The long-rumored new aircraft order is now official, and on the surface it may not seem very surprising. This order, however, is a milestone in the airline’s several-year shift away from a long-favored strategy. United is now all about growth, not only in the number of airplanes but also in the number of seats on each flight.
For years before the merger, United’s senior management deemed shrinking as the best way to manage the airline. They fell in love with regional jets and expanded their use as much as possible. The fewer seats they had, the more prices could theoretically rise. The problem was that other airlines gladly moved in to eat the airline’s lunch, and travelers were turned off by all the small jets.
Current CEO Scott Kirby has been trying to fix that problem ever since he left American to become United’s president. He knew that the airline had to grow domestically. Sure, it had a world-class international network to Europe and Asia, but it still was weak within the US market. Much has been done to fix that problem, but the airline is still behind the curve.
So now, United is growing with a massive new order for 270 new narrowbody airplanes. This is on top of the 228 already on order. That’s 498 narrowbody airplanes coming in the next 6 years. Gulp.
Here’s how the narrowbody order book currently stands:
|Aircraft||Previously On Order||Newly Ordered||Total on Order|
|737 MAX 8||12||50||62|
|737 MAX 9||3||3|
|737 MAX 10||87||150||237|
|737 MAX version TBD||76||76|
With this order, United is preparing to go big. The 737 MAX 8 has 16 First Class, 54 Economy Plus, and 96 coach seats. With 166 total seats, this is the smallest narrowbody United has on order, and it is not small. The MAX 10 will have 20 First Class, 64 Economy Plus, and 105 in coach. The A321neo will likely be a bit bigger, just a handful of seats.
Tangent time: If you’re wondering why United would order both A321neos and 737 MAX 10s when they have the same basic capacity, you’re not alone. When the question was asked, the response was that the neo is a little bigger, and United is so constrained in Newark and San Francisco that it wants the neo to get those extra couple seats. I don’t buy it. I first figured that was how United was going to get out of those 45 A350s it still has on order, but no. That order still stands. So this must really just be about keeping Boeing in check and making sure they sweat a little. Or maybe it has something to do with delivery slots. But I digress….
What will United do with all these airplanes? On a media briefing yesterday, United said it will use about 200 of these to replace single-class CRJ-200/ERJ-145 regional jets. Another 100 or so will replace aging mainline aircraft. The remaining 200 will be growth. That is a lot of growth, but how exactly will this play out?
We know for certain that the previously-ordered 50 A321XLRs will replace the 40 757-200s still in the fleet. These will have flat beds, and they will primarily fly thin routes over the Atlantic plus domestic trunk routes that need beds. We also know that the 757-300 will keep soldiering on. During the call yesterday, it was made clear that those will be replaced with a future order some day.
If we focus on the domestic/short-haul fleet that’s under 200 seats, this is what it looked like at the end of 2020.
|Aircraft||Seats Onboard||Number in Fleet at End of 2020||Avg Age|
|737 MAX 9||179||22||1.5|
Now, let’s think about how this will play out. The 96-strong A320 fleet desperately needs replacing. Sixty five of those airplanes are more than 20 years old with some approaching their 30th birthday. The A319 fleet is younger with only 32 of the 85 over 20 years old, but by next year, every single one will be at least 15. Why am I confident these will all go away?
United said as part of today’s announcement that in the next 5 years, it will install all new interiors on all aircraft. That means fast wifi, big overhead bins, LED lighting, and yes, long-rumored seatback screens at every seat. None of the A319/A320s have seatback screens installed, and there is no way United can justify spending that kind of money on these old airplanes.
I’ll also argue that the 49 737-700s are primed for retirement. They were all delivered in the 1990s. Finally, I’d throw in the 12 737-900s that are not ERs. Those are old too, and there’s no reason to keep them around.
Those four fleets together account for 242 aircraft using the year-end 2020 numbers. If you assume 100 of these new orders are meant to replace a subset of those, that leaves 142 to be replaced under the existing MAX orders which amount to 178. There are probably another 30 to 40 older 737-800s that will need to be replaced sooner rather than later, and there you have your new fleet plan.
If this plays out this way, United will have completely remade its fleet as you can see in this chart.
What we see here is that the number of 50-seaters will plummet, and that’s no surprise. United has talked about that for years, and American and Delta have both done the same. I asked Chief Commercial Officer Andrew Nocella about this yesterday on the call, and he said that they do see an important place for about 100 of these, but only in small markets, unlike today where these go in larger markets where they should not be operating. He gave Denver as a prime example of where there is a need for these airplanes to serve some nearby mountain markets.
The other thing to note here is that there is now going to be a gaping hole in between 76-seaters and 166 seaters. The A319/A320/737-700 fleets are the only aircraft that fall in that range, and now they’re likely to be gone. I asked if there was going to be a need to fill in that hole, and Andrew gave an emphatic “no.”
