Skift Take

Will United Airlines ever take the 35 Airbus A350s it has on order? At one point, it had an acute need for the new long-haul aircraft. But times change, and United already has a worthy successor for its Boeing 747 fleet — the Boeing 777-300ER.

Seven years ago when United Airlines ordered the Airbus A350 many expected it would become one of two passenger-friendly flagships in its long-haul fleet. Like the Boeing 787, the aircraft’s cabin is quieter and has more humidity than regular jets, including the Boeing 777, ensuring travelers arrive arrive in Hong Kong and Tokyo with less jet-lag than usual.

But it’s looking increasingly unlikely the aircraft will show up at United soon — if ever. United, which has been coy about its plans for the A350, said Tuesday it has deferred its first four jets, which were to arrive next year. It did not say when these four jets might be delivered, nor when the rest of the 35-aircraft order might arrive.

This deferral is not a major surprise. When United first committed to 25 A350s in 2010, and then altered the order in 2013, by adding 10 aircraft and switching to a larger version of the plane, it needed them to replace aging Boeing 747-400s.

But in the interim, United took another approach, agreeing to take 18 Boeing 777-300ERs for delivery between late 2016 and 2018. The 777-300ERs have United’s latest business class seats, but the aircraft is based on a more than decade-old design, and lacks some passenger-friendly amenities of the 787 and the A350. The 777-300ER is also not as fuel efficient as newer-generation jets, though it has competitive costs on a per-seat basis.

United’s 777-300ERs are starting to fly routes that might have been perfect for the A350, such as San Francisco to Hong Kong and Tokyo. Before, the routes had been flown by the 747, a plane United intends to retire later this year.

United has hinted for months it’s trying to change the A350 order, though it has not said much about how. “That’s an order we’re paying a lot of attention to and considering different alternatives,” CFO Andrew Levy said at an investor conference in February.

Airlines generally can’t cancel order so late, but they can convert them to other models. For example, when Delta Air Lines, which just took its first A350 earlier this month, decided it no longer needed Boeing 787s it ordered, it worked out a deal with Boeing to take narrowbody Boeing 737-900s instead.

While United deferred the A350s, the airline said Tuesday it will take two 787-10 aircraft ahead of schedule, in 2019. It also will take 12 more Boeing 737 Max short-haul aircraft in 2019 than it had planned.

Strong quarter

United said Tuesday it earned second-quarter net income of $818 million with a pre-tax margin of 12.7 percent, an increase of 2.8 percentage points, year-over-year.

Passenger revenue per available seat mile, or PRASM, a closely watched metric measuring how much money an airline makes for each passenger it flies one miles, increased 2.1 percent, year-over-year.

Meanwhile, cargo revenues jumped considerably, rising $254 million, or 22 percent, compared to last year.

United was less bullish on its prospects for the third quarter, saying it expects passenger revenue will be flat for the period. However, it predicted a healthy pre-tax margin between 12.5 percent and 14.5 percent.

Customer-friendly changes

In its release, United briefly discussed customer service improvements it made after April, after airport security officers called by airline employees in Chicago forcibly removed a customer from his seat.

United said it would try to reduce the number of passengers removed from flights at the last minute, an occasional consequence of overbooking flights. It’s called “involuntarily denied boarding” in airline parlance, and while it’s legal, passengers hate it. On Tuesday, United said it reduced the number of involuntary denied boardings by 79 precent in May and 88 percent in June, both year-over year.

“Initial results are encouraging,” CEO Oscar Munoz told employees in a note. He called on workers to provide better customer service by creating “a mindset shift — from ‘transaction’ mode to ‘interaction’ mode.”

In another new development, United is carrying more passengers on its own planes, rather than putting them on smaller United Express aircraft operated by contractors. United flew 9.5 percent more passengers on its own planes, while United Express airlines flew almost 6 percent fewer passengers.


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Tags: a350, airbus, Boeing, united airlines

Photo credit: United Airlines has deferred orders for four Airbus A350-1000 jets, which were to arrive next year. United may not have a use for the aircraft. 207821

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