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United asks Boeing, Airbus to bid for 150 planes

avrodriver

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UAL Corp's (UAUA - News) United Airlines has asked Boeing Co (BA - News) and Airbus (Paris:EAD.PA - News) to propose competing bids to supply up to 150 new airliners, the Wall Street Journal said on its website on Thursday.

The deal could be worth more than $10 billion for the two aircraft makers, the paper said.
United sent a formal request to Boeing and Airbus on Tuesday, the paper said, citing people familiar with the matter.
The request focuses on replacing many of the 111 aircraft in United's wide-body fleet, as well as some of its 97 aging Boeing 757 narrow-body planes, the sources told the paper.
United could sign a major order as early as the fall if Boeing or Airbus agree to certain conditions, the paper said.
However, the financing arranged by the manufacturer that doesn't eat into United's cash would be the most crucial, the paper said, citing people familiar with the matter.
United has hired aviation consulting firm Seabury Group LLC to help it negotiate with the plane makers, the paper said.
A spokesman at Airbus said he was not aware of this particular deal but added the firm was talking to its customers all the time.
Reuters could not immediately reach United or Boeing for comments outside regular hours.
 

Sonny Crockett

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United Plans Huge Jet Order -Wall Street Journal June 4,2009
By SUSAN CAREY

United Airlines has asked Boeing Co. and Airbus to propose dueling bids for up to 150 new airliners -- the latest example of major companies exploiting the recession to bargain-hunt.
For the two aircraft makers, the deal could be worth more than $10 billion at a time when both are watching other customers cancel or defer orders. By staging a winner-take-all competition, United's parent, UAL Corp., is hoping to obtain better terms than otherwise might be available, according to people familiar with the situation.
It's a notable move amid falling travel demand and a tight lending environment -- on top of UAL's recent heavy losses and poor credit rating. But even in good times aircraft builders will go to considerable lengths to lock in an order, using in-house financing arms and other maneuvers to help airlines buy. Their goal: Ensure a steady appetite for their product in the notoriously volatile airline business.



United is among myriad companies attempting to use the economic downturn -- and in some cases, lower steel and other commodity costs -- as a chance to expand or land better pricing. In February, chip maker Intel Corp. said it would spend $7 billion over two years to expand three U.S. plants. German discount retailer Aldi plans to add 75 U.S. stores this year, far more than usual, to appeal to cash-strapped consumers.
Exxon Mobil Corp. in March said it would raise spending on exploration and production in 2009 by 11%, to $29 billion, despite tumbling oil prices.
Others are playing hardball with suppliers. Louise O'Sullivan of Prime Advantage, a buying consortium for industrial-equipment makers, said her group's spring meeting had surprisingly strong attendance. "Some of the biggest [members] were there with grins on their faces," she said, because it "gave them the chance to hammer 40 to 60 of their suppliers in two days."
United has taken pride in its lack of aircraft orders in recent years, even as U.S. rivals started reopening their checkbooks. By ordering now, in the downturn, it hopes to be able to start taking delivery of the planes in a few years, when the economy is better. In the past, airlines have gotten stung by placing orders in good times, then having too many planes in a downturn.
United, which has a total fleet of 400 jetliners, sent a formal request to Boeing and Airbus on Tuesday, people familiar with the matter said. The request focuses on replacing many of United's 111-airplane wide-body fleet, as well as some of its 97 aging Boeing 757 narrow-body planes, these people said.
Chicago-based United has hired aviation consulting firm Seabury Group LLC to help it negotiate with the builders.
Unlike some of its largest domestic rivals, United already flies both Airbus and Boeing planes, giving both manufacturers an incentive to try to grab a bigger share of a major airline's business. As part of its order, United is hoping to simplify its fleet by ending up with fewer different types of aircraft, a change that would cut its maintenance and crew-training costs.
A spokesman for Airbus, a unit of European Aeronautic Defense & Space Co., declined to confirm or deny United's request. A Boeing spokesman declined to comment.
United could sign a major order as early as the fall, the people familiar with the matter said, if Boeing or Airbus agree to certain conditions. The most crucial would be financing arranged by the manufacturer that doesn't eat into United's cash, these people said. United also wants the flexibility to change the order later, according to these people.
By placing a firm order, an airline is committing to a buying and price schedule that stretches for years. However, contracts typically allow airlines to wriggle out of those deals with limited penalties.
If pitting Boeing and Airbus against each other doesn't yield a deal acceptable to United, the airline can wait because its fleet is, on average, a relatively young 13 years old. It already has retired more than half of its elderly Boeing 737s and plans to rid itself of the rest by year's end.
Boeing and Airbus still have multiyear order backlogs. But last year's spike in oil prices, along with the recession and financial crisis, brought on a series of order deferrals and a few outright cancellations by customers around the world.
Airbus in February said it would cut deliveries of its popular A320 narrow-body model to 34 a month from 36, starting next year. It originally had intended to ramp up to 40 units a month by 2010. In April, Boeing said it would trim its wide-body 777 production next year to five planes a month from seven.
For years, aircraft orders by major U.S. airlines were relatively rare. Following the 2001 terror attacks, carriers struggled with restructuring and bankruptcy. Overseas carriers did better, flooding manufacturers with orders. Carriers covet the fuel-efficiency of newer aircraft. The new models also let them cover routes they can't with existing planes.
U.S. orders have started to revive. AMR Corp.'s American Airlines, No. 2 in the U.S. by traffic, last fall announced its intention to order up to 100 Boeing 787 jetliners, if it can win agreement with its pilots' union on pay and other issues. This spring, American revved up deliveries of new 737-800s to replace some of its geriatric workhorse MD-80s.
United has been the odd man out since emerging from Chapter 11 bankruptcy protection in early 2006. In several conference calls with investors, as recently as April, it stressed that it had no new planes budgeted.



