United Airlines plans to shrink like never before, but also managed to order seven Boeing 787-10s in the first quarter of 2020.
In this post:
United’s Boeing 787-10 order
Per a new SEC filing, United Airlines placed an order for seven Boeing 787-10s in the first quarter of 2020, and these planes are expected to be delivered in 2021.
United Airlines already has 13 Boeing 787-10s in their fleet, with a further one on order. The airline had the option of ordering additional 787-10s, and they exercised that option.
With these seven additional 787s, United will have a total of 21 787-10s, plus their 787-8s and 787-9s.
The 787-10 is the largest member of the 787 family, but also the shortest range.
What on earth?!?
It’s not surprising we haven’t seen a formal press release from United proudly proclaiming that they ordered $2.4 billion (at list prices) worth of new wide bodies this year, given the situation they’re now in.
United Airlines plans to lay off a third of their pilots, and has a grim outlook on the future, with plans to retire dozens of planes prematurely.
Understandably the assumption is that United placed this order before the COVID-19 situation got bad, but did they really?
While United doesn’t disclose when in the first quarter the order was placed, Boeing discloses 787-10 orders from unnamed customers at the following times:
- Four orders on February 7, 2020
- Three orders on February 26, 2020
It sure would seem like those are the times that United finalized the order, given that the numbers and timing matched up.
If that’s the case, then that appears to be a rather gutsy and irresponsible move. United had already announced flights to China being cancelled in late January, so did United think there was no chance COVID-19 would spread?
At a minimum you’d think it would be prudent to be conservative and see how things play out, but that’s not the approach United management seems to have taken. Instead they went full steam ahead with new orders. Not only that, but they ordered planes just one year in advance.
Personally I hope there’s more to this than meets the eye, and that the order was finalized earlier than reports suggest. It goes without saying that these negotiations span many months, so this comes down to when United signed on the dotted line and made this final.
United Airlines 787-10
Bottom line
I understand airlines still have the obligation to take delivery of the planes they ordered in the past, so I don’t fault American for taking delivery of 787-8s that they ordered a couple of years ago, since they had no choice.
But to see United order seven 787-10s in the first quarter — and seemingly in February, after they were starting to slash their international network — sure seems risky.
I get that most of us (myself included) weren’t expecting things to get as bad in the US as they did, and didn’t expect the airline industry to collapse quite to the level it has.
But when you’re running a global airline, there’s something to be said for erring on the side of caution. That’s often not how airlines are run, though — they’re planned around the good times, with drastic cuts and government aid during the bad times.
@ChrisC that was in relation to UA ordering more 787s not IAG and what UA are using the order for to replace aircraft but does pose questions as to why they felt February was the best time. Apologies if my grammar has caused you such distress and confusion.
@ airlineinsider91
At 2.33pm on 4th May you posted this
" ...the order does raise questions ..."
This was after you had been told it wasn't an order.
So yes you did repeat that it was an order when it isn't.
In all fairness, nobody knew how much this situation would escalate until it did. At that time most people underestimated the threat. The virus was largely contained within China and it hadn't yet escalated in Europe. With the benefit of hindsight it was a mistake, but everything has changed so dramatically since then that you can forgive them for not being a bit more cautious.
It would have been prudent and conservative not to zip off to Nicaragua like you did. Hindsight’s great. Mix it with a load of conjecture and a bitchy tone, and we have this post.
Without understanding the payment and possession terms, this article is premature and misleading. What I read is that UA has indicated interest for further aircraft.
@Lucky so you're saying UA should soldier along with their A market (remember those) 777s?
@ChrisC should probably double check what I have wrote, I had indeed first wrote the comment as an order before Ben corrected me. In my second comment I wrote, IAG haven't said they will or won't be taking the MAX i.e they haven't followed up with or made comment on their letter of intent this far, so I think I only need telling the once. The basis of using IAG was only as an example...
