United Pushes Back Boeing 737 Orders and Opts for Max

 - November 16, 2016, 11:00 AM
United Airlines is reducing capital expenditure plans by deferring plans to refresh its Boeing 737 fleet. [Photo: United Airlines]

United Airlines yesterday confirmed that it has deferred orders for sixty-one 737-700s that will now be converted to as-yet-unspecified versions of the new 737 Max family. In a November 15 statement to investors, the U.S. carrier did not say when the revised deliveries will be made, but indicated that the move will reduce planned capital expenditure by around $1.6 billion through 2018. It has converted four of the sixty-five 737-700 orders to the larger -800 model, and these aircraft will be delivered in the second half of 2017.

As part of other measures intended to boost earnings by around $4.8 billion by 2020, Andrew Levy, executive vice president and CFO of parent company United Continental Holdings, also reported that it will now assume an order for 24 Embraer E175 jets cancelled by its regional partner Republic Airways, which is operating under Chapter 11 bankruptcy protection. This move will increase planned capital expenditure by around $550 million, but United has concluded that, due to low capital costs, the acquisition is more cost effective than an earlier plan to lease the aircraft.

Levy told investors that United is aiming to achieve greater flexibility in its fleet assets. The current fleet includes around 250 unencumbered aircraft (i.e. assets that United is free to dispose of), and by 2020 it expects this number to rise to 330 aircraft, with an additional 120 jets that can be returned to their lessors.

United also announced plans for a new Basic Economy class as part of a move to “densify” seating arrangements for its narrowbody and widebody fleet. It confirmed plans to retire all remaining 747s by the third quarter of 2018.