Thursday 7 September 2017

Airbus Updates No.1659

ANALYSIS: United Converts A350-1000 Order to A350-900

UNITED
ANALYSIS: United Converts A350-1000 Order to A350-900
September 06
08:112017
CHICAGO — United Airlines has expanded and modified its order for Airbus A350 jets, converting an order for 35 Airbus A350-1000s to 45 A350-900 widebodies. The conversion ends months of speculation about the future of United’s A350 order after multiple deferrals of delivery and commentary from company executives about potentially converting the order to other Airbus widebody variants or even canceling the order outright.
“For the past year, United has done a complete review to ensure that we have the right long-term fleet strategy, and it was clear that the A350 aligns with our replacement needs and our network,” said Andrew Levy (CFO of United), “The combination of the range performance and efficiencies make the A350 an attractive aircraft for United.”
“This updated and expanded order is a strong reaffirmation of the A350 XWB Family,” added John Leahy (COO-Customers for Airbus), “United and Airbus have had a long and strong partnership for many years, and we’ve worked together to ensure their requirements for the future are met, if not exceeded. The airline’s decision to grow its widebody fleet with, for the first time, a widebody model from Airbus, shows they know that the A350 will meet their financial and performance demands while pleasing their customers who will enjoy the quietest and most comfortable cabin in its class.”
United’s original A350 purchase consisted of 25 A350-900s. The order was placed in March 2010, before United’s merger with Continental Airlines later that year. In June of 2013, United converted the order over to the A350-1000 and added ten frames to the buy, landing on the current order for 35 A350-1000s.
The A350-1000s were intended to replace United’s aging fleet of Boeing 747-400 jets, which were incredibly inefficient in an era of high fuel prices and faced rising maintenance costs. The 35 jets would replace the ~25 747-400s in United’s fleet with some growth layered on top. But when the bottom dropped out from the oil market in June 2014, conditions changed.
Ironically, the advent of the A350-1000 and Boeing’s own 777X left the 777-300ER variant as a bit of a lame duck. With Boeing desperate to fill the production gap from the 777 Classic to the 777X, it began to offer very attractive pricing on the 777-300ER. And with fuel prices down, United felt comfortable accelerating the retirement of the 747s by ordering ten 777-300ERs at end-of-line prices in April of 2015.
Over the last two years, United incrementally added to its 777-300ER order, growing to a present fleet of 14 frames with four more on order. Between the 777-300ER and (in some cases from San Francisco) the 787-9, United has effectively pushed all of its 747-400s out of the door (all 13 remaining frames will be retired by year’s end). Along the way, United deferred delivery of its A350-1000s on multiple occasions (most recently in July).
It now appears that the July deferral was merely intended to position United for A350-900 delivery slots (as opposed to earlier A350-1000s). And while the A350-1000’s raison d’etre for a place in United’s fleet is up in the air, the A350-900 is a clear fit. Because of United’s hubs in major metro areas, it is subject to much more competition on its international flying than peer carriers like American or Delta. Accordingly, United needs the lowest possible unit costs on many sectors, a goal that is less well supported by the 787-9 (which is the world’s most efficient “long and thin” plane). The 787-10 does offer similar (better sans what was likely a massive Airbus discount) unit costs but lacks the range capabilities for flights to Asia and the Middle East of the A350-900.
For Airbus meanwhile, the order is a massive win, as it saves close to 4% of the company’s outstanding backlog on the A350. An outright cancellation by United would have been one of the biggest financial blows to Airbus since the global financial crisis (as Airbus has spent most of that time with record order figures and backlog). But in what is likely one of his final sales, Leahy and his team at Airbus managed to pull another customer back from the brink.
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Zvonimir Tolj

ZVONIMIR TOLJ

Online Editor. Journalism and Communications Student. A newcomer into the Aviation World, growing into an avid AvGeek. I live for Pop Music, Photography, Travel, Food, and devoted to Fashion, and Editorial Design. "It's hard to find a balance between sound and peace." zvonimir@airwaysmag.com

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