United places order for 200 Boeing planes, giving two troubled jets a vote of confidence


New York
CNN

United Airlines placed a massive order for at least 200 Boeing planes on Tuesday, split between two models dogged by recent problems: the 737 Max and the 787 Dreamliner.

It’s a crucial vote of confidence for Boeing, which took tens of billions of dollars in financial losses due to the problems with the two planes. The Federal Aviation Administration grounded the 737 Max for 20 months starting in March 2019, halting deliveries of the jets, after two fatal crashes that killed 346 people. The 787 was not grounded but the FAA halted deliveries for roughly a year due to quality control issues.

Even beyond those problems, Boeing has been losing the competition with European rival Airbus on new orders, especially for single-aisle jets like the 737 Max. It has done better in competition for widebody plane orders, but has faced problems there as well, with delays for a new model of the 777, the 777X, and the halt in 787 deliveries.

While neither United (UAL) nor Boeing (BA) would reveal pricing details, the list price of the jets total 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 Boeing (BA) desperately needs.

United said the firm orders for 100 twin-aisle 787 Dreamliners, along with an option to buy 100 more, will represent the largest widebody jet order on record by any US carrier.

“The Boeing team is honored by United’s trust in our family of airplanes to connect people and transport cargo around the world for decades to come,” said Stan Deal, CEO of Boeing’s commercial aircraft division.

Shares of Boeing rose 3% in premarket trading, following the announcement.

The 787 is a plane used primarily on long-range overseas routes. The model’s purchase represents United’s belief that there is pent-up demand for international travel, which has not bounced back as quickly as US domestic passenger demand over the last year. Some countries — notably China — still have strict restrictions on flying into the country, and some passengers are concerned about foreign travel.

But United will take delivery of the planes over the course of the next 10 years, during which time any restrictions and concerns may become distant memories. And the first 100 Dreamliners it receives will replace retiring older 757, 767 and 777 jets already in United’s fleet. Some of those older planes date back at least 30 years.

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

The significant order makes United the “flag carrier of the United States and the leading airline of around the globe,” United CEO Scott Kirby said Tuesday in an interview with CNN’s Poppy Harlow on CNN This Morning.

“This is just the next step in that path to replace some of our older 767s that are at the end of their life, but also to create growth opportunities for years to come in the international network for years to come,” Kirby said.

He also didn’t express any hesitation about ordering two Boeing planes that had trouble in the past, saying a “few tough years made [Boeing] stronger” and noting that United has always had a “great partnership” with the aerospace company.

The order, while an important lift for Boeing, isn’t a total surprise.

Airlines have a financial interest in sticking with the same model plane once they commit to it. The companies are able to save on pilot training and spare parts costs by populating their fleets with the same models.

Unlike a driver who can seamlessly move between car makers, commercial pilots are limited to flying only the model on which they are certified. While United has some orders with Airbus (EADSF), nearly 80% of its existing fleet is composed of Boeing jets.

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

Boeing started taking orders for the Dreamliner in 2004, and United was one of its earliest US customers. It is made of a lighter-weight composite material than the aluminum used to build most commercial jets, giving it much better fuel economy and thus operational savings compared to the older planes it will replace in the United fleet. United has yet to decide how many of each of the three different models of the Dreamliner it will take.

The 100 737 Max jets United is buying includes 44 planes for which it already had an option to purchase, and 56 new orders. In June 2021, it announced the purchase of 200 of the 737 Max jets, along with 70 competing planes from Airbus, in the largest aircraft order that United has ever placed.

–CNN’s Jordan Valinsky contributed to this report.

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