December 8, 2009 / 12:13 PM / 9 years ago

REFILE-UPDATE 4-United Airlines places $10 bln plane order

 (Refiles to add dropped name of Airbus sales chief)
 * United orders 25 Boeing 787s and 25 Airbus A350s
 * Planes to cut fuel costs and emissions by a third
 * $10 billion deal is bright spot in depressed aero market  (Adds comment from Boeing CFO, updates share price)
 By Kyle Peterson and Tim Hepher
 CHICAGO/PARIS, Dec 8 (Reuters) - Taking advantage of down market prices, United Airlines said on Tuesday it placed a $10 billion-plus order for 50 wide-bodied jetliners divided between Airbus EAD.PA and Boeing Co (BA.N), in a bid to slash fuel costs and emissions.
 United, a unit of UAL Corp UAUA.O, has letters of intent to order 25 of Boeing’s 787 Dreamliners and the same number of A350 planes from its European rival Airbus, part of EADS, following a six-month contest. The carrier also has future purchase rights for 50 of each aircraft.
 The third-largest U.S. airline said its order capitalizes on lower prices as Boeing and Airbus grapple with an economic downturn that has led to airline capacity cuts, weaker orders and cancellations. The order also marks one of the biggest aircraft deals since the start of the recession, as well as a bounce in U.S. plane investment after years of industry restructuring.
 “We obviously thought the current environment was an opportunity for us,” United Airlines President John Tague told Reuters.
 “We resisted the pressure during the up cycle to buy during the ‘while supplies last’ market environment and had the patience to wait until we saw this opportunity. We feel very rewarded by that,” he said.
 United did not give many details on its order financing but said it obtained financing from both manufacturers.
 The carrier said it expects to take delivery of the aircraft between 2016 and 2019. When that happens, it will retire its international Boeing 747s and 767s.
 “This order was analyzed in the context of replacement for our 767 and 747 fleet,” Tague said. The new planes are smaller than the ones they replace and therefore represent a reduction in average seat count by about 19 percent, the carrier said.
 Additionally, the newer aircraft will reduce United’s fuel costs and carbon emissions by about 33 percent compared with the retired aircraft and cut lifetime maintenance costs by about 40 percent per available seat mile.
 United indicated it had not yet decided whether to choose Rolls-Royce Group Plc (RR.L) or General Electric Co (GE.N) engines for the 787s. Rolls is sole engine supplier on the A350.
 The order prompted Helane Becker, airline analyst at Jesup & Lamont, to upgrade UAL shares to “buy” from “hold.” UAL shares were up 10 cents at 9.93 on Nasdaq in afternoon trade.
 “We believe the order can be a major positive for United Airlines going forward for a variety of reasons,” she said in a note. “The company gains flexibility at a minimum cost.”
 Other experts were less impressed.
 “I just see it as kind of an overdue beginning of a reinvestment,” said airline consultant Robert Mann, noting that rival U.S. airlines are already updating their fleets.
 Richard Aboulafia, aerospace analyst at The Teal Group, agreed the order was overdue.
 “All this is signs of an airline that is doing the bare minimum necessary to continue flying international routes in 10 years,” he said.
 The Boeing 787 Dreamliner and Airbus A350 together make up the next generation of lightweight composite-built jets being developed by the world’s two large airliner manufacturers.
 They are designed to address a promising market for aircraft built with tough but lightweight materials to save fuel and carrying 200 to 300 passengers over long distances on two engines.
 Planemakers see a market for thousands of such aircraft once the airline industry recovers from recession.
 United, which shares roots with Boeing, so far uses Airbus planes only for its short-haul and medium-haul fleet.
 Amid lower plane orders due to the recession, the deal — worth $10.1 billion at list prices — could kick-start a replacement cycle for less-efficient planes, said Airbus sales chief John Leahy.
 The Boeing part of the order will be a confidence boost to the 787 Dreamliner project, coming ahead of its first maiden flight which has been overshadowed by delays.
 Boeing Chief Financial Officer James Bell said on an analyst call on Tuesday that Boeing still expects the 787 to fly in 2009. Meanwhile, Airbus will start building the A350 next year.
 Separately, Ireland’s Ryanair Holdings Plc (RYA.I) said it was likely to shelve plans to buy 200 Boeing aircraft because the U.S. plane maker wants to change delivery conditions. [ID:nGEE5B70YY]
 Boeing shares were down 36 cents at $55.46 on the New York Stock Exchange. EADS shares were down 1.41 percent in Paris trading.  (Reporting by Kyle Peterson and Tim Hepher; Additional reporting by Deepa Seetharaman, editing by Marcel Michelson, David Holmes and Matthew Lewis)   

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