, Boeing has been losing competition to European rival Airbus for new orders, especially for single-aisle jets like the 737 Max. It has fared better in the competition for widebody orders, but has run into trouble there, too, with delays for a new 777 model, the 777X, and halted 787 deliveries.
Later Tuesday, Boeing reported that it had received orders for a total of 571 commercial aircraft through November of this year, net cancellations. So United’s order for 200 jets alone represented 35% of the orders the planemaker had already reported for the year. But even adding those 200 planes doesn’t bring Boeing’s total close to the 825 plane orders Airbus has booked, not counting its own cancellations.
While neither United
(UAL) nor Boeing
(LICENSED IN LETTERS) would reveal the pricing details, the list price of the planes add up to more than $37 billion. Even with the deep discounts typical of such purchases, the order will likely amount to tens of billions of dollars in Boeing sales.
(LICENSED IN LETTERS) desperately need.
United said firm orders for 100, 787 two-aisle Dreamliners, along with an option to buy 100 more, will represent the largest widebody order on record for any US airline.
“The Boeing team is honored by United’s confidence in our family of aircraft to connect people and transport cargo around the world for decades to come,” said Stan Deal, chief executive officer of Boeing’s commercial aircraft division.
Boeing shares rose 3% in premarket trading after the announcement.
The 787 is a used aircraft first of all on long-haul overseas routes. The model purchase represents United’s belief that there is pent-up demand for international travel, which has not recovered as quickly as US domestic passenger demand over the past year. Some countries, especially China, still have strict restrictions on flying into the country and some passengers are concerned about traveling abroad.
But United will receive the planes over the course of the next 10 years, during which time restrictions and concerns may become distant memories. And the first 100 Dreamliners it receives will replace the aging 757, 767 and 777 already in United’s fleet. Some of those older aircraft date back at least 30 years.
United’s options for an additional 100 Dreamliners represent the company’s plans to expand its fleet and reach into international markets.
The significant order makes United the “flagship carrier of the United States and the leading airline worldwide,” United CEO Scott Kirby said Tuesday in an interview with CNN’s Poppy Harlow on CNN This Morning. .
“This is just the next step on that journey to replace some of our older end-of-life 767s, but also to create growth opportunities for years to come in the international network,” Kirby said.
He also expressed no doubt about the order for two Boeing planes that had problems in the past, saying that “some difficult years made [Boeing] stronger” noting that United has always had a “great partnership” with the aerospace company.
The order, while a major boost for Boeing, is not a complete surprise.
The airlines have a financial interest in sticking with the same model aircraft once they commit. Companies can save on pilot training and parts costs by filling their fleets with the same models.
Unlike a driver who can seamlessly move between car manufacturers, commercial pilots are limited to only flying the model they are certified in. While United has some orders with Airbus
(EADSF)nearly 80% of its existing fleet is made up of Boeing aircraft.
“We have a large installed base of 787s,” Kirby said when asked on a press call about potentially increasing purchases of a competing Airbus model. “The economics of bringing in another type of fleet doesn’t make sense.”
Boeing began taking orders for the Dreamliner in 2004, and United was one of its first customers in the U.S. It’s made of a composite material that’s lighter than the aluminum used to build most commercial airliners, giving it a much better fuel economy and therefore operating savings compared to the older planes it will replace in United’s fleet. United has yet to decide how many of each of the three different Dreamliner models it will carry.
The 100 737 Max jets United is buying include 44 planes it already had an option to buy and 56 new orders. In June 2021, it announced the purchase of 200 737 Max aircraft, along with 70 Airbus competitors, in the largest aircraft order United has ever placed.
–CNN’s Jordan Valinsky contributed to this report.