On the call, United CEO Scott Kirby clearly explained that he sees United as being in a unique position by having hubs in the largest metro areas. With a large international fleet and hubs in big cities, Scott thinks dramatically upgauging with much larger airplanes is the right move.
This is a big bet with a lot of big, expensive metal. The impact on United will be staggering. Unit costs excluding fuel will drop 8 percent just from having bigger aircraft. Fifty-seaters account for about a third of domestic departures today, but that will drop to under 10 percent. Because of that, average seats per domestic departure will rise by 30 percent and average premium seats by domestic departure will rise by 70 percent. The hubs in the middle of the country will see over 100 new daily flights each as the coastal hubs grow with more seats, especially those that don’t have room for more departures.
United believes these changes combined with the onboard product improvements will create a wildly-successful airline that travelers love. I can’t say I’m as confident as the management team seems to be. Huge gauge increase and fast growth always makes me nervous, but it’ll be one wild ride to watch.
Such a shame – the 737 has always been a deeply unpleasant aircraft to fly coach in.
amen to that. :(
I’m not looking forward to any flights on a 737-10 in Y. Shame on Boeing for not figuring out the new MOM 757/767 replacement. I’m thinking that will never see the light of day now.
I am not a fan of the 737 either. That is one of the many reasons I avoid Southwest. I am glad to see some more 321s.
It’s not that pleasant to fly in first either.
Flew on a Delta 737-800 round trip JFK-ATL in Comfort Class last week.
The labeled and dedicated overhead space and video screens made it OK,
as well as the early boarding for Comfort Plus to claim the labeled overhead space..
Sounds like UA wants to match DL
A lot of confidence for sure, with a lot of unknowns. Kirby seems to think business travel will recover to “100%” of pre-pandemic levels. That’s wildly optimistic. UA does need to optimize at EWR and SFO, where it is hemmed in by operational challenges. The 757-200s do need to go, although 41 of them are 1990s builds but are heavily used and now fast becoming outdated. The A320s stem from a 1992 order because Boeing didn’t have a plane yet that could fly across the country that matched the 737 size. Those planes are getting quite old. The 737-700s and non-900s, which the latter amounts to fewer than 15 planes, will likely go, as will a great number of the 800s that are earlier builds. The MAX-8 and MAX-10s are the right replacement aircraft and the A321s will be well suited for the 757 replacement.
The long haul fleet has lots of slack though as international demand is muted and likely will remain so for a time. It will be interesting to see what UA does with the 767-300/400 fleet, the older 777s that are legacy UA aircraft and that outstanding A350 order which I don’t think will ever see the light of day.
Smart people finally run UA. That’s a good thing but it is pretty shameful that it took about 8 years (2010-2018) to combine CO and UA.
Fortune favors the bold.
Kirby and the whiz kids in network planning were on quite a roll prior to COVID. Sounds like they’re back in business.
I saw the mention of 50-seaters. Does this include the “CRJ-550?” I’m curious what these orders mean for that sub-fleet.
The 550 is the 2 class 50 seats in Cranky’s chart.
Kevin – The CRJ-550s will be at ~74 aircraft as planned. No changes to that.
And won’t they also be starting their own pilot training school? The pilot shortage is another constraint to growth, and they are tackling it head on.
If they start one, I doubt it will go straight to United without going through a regional. They tried that once with a school in Phoenix and the pilot union at United killed it. I know their recent announcement about recruiting more women and minority pilots still had them going through a regional before United.
I’m loathe to doubt Scott Kirby, but I have two concerns.
First is the advantage of having different-sized planes in your fleet to match supply (frequency and gauge) and demand — Courtney Miller has written about how this is an advantage for DL (in this link and elsewhere): https://www.linkedin.com/pulse/vision-717-how-delta-turned-jet-nobody-wanted-strategic-miller
(Of course Nocella’s “No” could be a negotiating move with the CSeries and Embraer, but they’ve said that before.)
Two is the rise of point-to-point carriers like Allegiant, Avelo and Breeze, on top of Spirit and Frontier’s continued growth. Kirby’s network strategy is built on connecting places like XNA-TPA (over IAH) and BDL-CHS (over IAD) — what happens when these carriers step in to soak up that demand on peak days of week? Is there enough business demand that can’t fly those carriers?
UA was the most correct/least wrong about COVID’s impact 15 months ago. This, though, sounds like “OK, COVID over, back to the 2019 playbook.”
“First is the advantage of having different-sized planes in your fleet to match supply (frequency and gauge) and demand — Courtney Miller has written about how this is an advantage for DL…”
The 717 was (and IMO still is) a strategic advantage fleet-wise. If nothing else until more A220’s come onto the property and pilot issues get sorted. Shame that roughly 1/2 the fleet is currently parked.