@ChrisC should probably double check what I have wrote, I had indeed first wrote the comment as an order before Ben corrected me. In my second comment I wrote, IAG haven't said they will or won't be taking the MAX i.e they haven't followed up with or made comment on their letter of intent this far, so I think I only need telling the once. The basis of using IAG was only as an example of an airline potentially not making the best decision for that moment but could have a good pact further down the line i.r 757/777 replacement for United.
@Airlineinsider
Again IAG did not order any Max's. A letter of intent is not an order. How many times do you need telling that yet you persist in saying 'order'
A short time after the letter was released Wilie Walsh basically admitted the letter of INTENT (not an order) was to put pressure on Airbus to speed delivery of BA's Airbus orders with an idle threat that they would lose future orders to Boeing.
Boeing...
@Airlineinsider
Again IAG did not order any Max's. A letter of intent is not an order. How many times do you need telling that yet you persist in saying 'order'
A short time after the letter was released Wilie Walsh basically admitted the letter of INTENT (not an order) was to put pressure on Airbus to speed delivery of BA's Airbus orders with an idle threat that they would lose future orders to Boeing.
Boeing basically went along with this because it made Airbus look bad and was a temporary diversion from its own problems. I really don't think anyone at Boeing expects BA to place an actual order for the Max - other planes yes but not the Max. And no one at Airbus expects IAG to switch orders to Boeing.
Once Walsh goes Luis Gallego who replaces him at IAG CEO will soon rescind the letter basically blaming the changed market and the FAA for not granting an airworthyness certificate.
There will be warm words of regrets from IAG and Boeing and assurances of future orders and the game will be over
How does this order fit in with the rest of the fleet though? What planes are they retiring now or in the time when these are expected to arrive?
If these are more fuel efficient planes then it makes sense in the long term - even if it sounds nuts today - to order and get them and retire planes with more expensive / maintenance costs.
It’s really not sensible to look at a single order for planes in isolation.
Hindsight is always 20/20. You were still traveling to Nicaragua in March.
Yay! Thanks for supporting Boeing. Hope the contract was written in stone and United can cancel! LoL
You know a lot about airline products and loyalty programmes. You seem to have very little understanding of how businesses are run. I used to work in another capital intensive business, and the process of getting new ships is a long one. Defining your needs, analysing markets, issuing RFQs, negotiating terms, securing finance, getting senior management and board approval to mention a few aspects. I’d be very surprised if airlines didn’t follow a fairly similar...
You know a lot about airline products and loyalty programmes. You seem to have very little understanding of how businesses are run. I used to work in another capital intensive business, and the process of getting new ships is a long one. Defining your needs, analysing markets, issuing RFQs, negotiating terms, securing finance, getting senior management and board approval to mention a few aspects. I’d be very surprised if airlines didn’t follow a fairly similar approach. Do you really think this happens over the space of a few weeks?
Speaking of 20/20 vision in hindsight - do you recall your several blog entries earlier this year in which you were looking forward to flying widebodies on domestic routes as US carriers reduced services to Asia?
Here goes ‘Lucky’ again with his United bashing.
I’m sure he would soon have complained about the age of United’s 777 fleet if this purchase of new 777s hadn’t come up instead.
I guess United wishes that they could just "remove", erm, I mean "cancel" (no, I mean "remove") these orders :-)
United being opportunistic as usual. They must have re-negotiated those option prices and gotten them at a nice price.
@Lucky
Before you blame UA for being rather gutsy and irresponsible move or even thinking nothing is done until it’s done, you need to understand few things.
Back in late February, our country was still way too optimistic, and reinforced by the government that everything is ok. You don't walk out of a deal with one of your major partners like that when things are not officially bad. You would expect the government to...
@Lucky
Before you blame UA for being rather gutsy and irresponsible move or even thinking nothing is done until it’s done, you need to understand few things.
