United Bets on Largest Boeing 737 Jet to Bolster Domestic Fleet

  • Airline’s order is biggest from a U.S. carrier for new model
  • Planemaker tries to gain ground on hot-selling Airbus aircraft

Airbus CEO Says A321neo Won't Be Hurt by Boeing's 737 MAX

United Airlines plans to add 100 of the newest Boeing Co. 737 Max jetliners to its fleet as the carrier’s revamped management team starts to reveal its new strategy for a fleet overhaul.

With the aircraft order showcased Tuesday at the Paris Air Show, United gains a new generation of transcontinental planes to compete with American Airlines Group Inc., Delta Air Lines Inc. and JetBlue Airways Corp. Those rivals have invested in the Airbus SE A321, and the commercial success of an upgraded version of that aircraft prompted Boeing to create the Max 10.

Winning the United order is bittersweet for Boeing, which formally launched its latest model amid a shower of orders, confirmations and conversions of older commitments. The deal makes the Chicago-based airline the biggest customer for the Max 10, but to gain that status United converted some orders for the Max 9 -- previously the largest of the new 737 family.

“It fits into the trend that you’ve seen all these airlines trying to accomplish, which is upgauging,” Stephens Inc. analyst Jack Atkins said in an interview. “If you can put more seats on a plane, you can lower your unit cost.”

Fleet Review

United Continental Holdings Inc. President Scott Kirby reviewed the network and fleet after joining the carrier last year from American. He scrapped an order for 61 Boeing 737-700s for short-range domestic flights, converting them to 737 Max jets to be added at an undetermined date. Those planes were part of this week’s Max 10 deal.

For a look at Boeing and Airbus orders in Paris, click here

He also was critical of previous management’s decision to exit New York’s John F. Kennedy International Airport, leaving United’s Newark-to-Los Angeles route as its only service between the nation’s biggest markets. The airline also announced an order for four additional 777-300ER wide-body jetliners from Boeing as it continued to rethink its fleet of larger planes.

United is reviewing another order from the previous management, a deal for 35 of the largest A350 wide-body jets. Chief Financial Officer Andrew Levy said in November that the carrier was considering whether to swap out some of those aircraft for other wide-body jets, such as the A350-900, which can fly longer routes, or the smaller A330.

United, the first U.S. carrier to opt for the Max 10, is the largest operator of the 737-900ER, the biggest of Boeing’s current generation narrow-body jets. Delta, the second biggest, said Monday it’s adding 10 more A321 planes to an order with Airbus.

List Price

The third, Indonesia’s Lion Mentari Airlines PT, announced a deal for the 737 Max 10 on Monday, hours after Boeing formally launched the latest member of an aircraft family that has flown for half a century.

While Boeing hasn’t announced a list price for the Max 10, Lion’s $6.24 billion commitment for 50 planes implies a value of $124.8 million a plane. That would mean the United order conversion would be worth about $12.5 billion before discounts that are customary for aircraft purchases.

Adding the 737 Max 10 allows United to add extra seats at a “very, very low marginal cost,” while enabling it to carry more connecting passengers at its hubs, said Mark Drusch, an aviation consultant in Dallas with ICF. The new Max 10s also may help replace some of United’s Boeing 757 narrow-body jets, the oldest of which average 20 years old, Drusch said.

United was among the customers pushing Boeing to refine its Max 10 design to avoid the balance and takeoff issues that plagued the 737-900ER, Levy said in a March interview at a leasing conference.

Pilots have long complained that the longest earlier-generation model is prone to tipping up if baggage isn’t balanced carefully in the hold. They also have to pitch the stretched plane’s nose up carefully during takeoff to avoid dragging the tail on the runway.

Balance Issues

Boeing tackled the issues by moving the center of gravity forward on the Max family of aircraft, while shifting the engines -- which are larger and heavier than on previous-generation models -- forward on the wing. Boeing also placed the bulk of the five-and-a-half-foot stretch to the jet’s fuselage in front of the wings, Keith Leverkuhn, general manager of the Max program, said Sunday.

The U.S. planemaker also looked to its 777 in designing a taller landing gear for the plane to help resolve balance issues. Boeing is testing prototypes of its invention printed with 3D components, said Mike Delaney, the company’s general manager for airplane development. The device extends the takeoff roll to give the plane added height, then folds up neatly to fit within an existing gear box -- allowing the manufacturer to avoid costly structural changes.

Customers responded as Boeing refined its design in recent months for a plane it contends can fly further without auxiliary fuel tanks -- and more efficiently -- than Airbus’s re-engined A321neo. And the U.S. company will continue to search for improvements that save weight and fuel as the new Max begins service in 2020. The first plane in the family, the Max 8, entered the commercial market last month.

Boeing projects that the Max 9 and 10 together will capture 25 percent to 30 percent of 737 sales over the next 20 years. The midsize Max 8 -- ordered by carriers including Southwest Airlines Co. -- will remain the “core” offering and account for the bulk of demand.

    Before it's here, it's on the Bloomberg Terminal.