United Continental Holdings Inc. said Tuesday that it would postpone receiving dozens of new Boeing Co. jets to trim spending.
The third-largest U.S. airline will defer 61 planes from a 65-jet order for 737-700s and convert them into the new Max model with yet-to-be-determined arrival dates. Boeing will switch the remaining four to the larger 737-800 model for delivery next year. United is expected to acquire the Max 9 version of the plane.
The airline, among four U.S. carriers that have recently attracted investment from Berkshire Hathaway Inc., also announced a push to boost its share of budget-conscious travelers with a new no-frills fare class.
The basic economy class entitles fliers only to an under-seat bag, a move also intended to avoid the delays caused by passengers stowing overhead baggage, and continues the segmentation of fares that is being pursued by other carriers such as Delta Air Lines Inc.
The moves are among a parade of planned changes unveiled by United Chief Executive Oscar Munoz and his new management team that includes cost cuts and revenue-boosting initiatives designed to increase profits by $4.8 billion by 2020.
The fleet changes are among the industry’s largest since Southwest Airlines Co. in June reached a deal with Boeing to defer 67 of its 737 Max deliveries scheduled for the 2019-2022 period until 2023 and beyond.
United expects the fleet changes to cut capital spending over the next two years by $1.6 billion.
Boeing and Airbus Group SE have order books for their best-selling jets stretching out for several years of production, and typically overbook knowing that some planes will be canceled or deferred. United canceled an order for 12 Airbus single-aisle planes in late 2013.
“We constantly work with our airline customers to meet their evolving needs, and our healthy 737 backlog of 4,321 airplanes gives us the flexibility to meet those needs,” Boeing said in a statement.
United also plans changes to flights at its three big hubs in Chicago, Newark and Houston that it hopes will add $900 million in incremental revenue by 2019. Changes include using larger aircraft on some routes and changing flight times to improve connections, as well as revamping its demand forecasting systems.
The Chicago-based carrier is also buying 24 Embraer 175 jets from the Brazilian manufacturer rather than leasing them from Republic Airways Holdings Inc., which is under bankruptcy protection.
United said it would continue reviewing its widebody aircraft needs and consider adding more used jets in addition to the Airbus A320 family planes it is already leasing from AerCap Holdings NV.
The company’s shares were recently up 1.2% at $63.72, trailing gains at Southwest and American Airlines Group Inc.
The Wall Street Journal
United Airlines postpones delivery of Boeing 737-700s