Yes, that gaping hole in the 76-160 seat segment will come back to bite UA if left unfilled. Your example of DL and the 717 is a good one. Qantas does similar things with that model down under. If UA were shrewd, they’d fill that seat gap in with the A220. The idea that running larger capacity narrowbodies with RJs linking smaller markets to hubs is one of these ivory tower academic concepts that sounds good on paper but which doesn’t work in real life. In real life, there is a universe of market scenarios where those A319’s and 737-700s should be replaced with the A220 because that’s the equipment that fits the market.
Lastly, the hub and spoke model is efficient but it’s also being challenged like never before (at least, not since deregulation when hubs really began). You have so many new entrants and not all are MMA cattle cars like Allegiant and Spirit. Breeze looks to be serious in the point to point model, using smaller (but comfortable) aircraft. Why connect through a hub to fly from MKE to CLE or PIT or SLC if you can do it non-stop? This is where UA’s ivory tower is vulnerable, IMO.
Add me to the list of folks skeptical about that huge capacity gap between the E-175/CRJ-700 and the MAX8/738. We know how Delta has filled in that gap strategically with the 717 and A220, and hasn’t American had a similar problem since the retirement of the Fokker 100? Though American was able to close the gap somewhat with the US Airways merger which brought in the E-190 (now retired) and Mesa’s CRJ-900 fleet.
United does have those unspecified 737 MAX variants which could be converted to MAX7. Everyone thinks the A220 is the superior option, but I think the MAX7 could be in play if United decides they want the commonality or releases they have too many big narrow bodies already so uses up those unspecified orders with the smaller version.
But don’t the MAX 7s now seat 150? That’s not a big difference from the MAX 8. Even if the 3-class cabin reduces the number of seats, it will still be bigger than the current 737-700/A-319 fleet. That still leaves a large seat gap between the regional and mainline fleets.
MAX 7 is one extra row vs. the -700. So UA’s config would be more like 126-132 seats. It would indeed fill the lower capacity mainline gap.
AA has bunches of pretty new 319s buzzing around. In AUS, they are a few flights per day to MIA/CLT as I recall. It’s no 717/220 but it does fit that segment of the market.
I will say that AS has a gap between E75s and 737-800s/320s now so it’s not just a United problem.
Carriers like Allegiant and Avelo with their variable schedules offer very limited prospects for business travelers. As a small example, I actually have business in a market that both United and Avelo compete, from LAX/BUR to RDD. Avelo is certainly cheaper, but with 2 flights per week, the ability to use them for business is only if the schedule aligns perfectly. Granted, the fact that they are in the market puts pressure on UA to keep fares down and frequencies up. Now if only XP/G4 would add SFO/OAK to BFL, United might actually compete a little harder!
What about the 767/ 777 fleets. Are there plans for a wide body replacement as well?
SEAN – They have not addressed the widebodies with this announcement.
There was some talk on the investor call this morning about extending the life of the 767s beyond 30 years. They love the 787, of course, and the A350 order remains on the books, but I just can’t imagine them ever taking those. So to me, this is something that’s TBD. I think the 767s and 757-300s eventually get replaced by what they hope will be a Boeing middle of the market aircraft, if it ever gets built.
This is an absolutely huge move by United and good for them for recognizing that they have to deal with their excessive reliance on 50 seat regional jets whose days are otherwise numbered. They also have to deal with the massive growth of low cost carriers which have lower unit costs.
There are massive risks and downsides as well. First, United will not have the fleet to compete in many small markets any more. Nationwide network airlines like American and Delta need either large regional jet fleets which American has or a relatively small regional jet fleet and a small mainline narrowbody. United will have a very small position with either – but United has never done well in small markets compared to AA and DL.
Second, UA will take on a massive amount of debt and will likely become the most indebted US airline as a result. They will get their operating costs down but their total costs will reflect their high debt service costs, just as AAL’s did pre-covid.
Third, any carrier that expects to grow has to expect they will face huge competitive pressure whether they say they are retaking natural share or simply seeking new growth opportunities for themselves. UA already had the lowest market share in its hubs of the big 4 and that is going to be a huge threat as they execute this plan.
This is a very bold move for United but they clearly had no choice on many levels.
As a 1K flyer on UA, I agree on point number one. The 550 has been a nice addition to the fleet and a surprisingly pleasant ride. Regarding the debt, given how “cheap” money is right now, if they are going to take debt on, now is the time to do it. But to your final point, I do think their hand was forced. Personally, I’m hopeful because I actually find the service on United to be great (since Oscar/Kirby took over) but I do think the Breeze/Avelos of the world are the big risk to this plan.
Is this a classic case of “malinvestment” as described by adherents to the Austrian School of Economics like Hayek, von Mises, and Rothbard, where artificially low interest rates set by the central bank allow otherwise deft entrepreneurs to mistake signals of what should be the market?
Yea, they’re going to need something in that 77-165 seat range. That gap is ridiculous.
