United Continental Postpones Boeing 737 Jets -- Update
November 15 2016 - 11:12AM
Dow Jones News
By Doug Cameron
United Continental Holdings Inc. said Tuesday that it would
postpone receiving dozens of new Boeing Co. jets to trim
spending.
The third-largest U.S. airline will defer 61 planes from a
65-jet order for 737-700s and convert them into the new Max model
with yet-to-be-determined arrival dates. Boeing will switch the
remaining four to the larger 737-800 model for delivery next year.
United is expected to acquire the Max 9 version of the plane.
The airline, among four U.S. carriers that have recently
attracted investment from Berkshire Hathaway Inc. , also announced
a push to boost its share of budget-conscious travelers with a new
no-frills fare class.
The basic economy class entitles fliers only to an under-seat
bag, a move also intended to avoid the delays caused by passengers
stowing overhead baggage, and continues the segmentation of fares
that is being pursued by other carriers such as Delta Air Lines
Inc.
The moves are among a parade of planned changes unveiled by
United Chief Executive Oscar Munoz and his new management team that
includes cost cuts and revenue-boosting initiatives designed to
increase profits by $4.8 billion by 2020.
The fleet changes are among the industry's largest since
Southwest Airlines Co. in June reached a deal with Boeing to defer
67 of its 737 Max deliveries scheduled for the 2019-2022 period
until 2023 and beyond.
United expects the fleet changes to cut capital spending over
the next two years by $1.6 billion.
Boeing and Airbus Group SE have order books for their
best-selling jets stretching out for several years of production,
and typically overbook knowing that some planes will be canceled or
deferred. United canceled an order for 12 Airbus single-aisle
planes in late 2013.
"We constantly work with our airline customers to meet their
evolving needs, and our healthy 737 backlog of 4,321 airplanes
gives us the flexibility to meet those needs," Boeing said in a
statement.
United also plans changes to flights at its three big hubs in
Chicago, Newark and Houston that it hopes will add $900 million in
incremental revenue by 2019. Changes include using larger aircraft
on some routes and changing flight times to improve connections, as
well as revamping its demand forecasting systems.
The Chicago-based carrier is also buying 24 Embraer 175 jets
from the Brazilian manufacturer rather than leasing them from
Republic Airways Holdings Inc., which is under bankruptcy
protection.
United said it would continue reviewing its widebody aircraft
needs and consider adding more used jets in addition to the Airbus
A320 family planes it is already leasing from AerCap Holdings
NV.
The company's shares were recently up 1.2% at $63.72, trailing
gains at Southwest and American Airlines Group Inc.
Write to Doug Cameron at doug.cameron@wsj.com
(END) Dow Jones Newswires
November 15, 2016 10:57 ET (15:57 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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