Airbus salvages $14bn order of United Airlines

Bloomberg

Airbus SE secured an order for 45 of its A350-900 jetliners from United Continental Holdings Inc., holding on to a critical win after a run of deferrals by US airlines for the European planemaker’s marquee wide-body plane.
The deal, valued at $14 billion before customary discounts, is a conversion of an earlier order for 35 of Airbus’s bigger -1000 variant. The carrier had indefinitely postponed delivery of its first four planes earlier this year as it reviewed its fleet plans. Deliveries of the new Airbus jetliners won’t begin until 2022, when United’s fleet of Boeing Co. 777-200ER aircraft reach 25 years of age.
The smaller A350 is “a better fit and size for the United network,” the carrier said in a regulatory filing on Wednesday. The airline’s earlier deal for 35 of the A350-1000 planes had a list value of $12.6 billion at current prices. United is seeking to renew its fleet of aging 747 and 777 wide-body planes.
The expanded Airbus order comes after American Airlines Group Inc. and Delta Air Lines Inc. both put off deliveries of the jet. Retaining Chicago-based United as a wide-body customer is crucial for Toulouse, France-based Airbus as it seeks to expand twin-aisle sales in Boeing’s home market.
The deal would lift Airbus’s backlog for the 325-seat A350-900 to 673 aircraft, while narrowing the order book for the 366-seat -1000 to 177, based on the planemaker’s latest order and delivery tallies. That underscores the pressure on bigger wide-body jets as carriers around the world rein in capacity expansion to ease pressure on fares.
United is the second-largest customer of the largest A350 model behind Qatar Airways Ltd. Delta said in May it would defer 10 orders for the jet and instead take a stretched version of Airbus’s A320 single-aisle workhorse. Meanwhile, American has postponed deliveries of 22 jets.
United’s fleet strategy has been in flux since President Scott Kirby joined the company last year from American Airlines, where he had helped negotiate a purchase of the Airbus jetliner. The original deal predates the carrier’s 2010 merger with Continental Airlines and marked United’s first order for an Airbus wide-body.
The next-generation jet is made of carbon-composite panel and is critical to Airbus’s efforts to compete with Chicago-based Boeing’s smaller 787 Dreamliner and the bigger 777X, the first twin-engine plane built to haul more than 400 passengers.
“For the past year, United has done a complete review to ensure that we have the right long-term fleet strategy,” Andrew Levy, United’s chief financial officer, said. “It was clear that the A350 aligns with our replacement needs and our network.”