United orders more Airbus A350s but drops largest model

PARIS (Reuters) - United Airlines has ordered 10 extra Airbus AIR.PA A350 jetliners, while ditching the largest model, the A350-1000, in favor of the smaller and more popular A350-900 and delaying deliveries to save cash, the companies said on Wednesday.

An Airbus A350-900 aircraft performs a flight pass during the Singapore Airshow in Singapore February 11, 2014. REUTERS/Tim Chong

United Airlines will now take 45 A350-900 aircraft instead of 35 of the upcoming A350-1000, which is undergoing flight trials before the first delivery later this year.

The move is a mixed result for Airbus, sacrificing what had been seen as a key endorsement for its A350-1000 but preserving a place in the wide-body fleet at United after a review that had raised doubts over the A350’s entire future at the airline.

United Airline’s finance chief Andrew Levy told a Cowen and Co conference that the 325-seat A350-900 was a “better fit” for United’s network.

The aircraft will be used to replace United’s Boeing 777-200ER jets, which start to reach 25 years of age in 2022.

Industry sources said United could still opt for the A350-1000 or other types if its fleet needs evolve.

“We have many more options that we can exercise at similar attractive economics,” Levy said.

The A350 order was held over from United Airlines’ fleet plans before it merged in 2010 with Continental Airlines, which had previously had an exclusive relationship with Boeing.

Industry analysts said the A350-1000 risked being crowded out of the world’s largest airline, which had also placed significant orders for the competing Boeing 777-300ER.

However, the airline also wanted to delay taking delivery of A350s, a decision that can trigger price escalation clauses and give planemakers some extra bargaining power in negotiations.

Parent company United Continental Holdings UAL.N said it had deferred A350 deliveries to late 2022 through 2027, lowering near-term spending by $1 billion.

The revised deal is worth another $1.5 billion for Airbus at list prices. The 366-seat A350-1000 has a catalogue price of $359.3 million, compared with $311.2 million for the A350-900.

Aircraft are typically sold at discounts.

Keeping the A350 at United had been seen as a key priority for Airbus executive vice-president Kiran Rao, recently named as successor for Airbus’s soon-to-retire sales chief John Leahy.

Airbus declined comment.

The A350-1000 was launched to compete with the older Boeing 777-300ER, whose production is slowing. But Airbus has struggled to preserve momentum at the top of its twin-engined range after Boeing fought back with the larger 777X.

Orders for the A350-1000 peaked in July at 212 units, when they represented a quarter of all orders for the A350 family. The latest reshuffle reduces that percentage to a five-year low of 20.6 percent, a Reuters analysis shows.

Additional reporting by Alana Wise; Editing by Brian Love and Elaine Hardcastle