RE: United Seeking to Order 150 Widebodies
matt weber
> entire widebody fleet. It says its last order for new aircraft was in
> 1998.
>
> Considering the rather lethargic aircraft market so far in 2009 , this
> is going to be an extremely coveted order by both manufacturers who will
> probably bend over backwards to get it.
>
> UA says it also need to look at replacing its 757s.
>
> From:
> http://ir.united.com/phoenix.zhtml?c=83680&p=irol-homeProfile#fleet
>
> Seats Number Avg Age
> B757-200 171 97 17
>
> Wide-body
> B747-400 350 26 14
> B767-300 212 35 14
> B777-200 267 52 10
>
>
> I could see United ordering 15 747/380s with the rest of the 747s
> replaced by 777s.
>
> I think Boeing would really need to get this for the 747-800i. If UA
> goes for the 380, it won't look good for the 747-800i.
>
>
> Considering that UA has considerable investiment in the 777, and
> especially if UA gets soem 777-300s to replace some of the 747-400s, the
> choice of the midrange may favour the 787.
>
> If you don't have 777s, then the 350, being bigger, may be a better fit.
> But if you have 777s, especially many -200s, then the smaller 787 may be
> a better fit for UA, especially if it needs some long range aircraft to
> replace some 757s.
>
> And with the 787 cancellations this year, this may have opened up a few
> early delivery slots that Airbus couldn't match.
>
> On the other hand, John Lehey may do much more than bend over backwards
> and make an offer UA can't refuse.
>
> I wouldn't be surprised however to see UA Order a few 321s to replace
> domestic 757s, then a whole bunch of 787s to replace long rangfe 757s
> and all of the 767s, some 777s to replace part of the 747s as well as
> the older 777s, and some 380s to replace the rest of 747s.
>
> However, if Boeing can win the 747 order, it would give a lot of
> credibility to the 747-800i programme.
>
> Anone know when such orders might be announced ?
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>While we're guessing what UA would do, I tend to agree with you, JF, but as
>to the Airbus 321's, I think range is a problem, as UA uses the 757's on
>transcon and also Hawaii missions, which are a bit long for the 321. Just
>look at US Airways' A321 fleet which frequently gets hit with load
>restrictions and operational fuel stops on westbound transcons in the
>summertime.
That happens because like UA, US didn't buy any extra capability when
they ordered the aircraft, nor do they have any money, so cannot
afford to either increase the MGTOW or buy bigger engines. The
A321-200 is a very capable aircraft, and can actually fly the
transcon mission fairly easily against prevailing winds IF you buy
enough airplane. The A321 has an EW that is about 14,000 pounds
higher than the A320, but the MGTOW is 40,000 pounds higher, so if
you buy enough weight, filling the tanks and carrying a full payload
of pax isn't very hard. However like Boeing, Airbus charges for high
MGTOW, and engine makers charge for higher thrust. If you don't pay
for these capabilities however, you don't get them.
I regard this as an academic exercise anyway. There are several
reason. The Backlog on the A320 family and 737NG family is still
quite large, so at the earliest in narrow bodies, UA would buying
them pretty much at the end of the life cycle. I expect we are going
to see both the A320 and 737NG replaced well before the next decade
is out. This just isn't a good time to be ordering narrow bodies.
OTOH, I am not sure UA management is smart enough to figure that out.
As for the rest of the order, UA doesn't really have a mission for
the A380. The A380 is attractive if you want to provide a lot of
seats with very few slots at airports. UA serves very few airports
where that is an issue, and UA would have a hard time selling all of
the seats on the airplane anyway. The 747-8i has the same problem.
The era of the 4 engine Widebody Jet is coming to a close.
While Both Airbus and Boeing would probably like the order very much,
and will pitch the 787 and 350 products (and the A350-1000, and the
787-10 when announced) will both provide roughly 777-300 capacity
at lower ASM cost.
The bind in all of this is UA doesn't want to use any of its own
money for these transactions, and after the way UA treated the
leasing companies in the Chapter 11 filing, nobody is any hurry to do
UA any big favors in financing these transactions. UA has no money
today, and their performance over the past couple years suggests they
aren't going to have any money anytime soon. The UA is performing
today, I am not sure they will still be around when it comes time to
delivery aircraft from this potential order.
