From Seattle PI:


United splits order between Boeing and Airbus

United Airlines on Tuesday announced it has split an order for 50 wide-body jets down the middle between Boeing's 787 Dreamliner and Airbus' A350 XWB and secured future purchase rights for 50 of each aircraft.
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"This is a significant investment in the future of our company." Glenn Tilton, UAL Corp. chairman, president and chief executive, said in a conference call. "This is another step to ensure we are well-positioned to succeed in an increasingly competitive global marketplace."

United expects to take delivery of the aircraft between 2016 and 2019 -- at the same time as it retires its international Boeing 747s and 767s. The carrier said it would eventually phase out its 777s as well, leaving the A350 and 787 as its only wide-body aircraft.

The orders are for the A350-900 and 787-8, although United can substitute other models in each family.

Ordering from both Airbus and Boeing makes sense because neither offers next- generation aircraft sized to optimally serve all of the current and future markets in United's network, the carrier said.

"The A350 and the 787 are the right combination of aircraft to financially optimize our network," United Airlines President John Tague said. "Selecting the next-generation aircraft from both manufacturers gives us the right range of aircraft sizes to optimally serve the market in our diverse global network, a benefit that clearly overwhelms any advantages of choosing a single manufacturer."

Asked why United decided not to order the larger 747-8 or A380 aircraft, Tague said: "Our objective is to optimize the company's performance in the down cycle and to manage the down-side risk, not to capture every last dollar of opportunity that an extremely large aircraft might create for a short period of time."

Asked whether United might consider ordering an updated 777 or 777 replacement, UAL Chief Financial Officer Kathryn Mikells noted that United has more than 90 wide-bodies and is only replacing 50 with this order.

"If a new aircraft type becomes available during our wide-body replacement program, there's nothing that prevents us from looking at that," she said.

United executives had previously decided to split the wide-body order from an order for single-aisle jets. With the wide-body order announced, Mikells said: "We will turn our attention back to the narrow-bodies next year."

Ordering the aircraft now allowed United to get a good deal, Mikells said. United did not disclose the financial terms.

"We got the right aircraft, and we got the right deal," she said. "Our rationale was simple: an opportunistic order at the bottom of the business cycle."

The terms of the deal allow United to continue to strengthen its cash position before its has to pay much out, Mikells said. "Cash payments from United amount to a total of only $60 million over the next three years and $152 million over the next five years."

In addition to the "broad substitution rights," United also got "significant deferral flexibility" and "significant backstop financing from both vendors," Mikells said.

The 50 new aircraft will reduce United average seat count by about 19 percent compared with the aircraft they will replace, and by about 10 percent when averaged over the entire international fleet, United said.

United estimates it will reduce its fuel costs and carbon emissions from the 50 aircraft by about 33 percent and average lifetime maintenance costs by approximately 40 percent per available seat mile.

The smaller size, longer range and lower operating costs of the aircraft also will allow United to profitably serve a broader range of international destinations, it said, noting that the A350s will have a range about 11 percent greater than its current 747s, while the 787s will go nearly 32 percent farther than its current 767s.

"The increased range of these aircraft will allow us to take full advantage of our well placed network of domestic hubs, allowing new nonstop service from our hubs to destinations throughout Africa, Asia Pacific, the Middle East and Europe, while improving the economics on international routes we already serve," United said.

In United's release, Boeing Chairman, President and Chief Executive Jim McNerney noted that United was launch customer for Boeing's 777.

"We think United is making a smart decision placing an order at this point in the cycle and taking delivery years into the future," he said. "The 787 Dreamliner will provide United with additional range and unmatched fuel efficiency."

Airbus President and Chief Executive Tom Enders said: "United Airlines is a global icon, and it's very gratifying that they have chosen the A350 to be a key part of their strategy. It also is fitting that the selection of the eco-efficient A350-900 comes at a time when the world is focusing on operating as efficiently as possible and minimizing environmental impact. Airbus and United have been partners for two decades, and we look forward to extending that partnership well into the future."

In a separate statement, Boeing Commercial Airplanes President and Chief Executive Jim Albaugh said: "United's selection of the Boeing 787 continues the 80-year partnership between our two companies. The 787 is the first new airplane of the 21st century. Its advanced technology and unprecedented improvements in fuel efficiency will help United achieve its business objectives and enhance its leadership position among the world's top airlines."

United will decide in coming months whether to equip its 787s with available Rolls-Royce or GE engines, Mikells said. The A350 only uses Rolls-Royce engines.

United's most recent previous order for aircraft was in 1998 and it last took delivery of new planes in 2002.