United And Boeing Hook Up For Giant 787 Order

United Airlines announced the largest widebody aircraft ever by a U.S. airline, a move that will enable the carrier to expand its global presence and BoeingBA
to continue its recovery from a two- and-a-half-year slump.

United said Tuesday that it has ordered 100 Boeing 787s with options to purchase 100 more. A formal announcement ceremony will come today at the Boeing plant in North Charleston, S.C.

“We refer to ourselves as the flag carrier of the United States because of our existing network and the potential,” said Andrew Nocella, United chief commercial officer, speaking to reporters on a conference call Tuesday. “This aircraft type can fly to all different markets around the world.”

Nocella said the 787s will replace aging Boeing 767s, noting, “We make more money every time we replace one of these older aircraft.”

The 787 “has the flexibility for any mission we need it on,” he said. The 787-8 is “well suited to emerging markets such as Ghana and Amman;” the 787-9 “has incredible range, flies Singapore to San Francisco, one of the longest in the world, and has the range to do all kinds of other routes,” and the 787-10, with more than 300 seats, can fly “core trunk routes to Europe and Japan.

“By 2030, if we exercise all these options, more than 80% of our long-haul platform will be 787s,” Nocella said, noting that the 787 is 25% more fuel efficient than the aircraft it will replace.

Why did United pick the 787 over the Airbus A350? “They’re both great airplanes (but) we already have a large base of 787s,” said CEO Scott Kirby, adding that the 787 is a better replacement for the 767 because it is smaller than the A350. Gerry Laderman, United chief financial officer, added, “We’re already a 787 operator. The economics of bringing in another fleet type doesn’t make sense.”

Additionally, Kirby added later, in discussing whether Congress will extend a Dec. 27 deadline imposing a new safety standard for the troubled Boeing 737 MAX, that an extension is “the right answer for the United States of America.

“Boeing is our largest exporter,” Kirby said, providing “the very kind of jobs we are working hard to repatriate.” If the extension is not granted, “It will mean that airlines around the world buy A321s …You will have airplanes manufactured in Europe and China.” Even United would end up buying more A321s, he said, as well as more 737-900s. (Some A321s are manufactured in Mobile, Ala.)

Besides announcing the 787 order, United also exercised options to purchase 44 Boeing 737 MAX aircraft for delivery between 2024 and 2026 and ordered 56 more MAX aircraft for delivery between 2027 and 2028. The carrier now expects to take delivery of about 700 new narrow and widebody aircraft by the end of 2032, including an average of more than two every week in 2023 and more than three every week in 2024.

Approximately 100 planes of the new widebody order are expected to replace older Boeing 767 and Boeing 777 aircraft, with all 767 aircraft removed from the United fleet by 2030, resulting in an expected 25% decrease in carbon emissions per seat for the new planes compared to the older planes they are expected to replace. United still has 45 A350s on order, but deliveries would not start until 2030, even if United decides to take them.

On Tuesday, Boeing shares rose 4% to close at $186.27, their highest level since April. Shares stood at $340 in February 2020, before the 737 MAX was grounded worldwide after 346 people were killed in two fatal crashes.

United did not disclose the cost of the aircraft, but Laderman said capital expense will total about $9 billion in 2023 and $11 billion in 2024, with much of the spending going towards the new aircraft. He noted that United has the ability to finance from its operating cash flow if it chooses. “We used to finance all aircraft through debt financing,” he said. “We now have the luxury of making a choice, to do that or to pay cash out of cash flow.”