Back when American declared bankruptcy, before that they had made large orders from both Boeing and Airbus. By doing so they played them off each other, and also gave themselves a stronger position in bankruptcy. It was a situation where the manufacturers had to go ahead and except the orders and then it gave them leverage in re-organizing financing.
One wonders if this might be a similar hedge against bankruptcy for United.
Or – is UA positioning itself for a possible bankruptcy of someone else….???
Perhaps UA is also playing with Airbus to obtain better pricing on a future A220 order?
Note also – this added complexity adds tremendously to costs, notwithstanding the common rated B737’s
Certainly worth watching……
On slide 5 of the investor presentation, the following sentence is highlighted in a box.
“United, like other airlines, is increasingly focused on maximizing individual competitive advantages to de-commoditize air travel.”
Ding ding ding ding ding !!!!!
Each airline is unique. Each has different strengths and weaknesses. Each network is different. The geography, history, and market demographics of each carrier are different. Why, then, do some folks feel every airline must conform to a particular business model?
Airlines are both capital intensive and labor intensive. That makes the business challenging to say the least. And a certain level of debt is part of capital-intensive businesses. The question is how much. It’s my opinion (and that’s all it is), that most of the recent (post-2008) capital spending by the legacies has been unavoidable. It was the result of underinvestment created by the post-deregulation push for market share instead of profitability. Southwest has the luxury of spreading out its capital expenditures because it didn’t get caught up in the “market share at all costs” game and has been consistently profitable as a result. But … there comes a point where companies simply have to pay the piper, bite the bullet, (or whatever euphemism one prefers). There are numerous transportation companies throughout history that are no longer in business because they didn’t invest in needed infrastructure.
United isn’t Delta. It’s not American. It’s not Southwest. It seems that Scott Kirby has learned from Pan Am’s experience that a strong international network needs a strong domestic network to feed it. I realize those were different times, but the overarching lesson is still there. United’s large Asian network is unique to it. Delta, and certainly American, aren’t close to matching it. But United isn’t quite as strong domestically as Delta or American. Even though United has its main hubs in excellent locations, those hubs generally have more competition than Delta faces. That’s why it’s important for United to differentiate itself. Living in the Phoenix area, I’ve seen firsthand how America West/US Airways (and now American) competes with Southwest. Both do quite well in Phoenix because they’re different. Vive la Difference!
A number of pundits on airline blogs seem to think the people who run airlines are blithering idiots. They aren’t. But they see things from a different perspective than we do. They have no choice. Nor do we. We can only look at the world through our own lenses.
Vive la Difference!
Your general theme about the competence of airline management is correct, esp. re: UA and its decision here. They had to make decisions based on changes in the marketplace which were in response to their fleet strategy that has been in place since the merger and before.
UA needed to upgauge and take advantage of its size in major coastal markets and use space to fly larger jets. This plan addresses that.
UA also needs to be able to feed its international flights well and the large number of regional jets hindered that.
However, United and Delta are very close to the same size to E. Asia right now; Delta is actually larger right now in terms of ASMs, has been through much of the pandemic and is scheduled to be through this summer.
There are major restrictions in China capacity and DL and UA are basically the same size where UA had a huge advantage there pre-covid. UA also flew alot of capacity to HKG and Southeast Asia and it isn’t clear how quickly any of that will come back. None of us know what Delta is thinking but they have a huge number of new generation widebodies coming into the fleet and could aggressively expand across the Pacific if they see opportunity; if United sees strong profit potential, Delta likely will as well.
Delta was larger across the Atlantic pre-pandemic and that is not likely to change. Latin America is the clear area of interest between the two.
CF addressed the 777-200A issue yesterday but no one responded. The lack of widebody orders today says UA is still hoping for resolution or not in need of replacing the -200A capacity to HNL at the expense of new widebodies long term. Also worth watching.
I’m thinking of the long term, not the short term. I’m really not interested in grousing about which airline has a couple of percentage points more market share to Asia, Europe or Latin America at any given time. What’s important (and the point of my original comment) is that each airline is different. And having a different business model isn’t a sin – at least not yet. Southwest, Frontier, Allegiant, Spirit, Alaska, jetBlue, et. al. have rather limited international exposure compared to the legacies, yet tend to do quite well financially.
DesertGhost – well said. Competition is giving consumers choices – some want to be pampered, others want to save money, and they there’s the customer in between. I think competition broadens the market, it’s not a zero sum game. Yes, there is pressure on ticket prices at UA, DL and AA when they compete with ULCCs. Yet they offer things the ULCCs can’t and the consumer will choose what’s best for them. The question, is there enough demand among the different customer groups to keep the Legacy carriers in some markets vs ULCCs? We’ll find out when Cranky updates the routes and markets every week. It’s part of the reason we read this blog, part of the reason we’re interested/invested in this airline industry and we definitely all have opinions.
