United Set for Blockbuster Order
United Airlines will outline its future plans at an event dubbed “United Next” on June 29. While the Chicago-based carrier is quiet about the details, many analysts expect it will be a blockbuster order for as many as 200 new aircraft. That order will likely include some combination of Airbus A321neos, Boeing 737 Maxes and maybe 787s, according to various reports. United is also expected to outline capital expenditure and margin targets at the event but it’s the order that is captivating the industry’s attention.
While mega aircraft deals are increasingly common in the industry, ones exceeding 200 firm orders are still rare. The largest order by sheer numbers is American Airlines‘ dual commitment for 260 A320 family and 200 737 family jets in 2011, whereas the largest by value was Emirates‘ commitment for 150 Boeing 777X aircraft worth at the time some $76 billion in 2013. United’s deal is not expected to surpass either threshold with MKM Partners Analyst Conor Cunningham estimating a capex commitment of roughly $11.1 billion for 200 aircraft.
A large narrowbody order would serve two purposes for United. First, it would provide aircraft to renew its aging narrowbody fleet. The average age of its mainline fleet was 16 years at the end of 2020, which compares to 10.8 years at American and 13.5 years at Delta Air Lines — its two main competitors. Both American and Delta used the crisis to accelerate the retirement of older jets, including Boeing 757s at the former and MD-88s and MD-90s at the latter, and streamline their fleets. And the average age of most of United’s narrowbody families is over 10 years and with three types — A320s, 737-700s and Boeing 757-200s totaling some 185 aircraft — over 20 years. Cowen & Co. Analyst Helane Becker expects part of United’s anticipated order to replace A320s and 757s.
Second, United needs more, larger narrowbodies. The airline readily acknowledges that it is over reliant on 50-seat regional jets at its United Express operation due to pilot scope restrictions. This pulls down its average number of seats per departure to 104 in 2020, according to U.S. Bureau of Transportation Statistics data. The average at American was 111 seats and at Delta 121 seats during the period. More larger narrowbodies, like the A321neo and 737 Max 10, will help boost this number in a margin accretive way — replacing smaller, older planes with newer, larger ones. However, United’s regional operation will continue to be hamstrung by scope limits without the addition of a so-called “100 seater” to its mainline fleet. Adding either Airbus A220s or Embraer E-Jet-E2s would unlock up to 70 more 76-seat jets above the current cap of 153 aircraft.
The expected order from United will build on its already robust number of aircraft commitments. That includes 50 A321XLRs, 45 Airbus A350-900s, 180 737 Maxes and one Boeing 787-10 as of the end of May. United upped its Max orderbook by 25 in March as part of a deal to accelerate deliveries to 2021-23.
WestJet Adding First Freighters
WestJet is making a bet that the pandemic’s e-commerce boom will last by adding at least four Boeing 737-800 freighters to its fleet next year. The passenger-to-cargo conversions will be the first dedicated freighters in the Canadian carrier’s fleet.
The first of the aircraft will enter the fleet in February 2022 and will enter revenue service in April, after training and Canadian regulatory review, which is necessary as the aircraft will be the first 737-800F in the country. WestJet aims to have all four freighters in its fleet by next summer, said Charles Duncan, executive vice president for cargo and president of Swoop. Depending on demand and how the aircraft perform in WestJet’s network, the carrier will weigh adding more freighters in the future.
With the addition of these aircraft, WestJet joins Air Canada, which said earlier in June that it is adding its first freighters later this year. Air Canada, however, is converting several of its own retired Boeing 767-300ERs to cargo.
WestJet has long had a thriving belly-hold cargo business, but it was minor compared with its passenger business. The Covid-19 crisis changed all that. The carrier’s cargo business grew by 40-50 percent during the pandemic, the carrier said. (WestJet, a privately held company, does not disclose revenue figures.) With its new freighters, WestJet is betting that its cargo business will grow and be increasingly important to airlines. “This is a 10-plus year investment for us, and we are taking a long-term view of the future of air cargo,” Duncan said.
Bottlenecks have hampered surface shipping as the world economy begins to shake off its Covid sluggishness, with ports constrained and shipping operating at capacity. But these short-term factors did not play into WestJet’s decision to beef up its cargo fleet. The shift in consumer behavior toward e-commerce is expected to last, Duncan said. “The proportion of retail sales that are shifting to e-commerce will continue to grow after the pandemic.”
The carrier chose 737 freighters for the fleet commonality. This will allow its mainline pilots to operate both passenger and freighter models. But the aircraft’s size also appealed. The 737-800F can operate to smaller airports that can’t accommodate widebody freighters in markets that may not have cargo demand to support larger cargo-only flights. Its smaller size also allows carriers to operate during cargo off-peak hours — during the day, instead of at night, as is usual by widebody freighter operators.
The new aircraft also are WestJet’s first foray into pallet, rather than belly-hold, cargo. The 737-800F has 11.5 pallet positions and can carry up to 55,000 pounds of freight. This allows WestJet to expand into larger freight, like seafood and perishable agricultural products, that it cannot easily handle on its passenger 737s, Duncan said.
Initially, the aircraft will operate on domestic routes as Canadian cargo demand is expected to remain strong. WestJet is planning to expand into transborder U.S. cargo routes as it adds more freighters. But the aircraft has a 3,107-miles operating perimeter and could fly routes to Mexico and the Caribbean as well, Duncan said.
WestJet is the latest North American airline to add 737 freighters to their fleets. Mesa Air Group operates a fleet of freighters for DHL, and Sun Country has a freighter subfleet it flies for Amazon. Air Canada will take delivery of two 767-300ER freighters this year, and will add to that fleet in 2022. And during the pandemic, Air Canada, American and United were among the North American carriers that operated tens of thousand cargo-only flights on temporarily converted passenger aircraft, also known as “preighters.”
- The latest and last member of Boeing’s 737 Max family has taken to the skies for the first time. The Max 10 flew for 2 hours and 31 minutes on its maiden sortie in the skies above the Pacific Northwest on June 18. The 737-10, at 143ft 8in long, is 14ft longer than the base 737-8 with room for up to 20 more seats, or up to 230 passengers. That added length and seating capacity comes with a range penalty of roughly 287 miles for a maximum range of 3,798 miles. Gol, United and Virgin Australia all have commitments for the Max 10.
- Lufthansa is not done with four-engine jets yet. The airline will reactivate five of its Airbus A340-600s to serve longhaul routes from its Munich hub in the summer 2022 schedule. Lufthansa cites the accelerating travel recovery for the move and said that it still plans to sell the jets in the future with no firm timeline. The airline also plans to introduce its first A350-900s with a first class cabin in Munich in 2023. In May, Lufthansa upped its commitments for the A350 and Boeing 787-9 by five aircraft each as part of a long-term plan to replace most four-engine jets with newer, more efficient models.
- The FAA warned Boeing that the troubled 777X program may face even more delays and could now be certified only by 2023. The jet’s entry into service may now be 2024, or four years late, Seattle Times first reported.