In addition what UA wants to do, with how UA wants to do it, is a
gross mismatch for what the financial community is willing to do for
UA. So either UA is going to have to get a lot more realistic about
how they are going to pay for this equipment, or this is going to be
an order that will go anywhere. There is no reason for the leasing
companies to carry the entire risk on this order, and neither the
A350 or 787 order backlog is short at the moment. The risks UA wants
everyone else to carry simply are not worth the potential rewards. It
may be a coveted order for the Airbus or Boeing, but the reception
from the people United wants to pay for it all is going to be at
best, luke warm, and quite possibly, downright icy.
I'd also remind those who are unaware of it, the kinds of screwball
financing that both Airbus and Boeing use in other parts of the
world, are prohibited by treaty in the USA. Boeing cannot use Ex-Im
financing in the EU, and Airbus cannot use the equivalent European
Export Financing in the USA.
My thoughts anyway.
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JF Mezei
> That happens because like UA, US didn't buy any extra capability when
> they ordered the aircraft, nor do they have any money, so cannot
> afford to either increase the MGTOW or buy bigger engines.
Ok, but now that they want/need/desire to replace their 757s, could they
not order fully decked out 321s (or equivalent 737) to fulfill a
signifficant portion of the 757s's missions and give the rest to the
787/350 ?
Since UA has 757s, there was probably no need to pay extra to get the
full capabilities of the 321s since those were met with existing 757s.
> I regard this as an academic exercise anyway. There are several
> reason. The Backlog on the A320 family and 737NG family is still
> quite large, so at the earliest in narrow bodies, UA would buying
> them pretty much at the end of the life cycle.
True. But *IF* UA is seeking a replacement for its 757s, wouldn't their
choices be limited to products currently on sale ?
And while the backlock for 320 and 737s are high, aren't delivery
schedules spread out over many years, allowing both manufacturers to
give fairly early slots to new buyers ? (having 1000 orders spread out
over 10 years would still allow you to have 20 spare delivery slots at a
120 aircraft per year production rate).
> I expect we are going
> to see both the A320 and 737NG replaced well before the next decade
> is out.
Yep, my guess is that they are waiting to see if the geared turbofan
will pan out. I think one danger in this is that Bombardier and
Mitsubishi who will get that technology first might steal a large chunk
of the low end 737/320 family markets.
Also, say Airbus/Boeing were to announce today a new generation
narrowbody with first delivery in 2016. (which really means 2017). If an
existing order for 320/737 had delivery date past 2017, you could
probably negotiate to have them converted to the new model as a launch
customer. But if you have delivery slots that are before that date, you
may decide to still get the old 320/737s because you need them ASAP to
replace very old aircraft.
> As for the rest of the order, UA doesn't really have a mission for
> the A380. The A380 is attractive if you want to provide a lot of
> seats with very few slots at airports. UA serves very few airports
> where that is an issue,
During its recent bankrupcy, UA sold a number of 747-400s. But it still
has 26 of them. (Not sure if some of those would be parked in the
desert). It would seem to me that US can still have uses for a jumbo
jet, especially on asian and australian routes.
> and will pitch the 787 and 350 products (and the A350-1000, and the
> 787-10 when announced) will both provide roughly 777-300 capacity
> at lower ASM cost.
Ok, tough blunt question: Is this the end of the 777 ? While Airbus
refuses to admit it, we all know that the 350 spells the end of the 340
and 330. But it is not so clear to me whether the 787 will be able to
fully replace the 777.
> The bind in all of this is UA doesn't want to use any of its own
> money for these transactions, and after the way UA treated the
> leasing companies in the Chapter 11 filing, nobody is any hurry to do
> UA any big favors in financing these transactions.
Except Boeing and/or Airbus which are rather desperate this year to get
some orders in.
> The UA is performing
> today, I am not sure they will still be around when it comes time to
> delivery aircraft from this potential order.
What are they doing wrong ? Are they hindered by legacy stuff like
pensions, etc ? Or are their operations really inefficient with much
higher operational costs ?