Looking at all of this, I was thinking about the 757-300 and I’m wondering if the 787 could be a suitable replacement. The seating capacity is similar. Although I don’t know what the operating cost difference would be.
Pilotaaron – It’s such a small fleet with only about 20 or 21 aircraft that it’s not really a huge issue. It’s also young, by 757 standards, with the aircraft being built in the 2000s. This doesn’t seem like it’ll need a decision for a long time.
Being Canada based flying down to US a lot, I have avoided all US based airlines for the lack of seat back IFE and poor food offering. I look forward to improved comfort and improved services hard and soft products.
The A319s and A320s do seem likely to be goners with this many new aircraft coming in, but I wouldn’t write off cabin overhauls just based on their age … after all Delta completely redid the cabins of then-similarly-aged A319s and A320s!
Sure, but that’s Delta. They had DC-9s flying in the 2000s and you couldn’t tell that were a super old aircraft!
Contrast to AA, which decided to buy new planes instead.
One thought on 321s here is that UA already has the XLRs, so additional fleet commonality will help rather than hinder there. I likewise don’t buy the story about needing a few extra seats out of e.g. EWR, but I *do* expect UA to strategically deploy the 321neos in markets where they have to fight harder for share, and the extra comfort level (though less of an issue now that MAXes are around) can tip the scales.
An example of this is my own market, albeit for DL. I haven’t been on a 737 flight on DL out of AUS in…ever? It’s 319/320/321 or 717 in the past, with the 220 now. Only exception is CR9s to CVG/RDU. Compare that to ATL-Florida where it’s 737/757s, or AUS on mainline from another carrier, where you’re probably on a 737. Again, the MAX isn’t so bad, but UA throwing 321neos on SFO/LAX/EWR from here may help pick up a seat or two.
One other note is that UA will probably be sacrificing frequency for gauge here, which at the moment feels like the right choice due to the preponderance of leisure travelers. But it makes point to point a harder sell in areas with, say, 200 PDEW…someone else can put small mainline on that route while UA has to pick either regional or 166+ passengers. So you have to shove people through DEN or IAH and hope that still fills planes.
When are those annoying CRJ 200s going away?
What is the approximate time frame for all this happening? Within the next 5 years? Next 10? 20?
Also, the pricing was probably right to place the order now rather than waiting for aircraft prices to pick up again.
Jason – Should be by 2026 or 2027, so it’s pretty quick.
Thanks – yes that’s pretty fast, but I don’t think it’s unreasonable in terms of training pilots, testing, hangar space and so on if they arrive gradually over that time. On average that would be about 5 aircraft per month for 4.5 years.
Jason H – It’s lumpy. They’re going to have 138 coming in 2022 or 2023, can’t remember which. That is a torrid pace.
Two thoughts: the gap and rapid growth…
The gap: insert merged airline (Breeze?)
Rapid growth: “Believe it!” — Braniff
It surprises me to hear how bullish Kirby sounds, but it’s great to see a United that is forward-thinking and proactive about the future, especially as someone from the bay area and (somehow) got bitten by the aviation bug growing up in the late 2000s flying around on UA’s ancient aircraft, when nothing seemed like it would never improve at the airline.
What puzzles me more than the narrowbodies, though, is the 767-300ER and 777-200ER fleets. I personally think with everything going on at Boeing, the NMA has the same chance of coming to fruition as United does launching Boom revenue service by 2029. Maybe others are more in the know, but I just can’t see it happening, not before UA gets tired of waiting and orders more 787-8s anyway. 767s did pretty recently get refurbished so they probably still have a few years, but their age will definitely still catch up soon.
I do think they might take some of the A350-900’s though, especially because they haven’t used the A321 orders as an opportunity to cancel them. The newest sCO 777-200ERs will be about 17 years old by 2027 and would be about ready for replacement, not to mention the sUA -200ERs which are even older. Could we see maybe 15-20 A350s take on 777-200ER routes out of EWR/SFO/ORD for which the 787-10 lacks range and the 787-9 lacks capacity?
The lack of widebody orders as well as the desire to extend the 767s for years more is notable. Delta and United are both strong candidates for a new generation widebody but the question is how many other airlines worldwide would be interested in a widebody of that size. When paid for as the 767s are for DL and UA, the total operating costs are competitive with the 787-8.
The A350s are powered by Rolls-Royce engines so simply replacing A350 orders with A320NEO family aircraft doesn’t make RR whole.
The A350 can carry more people further than the 787. The 787-10 in UA’s configuration is only slightly larger than the A350-900 for Delta and the A350 can fly much further. The A350 is much more fuel efficient than any version of the current UA 777s and fuel efficiency matters the most on long flights. Given that the A350-1000 is roughly comparable in size to the 777-300ER but with much better operating economics, UA might be trying to wait for the A350-1000, possibly with an Ultrafan engine and that might not all happen until late in the 2020s; the 777-300ERs are too young to be thinking about replacement even if they are not as economical as the A350-900.
