On the heels of its strongest second quarter results since the 2010 merger United Airlines found itself facing tough questions from investors about future fleet plans. The 737 MAX grounding affects 19 aircraft in the carrier’s active fleet, a relatively small percentage of the 600ish single-aisle planes the company operates. But the MAX fleet is also slated to grow. Some of the future growth will be covered through other frames, but the MAX remains a critical component of the company’s plans.
MAX, XLR and NMA
United Airlines faces tough questions on the future of its 757 and 767 fleets. With 131 aircraft looking at replacement in the coming decade there is an opportunity for aircraft manufacturers to deliver a solution that fits the carrier’s needs. More and more, however, it appears that United will choose a variety of frames to replace the missions the 757s and 767s fly today.
The 757 fleet fits a pair of purposes. The premium transcon markets are served by United’s oldest 757s. Those planes are looking at replacement before either the A321XLR or NMA would start to fly. Given that timing and United’s current order book the likely solution for the carrier is the 737 MAX 10. It has sufficient range and the cabin is large enough to install premium seating as well as the economy class product necessary in those markets. Moreover, getting premium seats on to the 737 MAX frame is increasingly common as a solution for airlines. This is a low-risk opportunity for United that keeps pilot commonality and introduces only minor fleet complexity issues. United has shown it is up for such challenges, with subfleets of the 767 expanding, for example.
The 757s also fly longer routes, including transatlantic services and from Denver to Hawaii. This is an area where United will need something different; the MAX options generally do not have the range for what United wants to operate with the type. Technically the MAX 9 is close, but with Denver’s altitude and headwinds it is unlikely that these will meet the company’s needs. Moreover, the 767 fleet offers higher capacity and greater range for United. And this is where the NMA comes into play.
With a range closer to that of a 767 and the ability to carry larger premium cabins like the 767 can, the promise of the NMA bests the A321XLR for United’s needs in this category. Assuming the NMA comes along in time, of course. With Boeing delaying any decision on the NMA while it continues to work through the 737 MAX grounding issues some airlines might find their hand forced in making a decision on other aircraft options. United’s CFO Gerry Laderman indicated that “We do have a little bit of time that we can wait” but also that the company “would like to see some clarity so we can make a choice.”
United appears to be preparing an alternate solution in the interim, knowing that late 2020s would be the earliest the NMA would fly. The latest revision for the 787-8 cabins delivers an option that has too much range, but otherwise could fill in for some of the thinner routes where the 757s or 767s fly. The new 788 will fly with 28 Polaris business class seats, plus 21 in the Premium Plus cabin, 36 in Economy Plus and 158 in coach. The 243 seats total is more than the A321XLR could offer and significantly more than it could offer with a comparably sized premium cabin.
American Airlines took a similar approach, ordering 22 787-8s in early 2018, specifically with plans for 767-300 replacement.
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The 788 is heavier than the 763 (~25 tonnes) and the theoretical NMA. In this context the initial 787-3 design would have likely been the better solution for the market. Alas, that design is dead and the NMA likely makes more sense than trying to revive the –3. And while the XLR is notably lighter, it comes up short on the other spec’s; it does not fill United’s needs.
While a true next generation aircraft to address the mid-market demand could be useful for airlines it appears that some of the largest potential customers are willing to choose other options in the interim. Whether this ultimately erodes the value proposition for the NMA remains to be seen.
Playing the Used Market
United continues its “opportunistic” purchase of used single-aisle aircraft, announcing a deal to take 19 more 737-700 frames between December 2019 and December 2021. These are in addition to used A319s from China Southern that will join the fleet starting later this year; the A319s are already in for retrofit. These two types offer United an approach to expanding its smallest mainline capacity. The company has avoided adding 100-seat aircraft to the fleet, in part based on the operating costs of the new type. Chief Commercial Officer Andrew Nocella explained in the call that “we look carefully at our hubs and concluded that the 100 seater is not the right aircraft for United at this time. But the aircraft you’re referring to have about 125 seats. It’s a pretty big difference for us and the right niche for our network at this point in time.”
The mainline growth from the used A319 and 737-700s will be joined by regional growth in the 70-seat range. United added 20 more E175s to its order book at the Paris Air Show last month. The company will also add more 50-seat planes in the form of its CRJ550 layout, slated to fly later this year.
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