> So either UA is going to have to get a lot more realistic about
> how they are going to pay for this equipment, or this is going to be
> an order that will go anywhere.
The way I see it, UA sees an opportunity in the market to make a "no
money down" purchase of aircraft it really needs. If Airbus/Boeing are
desperate enough, they will bend over backwards to find a way to finance
it. I think UA are being smart by asking for a "no money down" deal
right from the start.
> and neither the
> A350 or 787 order backlog is short at the moment.
But if Airbus could get a big 350 order from a high profile airline like
UA, it would be a great competitive/marketing coup to try to get closer
to the 787. So for Airbus, there is more of an incentive to capture this
order.
> I'd also remind those who are unaware of it, the kinds of screwball
> financing that both Airbus and Boeing use in other parts of the
> world, are prohibited by treaty in the USA.
You mean like United's first 777 that was officially exported to
Vancouver and delivered there so that it could benefit from export
financing ? Is that no longer allowed ?
When you consider the current financial mayhem and all of the steps
taken by western governments, it appears that all such rules about
subsidies and limits on deficit/GDP ratios are being blatantly
overlooked right now.
And if UA has dire problems, it may become GA: Government Airlines and
merge with Government Motors (GM) :-) ;-)
matt weber
>Ok, but now that they want/need/desire to replace their 757s, could they
>not order fully decked out 321s (or equivalent 737) to fulfill a
>signifficant portion of the 757s's missions and give the rest to the
>787/350 ?
They could, but that requires money that they don't have. In
addition, it is not clear that an A321 would give them lower ASM
costs than the 757's give them today. Part of the 757's
attractiveness is that is has a very low dead weight per seat, and as
you have pointed, out there are some missions that the 757 easily
flies that the A321 cannot.
>Since UA has 757s, there was probably no need to pay extra to get the
>full capabilities of the 321s since those were met with existing 757s.
UA has no A321's, only A319 and A320, and they didn't buy enough
airplane in either case. That's why Jet Blue can fly transcon in an
A320, and UA cannot.
> I regard this as an academic exercise anyway. There are several
> reasons. The Backlog on the A320 family and 737NG family is still
> quite large, so at the earliest in narrow bodies, UA would buying
> them pretty much at the end of the life cycle.
>True. But *IF* UA is seeking a replacement for its 757s, wouldn't their
>choices be limited to products currently on sale ?
Not necessarily. This is a strange business. Airbus has taken orders
for Vaporware in the past (Think about the ILFC order for
A330-500's). Boeing tried to sell the 747-500 and -600 as well as the
SonicCruiser.
>And while the backlogs for 320 and 737s are high, aren't delivery
>schedules spread out over many years, allowing both manufacturers to
>give fairly early slots to new buyers ? (having 1000 orders spread out
>over 10 years would still allow you to have 20 spare delivery slots at a
>120 aircraft per year production rate).
That assumes the only issue is the assembly of the aircraft. That
usually isn't the issue. A number of the parts, especially Titanium
Forgings like landing gears have very long lead times. Figure it
probably takes about 2 years notice to ramp up the production rate
because the lead time on some of the parts is upwards of 18 months.
Look at the grief Boeing is having getting the 787 assembly rate up
to something workable. Basically no one wants to invest in additional
capacity, and no one has wanted to make that investment for some
time. Airbus has that problem, and gets the issues of the European
Social Contract as a bonus.
It is easy for Airbus to add workers, it is very hard to get rid them
however, so Airbus has to think long and hard about ramping out
production, and any ramp up has to be able to run for a long time for
it to make economic sense.
>> As for the rest of the order, UA doesn't really have a mission for
>> the A380. The A380 is attractive if you want to provide a lot of
>> seats with very few slots at airports. UA serves very few airports
>> where that is an issue,
>During its recent bankruptcy, UA sold a number of 747-400s. But it still
>has 26 of them. (Not sure if some of those would be parked in the
>desert). It would seem to me that US can still have uses for a jumbo
>jet, especially on asian and australian routes.