For the next five plus years, UAL’s focus is on its domestic fleet – and that will sap every nickel of its capex – but they will see clear benefits from their plan
“They fell in love with regional jets and expanded their use as much as possible.” Well said. Cannot wait for a decreased CR2 and ERJ 145 footprint, especially here in middle America. While United is often the cheapest option here in Wichita, I cringe at the thought of having to ride 2 hours in a tin can to the hubs at IAH or ORD, and will actively avoid United if cost is comparable to fly someone else. And the thought of a CR2 to Denver when I can go mainline and also nonstop daily on Southwest or even Frontier, United is a hard pass. I don’t mind the ERJs as much as the ancient, cramped CRJs when you can get on the 1-seat side, save for the lack of WiFi and frequent delays. Will be interesting to see if they keep the smallest, oldest RJs on EAS routes such as LBL, DDC, HYS and MHK or upgauge to the 76-seaters.
I think most of the cities you listed are safe bets to keep 50-seaters. MHK might be able to sustain larger capacity, but it’d likely be a bigger-plane-but-less-frequency scenario.
That said, I think UA’s mid-sized market strategy is being overlooked a bit in this thread. Prior to COVID, United was making very intentional inroads into (or back into ) places like EUG, MSN , and the like. I can’t remember if ICT was part of that, but it’s possible.
Retiring the early model 737’s in the early 2000’s meant the end of mainline service for a lot of cities. They signaled their return in many places over the last 2-3 years. I think this order cements that strategy as part of their overall network plan going forward.
Really bold moves by UA. It’s quite necessary in the face of growing ULCC pressure in their backyard. I do find it strange they don’t think there is need for an aircraft between 76 and 160 seats. They are going to end up operating RJs on high frequency routes against smaller mainline of other carriers.
Sure, CASM will drop a lot when you replace 50 seaters with 200 seaters, but so will RASM drop. I’m sure there is a balance there. I just don’t see the markets for A319 and 73G suddenly able to support 160 seaters at the same frequency level.
This is such a bold move by UA! What I find most interesting is the 30% increase in capacity as a result. For the sake of simplicity, if we take 2019 passenger numbers:-
UA: 162.5 m
DL: 204 m
AA: 215 m
Even if we assume these will be different after the fleet retirements (all US3 will have retired aircraft), roughly 30% increase on 162.5 m = 211.25 ! This puts them right in the ball park of DL and AA. I must assume this is the intention, and way to grow by getting around not having ATL or a DFW? A part of me wishes that this also leads to some sort of focus city in the South-East :P.
Interestingly, this will also put their debt burden on par with AA, if not larger, won’t it?
SE focus city: I’ve advocated in the past for TPA as a new UA focus city or mini-hub, but with the rise of Breeze and Avelo plus Spirit and Southwest’s new aggressiveness in Florida, I think they just let DL/ATL and AA/CLT/MIA flight the Florida Wars and stay out of it.
Overall, I do expect Breeze and Avelo to do a lot more shorter north-south routes rather than longer east-west routes, which means they’ll hit DL and AA harder than UA, whose big 3 central hubs are majority east-west cross-country routings.
Debt: let’s not forget they are probably getting a screaming bargain from a desperate Boeing, which could really give them a leg up on other carriers purchasing their planes at more premium prices at other times in the past or future. And interest rates are very, very low. They are timing this perfectly.
From Morgan Stanley (https://seekingalpha.com/news/3711270-united-airlines-timing-on-aircraft-order-called-strategic-by-morgan-stanley):
“Near-term macro risk appears relatively low, there is a lot of pent up demand with a strong consumer, the balance sheet is still carrying excess (gross) liquidity, the fleet renewal will drive operating cost savings (esp. if fuel continues to rise),new planes are cheap (and so is money) and the new capacity could help drive share gains (or at least defend vs. peers).”
They are getting a screaming deal on the planes from a desperate Boeing – far, far better than AA or DL did before the pandemic. It will be a huge competitive advantage: newer better planes at lower prices than competitors paid (or will pay in the future once Boeing is less desperate).
Which airplane will replace the missions which can only be performed by the 737-700 or A319? They have better short field performance than their larger siblings. I’m thinking of some Caribbean airports, SNA, EGE, EYW, and high/hot cities like BOG
Anthony – It’s a good question, but there is plenty of time to figure it out. These airplanes won’t go away overnight, but it does seem like quite a gap. Then again, maybe they just don’t care about the markets that need it. Or maybe down the line we’ll see them change their minds and order something with better hot and high performance.
With this announcement, here’s how I’d roughly summarize the Big 4’s strategic positioning and differentiation. Think of it as a 2×2 table I wish I could embed.
