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United Airlines Plans a Record Fleet Expansion as Travel Rebounds

Date: June 29, 2021

United Airlines announced on Tuesday that it would place the largest order for airplanes in its history and create about 25,000 jobs a year after a pandemic devastated its business, betting on a domestic travel boom and demand for more expensive, premium seats.

The order, for 270 single-aisle Boeing and Airbus planes, is the biggest aircraft purchase from a U.S. airline in a decade and will allow United to increase the number of planes in its fleet and their average size. As part of that expansion, the company expects to hire more people, including up to 5,000 in Newark and 4,000 in San Francisco.

United’s purchase is the strongest signal yet that airline executives believe that the coronavirus pandemic is petering out in the United States and that demand for travel is set to increase strongly in the next several years. Just a year ago, the airline industry sought government bailouts and borrowed billions of dollars to survive.

The order is also a big win for Boeing, which has struggled to regain its credibility with regulators and airlines after two fatal crashes grounded its top-selling plane, the 737 Max. The manufacturer will supply 200 of United’s new planes, all versions of the 737 Max. Airbus will provide the remaining 70, all from the A321neo line, which competes directly with the Max.

United, which is based in Chicago, declined to say how much it was paying for the planes or how the orders would be financed. In a securities filing, the company said it expected to spend nearly $36 billion in the coming years for planes, plane improvements, engines and other capital investments. About 40 percent of that amount will be spent by 2023, when it expects the first of its 270 planes to be delivered.

American Airlines announced in 2011 that it was buying 460 planes, the last major order by a U.S. airline. United’s fleet is older than that of American and Delta Air Lines, its two biggest competitors. And about a third of United’s flights use 50-seat regional jets, which offer only a single class of seats. The new order, combined with existing orders, will help the airline decrease the share of flights on those small planes to about 10 percent, enabling it to sell more premium tickets.

Including previously announced orders, United expects to add more than 500 planes in the coming years. About 300 will replace smaller jets, while 200 will be used to expand the fleet. The airline is also planning to upgrade existing single-aisle planes to match the interiors of the new planes, with a focus on amenities like seat-back screens and better internet service. The airline has just over 800 planes.

“It’s about building an airline that can compete with anyone,” Andrew Nocella, the airline’s chief commercial officer, said in a call with reporters.

By 2026, the expansion, which the company is calling “United Next,” will increase the number of seats per United flight in North America by nearly 30 percent and increase the number of premium seats per flight by 75 percent. In expanding the number of first- and business-class seats for sale, United is hoping to lure away affluent and business travelers from Delta, which markets itself as a premium airline.

Plane prices vary greatly by transaction, but such large aircraft purchases are typically deeply discounted, and Boeing’s outsize share of the order probably reflects an even better deal for United, according to George Dimitroff, head of aircraft valuations for Ascend by Cirium, a consulting firm that specializes in aviation.

The order is one of several that Boeing has won in the months since global regulators began lifting their bans on the 737 Max late last year. The manufacturer has struggled to sell a larger 737 Max model, the Max 10, but United’s order includes 150 of those jets and 50 of the smaller and more popular Max 8. That is important because while the two models cost nearly the same to build, a Max 10 sells for more. Cirium values a Max 10 at about $50 million apiece, compared with less than $44 million for a Max 8. (United said the Max 10 would seat 189 passengers compared with 166 for the Max 8. The A321neo will seat about as many as the Max 10.)

“It makes sense for United, it makes sense for Boeing,” Mr. Dimitroff said.

The new planes are best suited for domestic flights, though they could be used on some trans-Atlantic routes. And while the order includes none of the larger, twin-aisle planes typically used for international flights, United has taken delivery of about 30 of those planes — Boeing 787s and 777s — over the past two years.

“There wasn’t a need for us to order wide-body jets right now,” Mr. Nocella said. The airline expects to fly more flights internationally in the summer of 2022 than it did in 2019, he added.

United laid the groundwork for this week’s order last summer during a daylong executive meeting at O’Hare International Airport in Chicago, said Scott Kirby, the airline’s chief executive. The airline decided not to retire any planes during the pandemic, which other airlines were doing, and began to lay the strategy for the current order.

“We sat around and spent the day talking about where we thought the world was going to go, and it’s turned out to be very close to what we thought it would be,” Mr. Kirby said in a call with reporters.

Air travel has slowly recovered throughout the pandemic, a recovery that accelerated in recent weeks as people began summer vacations. On Sunday, the Transportation Security Administration screened nearly 2.2 million people at airports, the most since the pandemic began 16 months ago. United said this week that it expected to earn a monthly pretax profit in July, its first since January 2020.

United said the new planes it was buying would help improve its overall fuel efficiency by about 11 percent.

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