Money Matters, Simplified.
United seeks jets from Boeing, Airbus
by Jamie Anderson - June 4, 2009 - comments
At a time when airlines are cutting routes and grounding planes, United Airlines, the third-largest U.S. carrier intends to buy as many as 150 jets, much to the surprise of everybody
Chicago, June 4: Fresh warnings of industry losses aside, United Airlines (NASDAQ: UAUA) has invited bids from Boeing Co. (NYSE: BA) and Airbus SAS, the subsidiary of European Aeronautic Defence and Space Company N.V. (Euronext: EAD, BMAD: EAD, FWB: EAD for an aircraft order.
Bumper order
A person familiar with the matter said that United intends to buy a total of 150 wide body and narrow body planes. United, which already has a fleet of 400 jetliners, has taken the services of aviation consulting firm Seabury Group to assist it bargain with the suppliers.
The Chicago, Illinois based United’s order comes as a surprise to many as most corporate houses are axing or delaying purchases in the present day economic scenario.
The deal is expected to be worth $20 billion, if the median list prices from the plane makers are taken into consideration.
Indicating that the bumper plane order from United is a classic example of major companies taking advantage of the recession to hunt for bargains, Chris Tarry, an independent airline analyst based in London opined, “If you want good prices, this is the time to buy.”
He added, “If you’re going to buy 150 planes, then you’re going to get a very good price, particularly for near-term deliveries.”
Battle between Boeing and Airbus
By inviting bids and declaring a ‘winner-take-all competition’, UAL Corp., United's parent, intends to get the best possible deal and a financing arrangement by the supplier that does not eat into United's cash.
Both the France based Airbus and Chicago based Boeing are in deep distress as demand for air travel has waned and cancellation of orders has become the order of the day. Both the companies are facing an earning squeeze due to dwindling prices. Bagging the United order would release a lot of pressure on the revenue front for either of them.
John Leahy, chief operating officer of Airbus, expressed his eagerness to bag the order. He said, “We’re definitely working with United Airlines on their fleet replacement needs.”