UA: premium experience, 1st-tier cities
DL: premium experience, 2nd-tier cities
AA: economy experience, 1st-tier cities
SWA: economy experience, 2nd-tier cities/airports (even in 1st-tier cities they tend to be at the 2nd-tier airports: OAK, BWI, MDW, HOU, DAL)
I’m not sure how anyone takes flagship first lounges, the only US international first class, legroom in the back and front of narrow bodies at the same as delta, high speed satellite wifi across the entire fleet, free streamed entertainment, and then comes away with “economy” experience for AA, but it’s certainly an interesting takeaway if Seatback screens are what you base your entire premium/economy experience around.
Delta and United certainly provide a premium experience as well, though United and AA invested in the true premium lounges while delta has not.
That’s quite an interesting perspective, although I am not sure it is as clear-cut as that, as @Julie also raised an interesting point. But I think your classification matrix also shows that each of the US4 have an opportunity to carve a niche for themselves.
Given that the carriers have chosen different strategies, it will be really interesting to see how this all turns out. But I do think that non-stop flight options, price and FF programs still go a long way in determining customer loyalty (especially for international business travel), something which is probably not taken into account for your classification scheme…
not sure how you categorize NYC or Los Angeles, but Delta has been the largest airline there by number of local passengers carried (to/from NYC, not connecting) for years and has bypassed American in Los Angeles over the past year. Whether Delta or American end up as the largest carrier at LAX doesn’t change that United will continue as the 3rd largest there.
Premium has to consider what every passenger experiences. The A330 and A350 have wider seats in coach and premium economy cabins compared to AA and UA’s 787 and 777 configurations. Having sat in 8 and 9 abreast 787s and 9 and 10 abreast 777s as well as Airbus products, I doubt if my preference for the wider seat is unique.
“Premium has to consider what every passenger experiences. The A330 and A350 have wider seats in… premium economy cabins ”
Except no. And easily something one can check from the airline’s own websites.
Delta’s wide bodies don’t have wider seats in the premium cabins where customers are expecting a premium experience.
Their premium economy is actually the one between the three that doesn’t go up to 19″ in width, but remains at 18.5″ like some on AA and UA as well. Delta doesn’t lead on any plane in seat width in premium economy, they’re only behind AA and UA in that regard. On no plane are AA and UA narrower seats in premium economy vs any Delta aircraft. And all that ignores that most Delta customers will be lucky to even find a Premium Economy seat on their aircraft since it isn’t widely deployed on their fleet and Delta only announced their intention to put premium economy on the A332/A333 and 767 in May of 2021, waaay behind the deployment of premium economy on both AA and UA wide body aircraft.
And the other premium cabin, Business class:
Delta is generally narrower in width throughout their overall fleet with the 767 and A332/A333 infamous “coffin seat” with no plans to update the A330 and most 767 with the new Delta seat. Their new A339 and A350 are slightly wider, per Delta’s website below. But if the average customer is picking a premium seat on seat width, which I truly doubt, they’ll have much better luck with AA and United products on that metric until the A339 and A350 are more widely deployed since the A332/A333/767 vastly outnumber the A339 and A350 fleets at Delta.
Delta isn’t wider on any aircraft in premium economy vs AA and UA. Generally, the industry standard is 18.5″ with the exception that both AA and UA go up to 19″ width on their aircraft. Delta does not go up to 19″ on any aircraft. Delta is the most narrow in premium economy and customers will be lucky to even find premium economy on a Delta wide body, unlike AA and UA.
Tim, You’re still using short-term measurements as a set-in-stone fact about what’s going to happen long-term. The situation is still very much in flux. As I see it, there’s simply no way to know what’s going to happen definitively. All we – and airline managers – can do is guess. But I feel there’s a need in today’s undisciplined media landscape to label speculation as speculation, and opinion as opinion, not as set-in-stone fact. Let’s see where things shake out over the next three to five years. It should be an interesting ride. But of course, that’s sheer speculation on my part.
You are absolutely right. The future is unknown but the airline industry is and will be intensely competitive. All airlines are continually adjusting strategies. United is targeting low cost carriers esp Southwest which has large operations in nearly every United hub metro area.
Regardless of an inch or two in seat width, Delta’s international fleet is more fuel efficient than American and United and that does and will matter in how the big 3 compete. 777s are no longer cost competitive
Because Delta’s entire fleet strategy for a decade has been “buy new aircraft for fuel efficiency over lower ownership cost of old planes”. (Insert rolling eyes emoji here). It’s been the opposite.
The 777s are plenty competitive at aa and ua.
Old or new doesn’t matter any more than fleet age does. Total cost does matter. United is making this move because their RJ heavy model doesn’t generate revenue bear as efficiently as any other airline.
Delta does generate more revenue at a lower cost and there are plenty of people that have documented it.