Back in late February, our country was still way too optimistic, and reinforced by the government that everything is ok. You don't walk out of a deal with one of your major partners like that when things are not officially bad. You would expect the government to do a better job at preventing it, but unfortunately we love our civil rights too much, we still go to party on the beach.
UA still didn't officially determine what planes to retire. Don't forget their 772 are very old. Pandemic or not, they still need to be retired due to age not capacity.
On the other hand, this is deal a good stroke of luck. I don't know the details yet of the financing but I'm going to guess they are actually very lucky to get the deal in before the liquidity crisis as they probably got a very very favorable term vs the deal they might get today.
I also wouldn't jump the gun and conclude it was United on those dates purely on cross reference but it does look possibly UA.
I can see why. The 787-10 can be used domestically on heavy routes. Can replace the 75 and 77 on trans routes and do hub to hub flights. Would be much more economical.
I wonder if those A350-900's pushed to 2027 will ever actually appear. It seems that United and American are going primarily 787 for the backbone of their long-haul fleet.
The first pre-delivery payment upon making an order is often a fraction of the overall purchase price - like in the ballpark of <5%. The bigger payments come closer to delivery, so the bigger immediate cash savings are really if deliveries for this year can be deferred.
I am willing to bet the price was commensurate with the situation. I also figure that if UAL gores belly up that will be just a footnote but if things ever recover they will be in a good position. UAL has a pretty competitive product and schedule to Western Europe. Flying there in normal times is like printing money. I believe the range of these airframes is OK for Europe and TLV from the East...
I am willing to bet the price was commensurate with the situation. I also figure that if UAL gores belly up that will be just a footnote but if things ever recover they will be in a good position. UAL has a pretty competitive product and schedule to Western Europe. Flying there in normal times is like printing money. I believe the range of these airframes is OK for Europe and TLV from the East Coast. There is a lot of real estate within that range and airfares can be very rewarding Trans-Atlantic.
So you are criticizing something they did back in February, based on the fleet needs and renewal determination at the time, with the mindset of beginning of May? The slashing of China routes was supposed to be a short-term reduction, while purchase aircraft is a long-term investment.
UA just canceled half their 737MAX orders.. a good deal was made between Boeing and the Company... which clearly none of you know about... just as Delta recently stopped up quite a few A350's from LAN... yet, no negative publicity was done for Delta..
They need to switch these ordered to -8’s or -9. What routes do they plan on having such high demand??
So when they file bankruptcy (which all of them eventually will) I see UA dumping that ridiculous airbus A350 order and go all in with the 787 -8 -9 -10 to replace their 777-200s and keep the 777-300 as their big boys. Narrow body will go 737/737M except for the A321 XLRs and A319 (which are still pretty young. I better and more flexible mix. Good by to the 767,757,A320s.
A much smaller carrier .
Rumor has it that these were part of a settlement with Boeing over MAX delays
As many have pointed out, the groundwork for this order was put in place many months before the transaction was disclosed and is part of a long-term fleet renewal plan. Even in late February, many people- bloggers included- had no idea of how COVID-19 would develop, and even if the order had been decided just then it still would not have been reckless. UA has been the most conservative of the US big three in...
As many have pointed out, the groundwork for this order was put in place many months before the transaction was disclosed and is part of a long-term fleet renewal plan. Even in late February, many people- bloggers included- had no idea of how COVID-19 would develop, and even if the order had been decided just then it still would not have been reckless. UA has been the most conservative of the US big three in terms of raising liquidity, slashing costs and schedules, and having a pessimistic forecast. Clearly the story here in much more nuanced than a bunch of airline executives ordering planes while banking on government aid.
@Lucky, IAG haven't stated that they won't receive the MAX although with them looking to close the BA hub at Gatwick, this is looking more and more likely. My comment was in no means a criticism of your article, the order does raise questions but looking at what they are replacing, it makes sense. Would you look at doing an article on Wizz Air in Europe and how they are bucking the trend and what...
