United, predicting a rebound in travel, buys 25 Boeing 737 Max jets
United Airlines disclosed Monday one of its largest orders for the Boeing 737 Max jet since the aircraft was grounded in March 2019, agreeing to buy an additional 25 planes.
The airline also accelerated the delivery timetable for 45 other 737 Max jets it had previously ordered. United said the decision was based on its belief that the recovery in air travel will be firmly in place by next year.
“With a number of our aircraft nearing the end of their lifecycle and the growth opportunities that we know will exist in the Covid-19 recovery period, this agreement will help us to grow as demand returns and renew our fleet with more environmentally friendly, customer-pleasing aircraft,” United Chief Commercial Officer Andrew Nocella said in a memo to employees.
The news lifted shares of both United and Boeing by more than 4% in morning trading. Shares of other major US airlines were also higher.
United reached the agreement to buy the planes on Friday and disclosed the deal in its annual filing with the Securities and Exchange Commission on Monday. The carrier also disclosed that it had moved up deliveries of 40 planes to 2022, plus five more that it will have delivered in 2023. United now has more than 180 737 Max jets ordered for delivery from this year forward.
United had just 14 737 Max jets in its fleet at the time of the aircraft’s March 2019 grounding following two fatal crashes that killed 346 people. United was the first airline to resume deliveries of the plane after the US Federal Aviation Administration lifted the grounding order in November of last year. Boeing has delivered at least 12 737 Max planes to United since then. It has yet to report its February deliveries.
United resumed flights aboard the 737 Max on February 11 and is currently using the plane on about 30 flights a day.
Although there have been concerns that passengers would be reluctant to fly the plane due to safety concerns, Nocella said that United is confident that passengers will be comfortable with flying on the 737 Max.
“Flights on our Max aircraft in 2018 and 2019 had the highest average customer satisfaction score of any large narrowbody aircraft,” Nocella said in his memo. United is also eager to take advantage of the 15% fuel savings that the Max offers compared to older 737 jets.
But the 737 Max is not the only Boeing plane to experience recent safety problems. Some older models of the 777 widebody jet were grounded after an engine broke apart on a United soon after takeoff, forcing an emergency landing and showering debris onto a neighborhood below. Fortunately that plane was able to land safely with no injuries on the plane or on the ground.
Boeing has been scrambling to find buyers for the 737 Max after airlines canceled 655 orders for Boeing planes in 2020, most of them for the 737 Max. Those cuts were mainly due to the plunge in air travel caused by the Covid-19 pandemic and the need for airlines to conserve cash in the face of huge losses.
Boeing continued to build the planes during the grounding, but many of the 450 737 Max planes it completed during those 20 months had no buyers once the FAA gave approval for them to again be delivered.
“We are humbled by United’s vote of confidence in the 737 family and the Boeing team. This order also reflects our shared view that air travel and our industry are resilient and will recover,” said Ihssane Mounir, Boeing vice president of commercial plane sales and marketing.
Boeing announced an order for 75 of the 737 Max planes from Irish discount airline Ryanair in December. This United order is the largest by a US airline since the grounding and is tied for the second largest with a 25-plane order from Virgin Australia in December.