Only because they don't have the money to replace them with airplanes
with lower ASM costs, and didn't buy enough airplane for the 777 to
fly many of those missions, and don't have the money to fix that
problem either. UA has refused to spend a cent of its own money on
fleet upgrades for some years now, the result is an ever shrinking
market share, and an ever deteriorating revenue environment.
>> and will pitch the 787 and 350 products (and the A350-1000, and the
>> 787-10 when announced) will both provide roughly 777-300 capacity
>> at lower ASM cost.
>Ok, tough blunt question: Is this the end of the 777 ? While Airbus
>refuses to admit it, we all know that the 350 spells the end of the 340
>and 330. But it is not so clear to me whether the 787 will be able to
>fully replace the 777.
The formal announcement of the 787-10 will probably mark the end of
the 777 program. One of the reasons the 787-10 hasn't been announced
is because it would seriously impact the 777-300ER, and at the moment
Boeing has other more serious issues in the 787 program to deal with.
Airbus by comparison only has the A340-500/600 to compete with the
A350-1000 configuration, and even Airbus knows the A340 is dead, so
there are no Airbus sales for an A350-1000 to cannibalize.
Part of the 787-10 problem is it needs a new engine, there isn't
enough capability left in the GEnx to get to the 90,000+ pound thrust
that it will need. GE doesn't want to spend the money until there is
some income from the GEnx program, which is still probably almost a
year away. My guess is we are about a year away from the 787-10 announcement.
>> The bind in all of this is UA doesn't want to use any of its own
>> money for these transactions, and after the way UA treated the
>> leasing companies in the Chapter 11 filing, nobody is any hurry to do
>> UA any big favors in financing these transactions.
>Except Boeing and/or Airbus which are rather desperate this year to get
>some orders in.
Desperate perhaps, but NOT crazy.
> The UA is performing
> today, I am not sure they will still be around when it comes time to
> delivery aircraft from this potential order.
>What are they doing wrong ? Are they hindered by legacy stuff like
>pensions, etc ? Or are their operations really inefficient with much
>higher operational costs ?
UA has chronic problems on both the cost and revenue side. The
management really didn't address many of UA's long term problems
while they had a chance in Chapter 11. For example UA probably should
have just handed the keys to their maintenance operation to the
employees with a 1 year guarantee of work from UA, and after that,
they would be on their own to win or lose business on their own. The
last time I looked UA's effective maintenance cost per ASM was about
50% higher than WN's.
UA top management is consistently overpaid, and under performing.
Southwest get more revenue per revenue passenger mile than United,
even though Southwest has no premium cabins! In other words UA's
premium and Economy Plus Cabins are not producing any yield premium at all.
UA is a company that is traditionally an also ran, and because of
management and labor attitudes, the industrial relations climate is
to be polite: toxic.
>> So either UA is going to have to get a lot more realistic about
>> how they are going to pay for this equipment, or this is going to be
>> an order that will go anywhere.
>The way I see it, UA sees an opportunity in the market to make a "no
>money down" purchase of aircraft it really needs. If Airbus/Boeing are
>desperate enough, they will bend over backwards to find a way to finance
>it. I think UA are being smart by asking for a "no money down" deal
>right from the start.
As long as UA demands 'no skin in the game', nobody is going to
finance the order.
There isn't a good reason to do so, and some very good reasons not
too given UA's history.
An order that represents no revenue represents an order with no
commitment from the customer. Neither Airbus or Boeing need those orders.
>> and neither the
>> A350 or 787 order backlog is short at the moment.
>But if Airbus could get a big 350 order from a high profile airline like
>UA, it would be a great competitive/marketing coup to try to get closer
>to the 787. So for Airbus, there is more of an incentive to capture this
>order.
Airbus is keenly aware of the trade relations situation, and that
coupled with UA's ill health probably are putting a serious damper on
what Airbus can or will do.
Unlike Automobile companies, Airlines are merged (and then
disappear). AA did it to Air Cal, Reno Air and TWA. When the smoke
had cleared, there were a few airplanes left from the other carrier,
but the employees and route systems largely disappeared.
Perhaps there will finally be a US-UA merger. They deserve each other.