@Lucky, IAG haven't stated that they won't receive the MAX although with them looking to close the BA hub at Gatwick, this is looking more and more likely. My comment was in no means a criticism of your article, the order does raise questions but looking at what they are replacing, it makes sense. Would you look at doing an article on Wizz Air in Europe and how they are bucking the trend and what the possibilities are for them going forward, a very interesting airline indeed.
@AirlineInsider91
No, IAG din't order these 200 MAX. They just pulled a publicity-stunt together with Boeing by signing a Letter of Intent which gives IAG the option to buy those 200 MAX. But they did not commit to really doing so, they can simply walk away withou paying a penny if they want to.
“Personally I hope there’s more to this than meets the eye, and that the order was finalized earlier than reports suggest.“
Couldn’t you have written this post after you made sure of the timing?
I know you’re on a roll with your anti-UA posts, but at least wait until all the facts come in.
What about ANA's Febuary order for 15 more dreamliners? Wouldn't that be even less responsable?
@Lucky, IAG placed an order for 200 MAX aircraft despite the aircraft being grounded for 2 avoidable crashes attributed to the aircraft.
United ordering aircraft in late February isn't a suprise, it has been known for a while that they would be retiring some 777's used on transcon and were looking to expand to Europe replacing outdated 757's, so really a no brainer. I'm pretty sure if any of the airlines had known how...
@Lucky, IAG placed an order for 200 MAX aircraft despite the aircraft being grounded for 2 avoidable crashes attributed to the aircraft.
United ordering aircraft in late February isn't a suprise, it has been known for a while that they would be retiring some 777's used on transcon and were looking to expand to Europe replacing outdated 757's, so really a no brainer. I'm pretty sure if any of the airlines had known how bad the situation would be now from the outlook at the end of February, many of them would have done things differently! Hopefully UA pull through this in decent shape aswell as WN & the low cost carriers.
@ AirlineInsider91 -- IAG didn't order 200 MAXes. They signed a letter of intent. That's very different, and they haven't followed through on it. Airlines sign all kinds of letters of intents for orders they don't plan on following through on.
Do you have ANY idea how long it takes to negotiate the purchase of an asset like an airplane??
Seriously. Do you think they called Boeing on Feb 27 and said, 'hey, we'll take some more -10s'
Good lord, just... please.... you gotta use more brain power when you write articles like this.
When were their options going to expire?
Do they have a sale and lease back in place?
Did they...
Do you have ANY idea how long it takes to negotiate the purchase of an asset like an airplane??
Seriously. Do you think they called Boeing on Feb 27 and said, 'hey, we'll take some more -10s'
Good lord, just... please.... you gotta use more brain power when you write articles like this.
When were their options going to expire?
Do they have a sale and lease back in place?
Did they swap other frames (that they don't have to disclose)
You just... you know NOTHING, yet, you write some article about how United did something wrong.
These places will fly for 25 years... and you decide this week isn't a good way to disclose this?
You're like the people that were mad at American for a day. 'omg, they raised fees, how could they!!!'
You gotta do a LITTLE more research before you write garbage like this man.
I know you have a blog, and it's easy to type random opinions.
But, god, this is awfully awfully awfully lazy writing.
@ Doug -- Of course I get that they take a long time to negotiate. But nothing is done until it's done, and *assuming* the order was finalized on the dates above, it does seem irresponsible. As I note, though -- "Personally I hope there’s more to this than meets the eye, and that the order was finalized earlier than reports suggest."
Not amazing timing for sure, but regardless of their plans to shrink, they will need to replace their 777-200s in the coming few years, as the oldest ones are now 25 years old. The 787-10 is a fantastic replacement for the 777-200/-200ER, which will become increasingly expensive to maintain. We don't know what terms United bought these on, but clearly with the trouble Boeing is in now, they would have got a significant discount.
Good ole’ United can’t seem to get out of their own way.
I’m so glad I don’t have any points with them.