United Airlines will grow its 737 MAX fleet significantly in the next three years. The company announced a deal to increase the order book with Boeing by 25, with delivery slated for 2023. Additional adjustments to the order book should see a total of 90 new MAX join the carrier’s fleet by the end of 2023.
United took five 737 MAX aircraft from Boeing in December 2020, following the FAA’s move to un-ground the type after the MCAS system was reengineered and training processes adjusted. The carrier had previously expected to take 44 MAXen in 2020.
The updated fleet plan now calls for 21 MAX deliveries in 2021, 40 in 2022, and 30 in 2023. The 2023 deliveries include 5 previously ordered by the company and the 25 new planes ordered last week and announced today. An additional 97 737 MAX planes are also on the books for later delivery.
MAX Growth Opportunity
Undoubtedly the confluence of circumstances makes choosing more MAX a compelling decision for United today. Boeing faces hundred of order cancellations, especially in the near term, allowing for airlines to secure quick delivery slots. It also presents a situation where Boeing is highly motivated to get deals done.
United also notes that the cost of the new 737 MAX aircraft will be lowered as a result of confidential compensation negotiations between the companies related to the MAX grounding:
In March 2020, the Company entered into a confidential settlement with Boeing with respect to compensation for financial damages incurred in 2019 due to the grounding of the Boeing 737 MAX aircraft. In June 2020, the Company entered into an amended and restated confidential agreement with Boeing which provides for the settlement of additional items related to aircraft delivery and updates the scheduled delivery for substantially all undelivered Boeing 737 MAX aircraft. The compensation to the Company under the amended and restated settlement agreement is in the form of credit memos to be issued upon the satisfaction of certain conditions related to aircraft deliveries. The Company is accounting for this settlement as a reduction to the cost basis of future firm order Boeing 737 MAX aircraft deliveries and previously-delivered Boeing 737 MAX aircraft, which will reduce future depreciation expense associated with these aircraft.
Replace and expand
No doubt some of the new MAX will be used to replace older planes. The dedicated transcon premium 757-200 fleet is expected to be replaced by a dedicated sub-fleet of the 737 MAX 10, for example. How the rest of the MAX replace or augment the carrier’s operations remains to be seen, however. With the oldest frames in the 737NG fleet now over 20 years in age the opportunity to increase fuel efficiency through fleet refresh could be a win for the company.
And assuming the interior configuration plans hinted in late 2019 hold, the new MAX should also be a bit of an upgrade for the passenger experience. The MAX 8 and MAX 10 are expected to include in-seat IFE and improved in-seat power offerings, two nice boosts compared to the prior MAX configuration.
Separately, United also indicated that it will continue to induct used 737-700 aircraft into the fleet, with 11 more expected to join the carrier this year. But United scuttled similar plans to increase the A319 operations through used frames. United expects to purchase 17 more A319s this year and next and intends to sell them rather than place them into service.
With the revised orders in place United now expects to spend $4.9 on aircraft and related spare engines, aircraft improvements and all non-aircraft capital commitments in 2021. Another $2.9 billion is flagged for 2022 and $2.8 billion in 2023.
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