United orders 200 Boeing planes, giving two ailing jets a vote of confidence


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CNN

United Airlines on Tuesday placed a bulk order for at least 200 Boeing planes, split across two models that have been hit by recent problems: the 737 Max and the 787 Dreamliner.

It is a crucial vote of confidence for Boeing, which suffered financial losses in the tens of billions as a result of the problems with the two aircraft. The Federal Aviation Administration grounded the 737 Max for 20 months beginning in March 2019, halting deliveries of the jets after two deadly crashes that killed 346 people. The 787 was not grounded, but the FAA suspended shipments for about a year due to quality control issues.

Those problems aside, Boeing has lost competition with European rival Airbus for new orders, particularly for single-aisle jets like the 737 Max. It’s done better in the competition for widebody orders, but has struggled with delays in one there, too new model of the 777, the 777X, and halting 787 deliveries.

While neither United (UAL) nor Boeing (BA) would disclose pricing details, the jets’ list price is 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 sales that Boeing (BA) desperately needs.

According to United, the firm orders for 100 twin-aisle 787 Dreamliners, along with an option to purchase 100 more, will represent the largest widebody order of any US airline.

“The Boeing team is honored by United’s faith in our family of aircraft to connect people and move cargo around the world for decades to come,” said Stan Deal, CEO of Boeing’s Commercial Aircraft Division.

Boeing shares rose 3% in premarket trading following the announcement.

The 787 is a used aircraft primarily on long overseas routes. The purchase of the model reflects United’s belief that there is a pent-up demand for international travel that hasn’t recovered as quickly as demand for U.S. domestic passengers over the past year. Some countries — China in particular — still have strict restrictions on flying into the country, and some passengers are concerned about international travel.

But United will take over the aircraft over the next 10 years, during which time all limitations and concerns may become distant memories. And the first 100 Dreamliners it receives will replace older 757, 767 and 777 jets already in United’s fleet. Some of these older aircraft are at least 30 years old.

United’s options for 100 additional Dreamliners reflect the company’s plans to expand its fleet and reach into international markets.

The significant contract makes United “the flag of the United States and the leading airline in the world,” 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 this journey to replace some of our older 767s that are nearing the end of their useful life, but also to create opportunities for growth in the international network for years to come,” Kirby said.

He also had no hesitation in ordering two Boeing planes that have had problems in the past, saying that “we’ve had a tough couple of years [Boeing] stronger,” noting that United has always had a “great partnership” with the aerospace company.

While the order is a major boost for Boeing, it’s not a complete surprise.

Airlines have a financial interest in staying with the same aircraft model once they have committed to it. Companies can save on pilot training and spare parts costs by stocking their fleets with the same models.

Unlike a driver, who can switch seamlessly between automakers, commercial pilots are limited to only flying the model they are certified to fly. While United has some orders from Airbus (EADSF), nearly 80% of its existing fleet is made up of Boeing jets.

“We have a large installed base of 787s,” Kirby said when asked at a press briefing about potentially increasing purchases of a competing Airbus model. “The economics of introducing another fleet type doesn’t make sense.”

Boeing began taking orders for the Dreamliner in 2004, and United was one of the first US customers. It is made from a lighter composite material than the aluminum used to build most airliners, making it much more fuel efficient and therefore operational compared to the older aircraft it will replace in United’s fleet. United have yet to decide how many of each of the three different models of the Dreamliner they will take.

The 100 737 Max jets that United is purchasing include 44 aircraft already under purchase options and 56 new orders. In June 2021, the company announced the purchase of 200 of the 737 Max jets along with 70 competing aircraft from Airbus, the largest aircraft order United has ever placed.

– CNN’s Jordan Valinsky contributed to this report.

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