United orders 100 Boeing wide-body jets in boost for US plane maker
United Airlines has ordered 100 wide-body jets from Boeing, updating the carrier’s fleet while giving the US aerospace manufacturer a needed win over its European arch-rival.
Chicago-based United said the order of 787 Dreamliners is the largest order for wide-body planes ever placed by a US carrier, in a deal that gives it the option to increase the purchase to 200 jets. Wide-body jets fly longer routes than smaller, cheaper single-aisle planes.
The new planes will replace the Boeing 767s and 777s that United currently flies, improving fuel efficiency by 25 per cent through better engines and greater use of lightweight composite materials. United will receive the first jets in 2024 and take delivery through 2032.
“The economics of these planes are unmatched,” said Andrew Nocella, United’s chief commercial officer. “Every time we replace one of these we make more money.”
The order is a boost for Boeing over Airbus, its main competitor. The European company has seized market share since 2019, when Boeing’s 737 Max was grounded for 20 months following a pair of fatal crashes. Problems in manufacturing the 787 later forced the US aircraft maker to halt deliveries of the plane for all but two months between October 2020 and last August.
Air travel rebounded this year, allowing US carriers to raise fares and generate profits. Yet snags in the aerospace supply chain have prevented Boeing and Airbus from satisfying their customers’ demand for jets.
Airlines began placing larger orders last year as they predicted an increase in demand, rushing to secure a slot in manufacturers’ order books. Supply chain constraints have slowed the pace of deliveries from Boeing and Airbus.
United ordered 270 jets in June 21, while airline investor Bill Franke ordered 255 in November 2021 to spread across several ultra-low-cost airlines where he holds a stake. This year Airbus sold nearly 300 planes to four Chinese carriers, including 96 A320neos to China Southern Airlines, a traditional Boeing customer.
Boeing’s order backlog for wide-body planes, from the start of the year through October, exceeds that of Airbus: 1,046 to 625. Yet the popularity of Airbus’s single-aisle offering, the A320 group, means the European plane maker still has more orders overall, with a backlog of 7,397 to 4,441.
Boeing lists the price for a single 787 as between $248mn and $338mn, depending on the number of seats, but airlines routinely receive discounts that can equal half the amount that manufacturers advertise.
The order is likely to restrict United’s free cash flow — cash flow minus capital expenditures — at a time when it carries debt assumed during the pandemic. The airline reported $38bn in total debt at the end of the third quarter.
Jefferies analyst Sheila Kahyaoglu said in a note that United’s combined narrow- and wide-body orders are likely to limit free cash until the end of the decade. “[United’s] cash balance is the concern,” she said, “with de-levering pushed again to the right.”
Chief financial officer Gerald Laderman said the new aircraft order would not affect the airline’s 2026 target to reach adjusted total debt that is less than 2.5 times the company’s adjusted earnings before interest, taxes, depreciation, amortisation and aircraft rent. The ratio is currently about twice that target.
The jets’ greater profitability “will help us to continue to achieve our deleveraging goals”, he said.