United Airlines orders Boeing 787, Airbus planes

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Associated Press

Posted on December 15, 2009 at 6:51 PM

Updated Tuesday, Dec 15 at 6:53 PM

United Airlines said on Tuesday it will spend billions over the next decade on 50 new jets, splitting its order between Boeing Co.'s 787 and the Airbus A350.

Deliveries are expected between 2016 and 2019. The planes will replace United's Boeing 747 and 767s.

At list prices the new jets would be worth more than $10 billion, with about $4 billion for Boeing's 787-8 and around $6 billion for the Airbus planes. United President John Tague said the carrier got a discount on the price, which is common for jet orders, though he didn't specify how much.

"We felt that we had a significant opportunity by timing the order with the backdrop of the current economic environment," he said.

United has not yet worked out financing for the planes, although Tague said the manufacturers agreed to provide loans if needed. The deal requires United to put up $152 million over the next five years. In October United raised about $424 million in a stock and notes offering, and it has been mortgaging other assets such as spare parts to get it through the drop-off in travel demand brought on by the recession.

United said it has signed letters of intent for both planes. John Leahy, Airbus chief operating officer, said Airbus expects a firm order in a month or two. That would bring total orders for the A350 to 530, Leahy said.

"We're not surprised by the decision to split the order," Leahy said. He said it was noteworthy because it was the first time United has ever ordered non-Boeing wide-body jets.

Both planes have two aisles and would usually be used on international flights. The 787-8 seats 210 to 250 people. Airbus said the A350 seats 314 in a typical configuration. Both can fly more than 9,000 miles — enough to go nonstop from United's hub in Chicago to Shanghai.

"They give us access to virtually every region in the world from all of our hubs," Tague said.

United made its last jet order in 1998, and hasn't taken a delivery since 2002. It has been aggressively shrinking in recent years. The new jet order won't change that, because the new planes have fewer seats than the ones they're replacing. United said the new jets will have 19 percent fewer seats than the planes they will replace. Overall its international fleet will have about 10 percent fewer seats once the new planes are flying.

United could have picked the much larger A380 or 747-8. Although it might be able to fill those massive planes during boom times, United would risk having many empty seats in a recession. Tague said the company would rather reduce its risk in future tough times, rather than "capture every last dollar of opportunity that an extremely large aircraft might create for a short period of time."

Both planes are made with composites, meant to be lighter (and thus more fuel-efficient) than the usual aluminum construction. Neither plane has ever flown. Boeing hopes its 787 will make its first flight by the end of this year, while Airbus is aiming to deliver its first A350 in 2013.

United, the third-biggest airline in the U.S., said this summer it was seeking dueling proposals from Boeing and Airbus to replace the biggest jets that make up nearly half of its fleet.

The orders come with future rights for 50 of each aircraft, United said.

United Airlines is a subsidiary of UAL Corp., based in Chicago.

Shares of United parent UAL Corp. rose 4 cents to close at $9.87 Tuesday. Boeing shares fell 16 cents to $55.66 after hitting a 52-week high of $56.22 earlier in the session.

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AP Business Writer Greg Keller in Paris contributed to this report.

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