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Thursday, January 21, 2016

United to Invest $1.7 Billion in Fleet in 2016

United Airlines is reducing its regional flight operations while also planning to add 40 new Boeing 737-700s to its commercial fleet.

Woodrow Bellamy III

[Avionics Today 01-21-2016] United Airlines expects to invest $1.7 billion into its commercial aircraft fleet in 2016, the airlines' executives told analysts and journalists during its 2015 fourth quarter earnings call on Jan. 21. The international carrier reported $4.5 billion for full year net income.
 
 
United Airlines Boeing 787 at Denver International Airport. Photo: United. 
 
While United's acting CFO Gerry Laderman did not outline how the airline plans on spending the expected $1.7 billion, he noted that technology is a top priority.
 
"We believe that further investment in our technology is critical for our ability to compete in the years to come," said Laderman, adding in a statement released with the full year results that United passengers "have a preference for an improved travel experience, including first class seats, Economy Plus, and Wi-Fi."
 
One of the airlines' biggest announcements was also an agreement reached to acquire 40 new Boeing 737-700s, which the company is acquiring in order to replace some of the smaller aging aircraft operated by United's regional subsidiary carriers. The new aircraft are scheduled to enter the fleet in mid-2017. 
 
"We also expect to invest approximately $1.7 billion in our fleet in 2016, we plan to take delivery of 14 737s, five 787-9s, our first 777-300ER and nine used A319s. We will also add 40 Embraer E 175s to our regional fleet," said Laderman. 
 
Laderman also noted that the fleet investment represents a shift for United to increase flying for its mainline operations while reducing the overall number of regional flights. 
 
"It is our expectation that our current fleet of approximately 250 50-seat aircraft will be reduced by more than half by the end of 2019," he said. "While this new 737 order does provide replacement capacity to partially offset the reduction in the regional operation, we're continuing to pursue additional aircraft to continue up-gauging and meet our capacity plans."
 
Currently, the airline operates more than 700 mainline aircraft.
 
United also reported on several trends regarding passenger demand that occurred throughout 2015 and specifically during the first quarter. For example, United Vice Chairman Jim Compton said that demand for transatlantic flying dropped shortly after the Paris terrorist attacks that occurred in November. 
 
Also, the record lows in energy prices had both positive and negative impacts for the airline throughout last year. United saved approximately $4.2 billion directly on jet fuel costs in 2015. However, the drop in oil prices also lead to a decline in travel from  corporate customers, and particularly lead to a lower demand out of the hub in Houston, Texas, home to many of the largest oil companies in the U.S.
 
Internationally, United is focused on expanding its presence in China’s secondary cities, with routes currently awaiting approval by the Chinese government. One of those routes is non-stop service to Xian, which the airline expects to launch by May 2016.
 

United CEO Oscar Munoz, who recently took over for former CEO Jeff Smisek was also on the earnings call Thursday and said he is slowly returning back to work after receiving a heart transplant earlier this month. Munoz expects to be back to work full time by the end of March. 

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