Comfort is subjective but you still didn’t address international coach
Fuel efficiency is not subjective. Delta’s international fleet is much more fuel efficient than American and United. You need only see the number of 777s that have been removed around the world. A 30% efficiency difference matters
Give it up. If you’re trying to compare most fuel efficient widebodies at aa, ua, and dl, delta isn’t going to win that. AA and UA have a far greater percent of brand new 787, fuel efficient, widebodies in their fleet than delta has new widebodies. The fuel efficiency of a paid off 777 is interesting vs a brand new a350 but really means nothing in the grander scale given AA and UA have been taking on new 787 for years now.
Tim wrote, “Delta’s international fleet is more fuel-efficient than American and United and that does and will matter in how the big 3 compete.”
My response, Prove it.
And I mean prove it. Don’t merely cite questionable secondary sources, such as DOT data, that aren’t definitive or are subject to interpretation. You made a definitive statement and stated it as an irrefutable fact. Please back it up with irrefutable proof. Thanks.
To add a bit. There are different measures of fuel efficiency. I want one that definitively (and I mean definitively) proves beyond all doubt that Delta’s international fleet is more fuel-efficient across the board, and by every possible measure, than its peers. Thanks again.
Tim: All three are fairly strong in NYC and LA, but DL lacks any meaningful presence in SF, DC, or Chicago – major tier 1 markets – nor in Texas, the #2 economy in the country.
Note the premium and long-haul passenger demand by city graphs on chart 10 here, as well as the number of premium seats in slide 20: https://ir.united.com/static-files/21b5f8b4-6d5d-4ec9-977f-888ed4c7ae33
you might choose to carve up the country into markets which you think are worth more than others but a dollar of revenue and profit is the same regardless of where it comes from. Every airline has certain points of strength and weakness. United is a distant 3rd to the other big 3 in medium and small sized cities and this plan likely won’t change that because United’s focus is clearly on defending its hubs and using large narrowbody aircraft to do that.
United has done a bold job of fixing its excessive use of small regional jets but it is spending enormously to get to the same percent of mainline seats as Delta. American has an advantage now in having more large regional jets but that might prove to be a disadvantage as the pilot shortage deepens and labor costs go up. United is making the right moves domestically.
United has not fixed its international cost competitive or comfort issues or updated its fleet to the degree it has announced for its domestic fleet. Fuel efficiency and comfort matter the most on international flights.
Earnings will be announced in a couple weeks and then we will all have plenty of reason to watch future earnings to see how this all plays out.
“United is a distant 3rd to the other big 3 in medium and small sized cities and this plan likely won’t change”
And this is exactly why I said UA has a Tier 1 focus while DL has a Tier 2 advantage.
International comfort issues? Polaris is raved about pretty much everywhere, whereas other commenters in this thread note DL is behind the curve.
Earnings: which airline lost more than all the others last year? ;-) Will take a while to dig out of that hole on a net basis…
Except that Delta is larger in NYC and Los Angeles. You can’t round up for groups you create and then toss out the difference in the two largest markets
The majority of the world doesn’t fly in business class. United and American chose to selectively create premium for some passengers but not others. As fuel and space differences between the three play out and as United revamps its domestic fleet, it is a given that United will gain domestically relative to its peers and lose ground internationally. No need to argue about it but don’t be surprised
The 330-300 burns 17% less fuel than the 777-200ER. There is no case where any American or United 777 costs less to operate than any other US carrier wide body including the 787
Enjoy your Fourth if you are in the US
“Except that Delta is larger in NYC and Los Angeles. You can’t round up for groups you create and then toss out the difference in the two largest markets”
I’m not counting who’s #1 by a few points of market share in each city, but who has substantial service in a list of tier 1 cities including NYC, LA, Chicago, SF, and DC. UA and AA (other than SF) qualify, DL only does in 2 of the 5.
“As fuel and space differences between the three play out and as United revamps its domestic fleet, it is a given that United will gain domestically relative to its peers and lose ground internationally.”
I’d argue the opposite on international: all of those new domestic 737s replacing RJs will feed a *lot* more seats into the UA international gateway hubs at EWR, IAD, SFO, LAX, IAH, and ORD which in turn can support a lot more international connecting flights.
If anybody is at risk of losing ground to peers internationally, it’s Delta, who is now facing much stiffer competition at BOS, JFK, and SEA with the AA-AS-B6 alliances. You can argue about how effective the alliances will be, but no matter how you cut it Delta has more international competition at those hubs than they did before the pandemic.
I wouldn’t necessarily categorize BWI and OAK as second tier. I get that you’re saying they are second tier if defined as strictly DC and SF airports, but that’s not the right way to look at them (same is true for EWR). Better to think of them as primary for the part of the regions they serve, and a popular alternative for those who may live closer to SFO, IAD and DCA. In fact, BWI has the highest traffic numbers among airports in the Baltimore – DC region.
This new order illustrates the limitations of using RASM and CASM as measurements of profitability. Both of these metrics can be altered markedly depending on the number of seats per plane, and how far they’re flown. Neither factor measures margin, which is the main thing any business has to manage.