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United unveils largest plane order amidst pandemic

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The fleet plan is central to United’s goal of capturing more travelers, particularly high-paying ones in major coastal hubs like San Francisco and Newark, New Jersey. The Max 10 and A321neo planes are the largest models in their families and United will use them to grow in those markets, which have capacity constraints, said Andrew Nocella, United’s chief commercial officer.

United unveils largest plane order amidst pandemicIt also plans to expand in hubs like Denver and Chicago and have annual systemwide growth of about 4% to 6% in the next few years, Nocella said.In a wide-ranging growth plan, the airline said it plans to add more roomier seats and seatback entertainment, a departure from a previous strategy.The airline also announced a hiring spree that it expects to total about 25,000 employees for the new planes, including pilots, flight attendants and mechanics.

The order shows United’s optimism about the recovery in air travel, which so far has been concentrated in domestic leisure flights. United said Monday it expects to post positive, adjusted pretax income next month for the first time since January 2020.

United and other airlines took $54 billion in federal payroll aid in exchange for keeping workers employed. CEO Scott Kirby said the airline’s strategy that kept pilots trained and flying similar planes allowed it to be ready for the demand rebound.

Boeing shares lost 1.8% to end at $235.76 and United’s fell 0.7% to $52.15, while the S&P 500 ended less than 0.1% higher. Several analysts had expected the airline to announce a large order.

The order includes 200 Boeing Max jets. Of those planes, 150 are Max 10s, the largest in the family. Boeing completed the first Max 10 test flight earlier this month.

The remaining 50 Boeing planes are the manufacturer’s most-popular model, the Max 8.

The large purchase on top of United’s existing order book for Max planes is another vote of confidence in the airplane maker, which has struggled to regain its footing after two Max crashes and several production problems.

United also plans to buy 70 Airbus 321neos, adding to an order for dozens of the long-range version of the plane.

The sale is worth more than $30 billion at list prices, but airlines, particularly for large orders, generally receive substantial discounts. United declined to disclose what it is spending on the aircraft. The order is likely closer to $15 billion, estimated Rob Morris, global head of consultancy at Ascend by Cirium, which appraises aircraft and provides a host of other industry data.

The carrier now has about 500 narrow-body aircraft arriving starting next year. About 200 of the planes will be used to grow the airline’s fleet of 500 aircraft, while 300 will go to replace older jets such as its Boeing 757-200 planes, which it will retire, said Nocella.

Some of those planes will replace older single-class, 50-seat regional jets. That’s part of United’s push for higher-paying travelers. Larger planes with more seats and amenities will make United more competitive, the airline said in an investor presentation.

United executives said flying the larger mainline jets means it will be able to add more first-class and economy-plus seats, or coach seats with more legroom. It also unveiled new interiors for the planes that include seatback screens and larger overhead bins, which it says will fit every passengers carry-on bag.

That focus on higher-priced seats- and the customers who will pay more for them – is a shot at rival Delta Air Lines. Before the coronavirus pandemic, Delta was heavily focused on those travelers- particularly in coastal hubs – adding more legroom and roomier jets between cities that traditionally have drawn valuable business travel.

Business travel demand was decimated in the pandemic but has recently crept back, according to analysts’ reports.United CEO Kirby told reporters that he expects business and international travel demand to recover “100%.” He said business travel demand is still down 60% from pre-pandemic levels but has been improving.

Another shift in United’s strategy is that it will outfit its planes with seatback entertainment, something United had moved away from. (CNBC)

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