United Airlines has come out with a number of announcements today that collectively signal they believe premium demand is truly durable, enough to justify heavy fleet investment even after warning about oil above $100 through 2027 (and a possible spike to $175) and a roughly five-point trim to planned capacity this year.
They’ve announced that their fleet plan includes ‘up to’ 252 new aircraft deliveries through April 2028 – that’s a huge number of planes in just two years. In fact, it’s twice the pace they’ve been on for the past five years where they added 22 Boeing 787s, 237 Boeing 737 MAXs, and 67 Airbus A321neos, as well as completed 70% of their narrowbody retrofit plan (seatback entertainment screens, larger overhead bins) and increased premium seats per departure by 40%.
As they move forward they are more of their network around premium seats, lounge access, loyalty (both in terms of keeping customers on their plans, and pressing customers to take their credit card to get value out of their program), and newer aircraft (and newer interiors on older aircraft) while explicitly cutting weaker flying elsewhere.
- 47 new Boeing 787-9s with their new signature interiors (but still not retrofitting existing planes with a better business class)
- 40 “Coastliners” to fly premium transcon routes with a dedicated, consistent, premium-heavy product
- 28 Airbus A321XLRs to replace Boeing 757s on medium and long haul
- 119 Boeing 737 MAXs
- 18 Airbus A321neos
The airline just said they would trim about five points of planned capacity because of fuel. Where these aircraft replace existing planes, they aren’t growing seats. They’re leaning into premium seats as a percentage of their total product, believing these premium and loyal customers will be more willing to absorb fare increases and less effective by economic disruption.
However, if oil really does persist at a higher level that should mean less economic activity and less business travel. And economic contraction will certainly have a wealth effect. The airline seems all-in, and it remains to be seen whether their thesis will prove out.
Premium and elite customers should like it, broadly speaking. This doesn’t really help customers in economy, though the retrofits are generally positive for them and Starlink internet is amazing. As a percentage of seats it makes upgrades a bit easier, potentially (not that anyone has a decent upgrade shot on United these days). Trimming economy capacity though isn’t great for fares.
These aren’t new aircraft orders, and this fleet plan isn’t new, but United is clearly restating its narrative and path in the face of headwinds.
Any reduction at O’Hare?
It isn’t supposed to. If anything, it’s to encourage the low-margin riff-raff to go elsewhere.
UA’s biggest risk is that their massive capex will far outstrip their cash generation on top of higher fuel costs.
Laughably, Kirby said at the JPM conference that air travel is inelastic and he confirmed that through analysis. He is in for a rude surprise.
and they won’t get all of those jets which is why they say “up to…” their order book includes what was supposed to be delivered this year and next plus what is delayed.
They will get alot of new aircraft and their fleet age will go down as their product improves but trying to do this all in a very high cost environment is highly risky.
I tend the think the 757’s with United have pretty much run their course! Most are in excess of 25 years old. Good choice to replace with the XLR’s. The range on those are amazing!
@Tim Dunn: “Laughably, Kirby said at the JPM conference that air travel is inelastic and he confirmed that through analysis. He is in for a rude surprise.”
Meaningless without more detail.
Premium pays. Maybe that’s why UA has been giving GS/1K their own security lines at IAH, while the rest of us suckers wait 3+ hours, even with CLEAR+, PreCheck, and TouchlessID. (I know, I know… @Michael Mainello, blame the party that’s out of power and offered a stand-alone funding of TSA… psh.)
Another classic TD contradiction:
“Their problem is their massive capex from all these new aircraft” “Their other problem is that they won’t get as many new aircraft (and therefore have lower capex) than they say they will”. Also have you read their financial reports? They are pumping out free cash flow?
Sure they might not pay out as much in dividends in the next 3-5 years but clearly (and this goes for any airline capex by the way) they are investing for more than 3-5 years.
L3,
the transcript from the JPM conference is available.
And it is no surprise, Andy, that you can’t sort it all out but UA just said that their fuel bill could be $11 billion higher. They already were committed to almost $10 billion in capex even if they don’t get all of the planes they promised.
You are smoking something serious if you think they will increase fares to a level that will cover all of their higher costs and capex and still have plenty of cash flow.
and you also don’t grasp that, it doesn’t matter if airplanes last for 25 years or more – they do – but you have to be able to pay for them today – or take on debt – which UA is certain to do.
Remember how much some people mocked AA for its massive fleet spending while making far less than at peak not that long ago?