—Joe Barrett contributed to this article.
Write to Susan Carey at susan.carey@wsj.com
 

pilotgolfer

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Where is all the money for this coming from?


This looks like a pretty big carrot during contract negotiations. If you mean pilots would just sign off on this crappy contract proposal, look at all these shiny new airplanes you will get.

I'm still waiting for ATA's 717s to show up!
 

Colonel Savage

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Just a bunch of replacement hulls, no growth would occur as a result. What's the incentive to sign a crappy contract? Outsourcing will continue unabated anyway.
 

Skippy

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:smash:

this little blurb does many things:

1. dangles a carrot ( presents the falsehood of growth)-- they have to replace their aging fleet
2. it doesn mean the furloughees are coming back any quicker or even any growth for that matter as they continue to find codesharing partners thru the star alliance
3. raises thei stock price as well as the manufacturers ( i woudnt be surprised if untied bought shares of both boeing and airbus and ride that a little-- thats prob worth about 5 free triple 777's ( that's some of the money/savings right there
4. does anyone forget they already have an order with airbus for 45 ish planes--- apparently they are going to just forfeit 91 million dollars and not take them
5. they will probably split the order and save that 91 million




i didnt even get a slight chubby when the announcement was made-- it doesnt mean crap until every furloughee is back and we've begun hiring new hires again and im making a decent wage with a decent QOL contract.

SKIPPY
 
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Paul R. Smith

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They haven't ordered anything yet.
 

johnsonrod

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I'll believe it when I see them on the ramp. No doubt the CEO and his staff will get huge bonuses for successfully negotiating lower prices on the jets (in a down economy when other airlines are cancelling orders). They will deserve BIG BONUESES for that...

Plus, I am pretty sure that any fleet types would need to match whatever CAL uses because they would want to have similar fleet types if a merger would ever be attractive in the future... Expect 777s and 787s to be delivered in 2018+. UAL's A350s probably wouldn't mesh well with CAL's 787s.
 

dispatchguy

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it doesnt mean crap until every furloughee is back and we've begun hiring new hires again and im making a decent wage with a decent QOL contract.

SKIPPY

Dont hold your breath as long as Tilton and co are in town.
 

N1atEcon

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Maybe UAL is like Uncle Sam. Maybe they can just print money they don't have.
 

ualdriver

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:smash:
i didnt even get a slight chubby when the announcement was made-- it doesnt mean crap until every furloughee is back and we've begun hiring new hires again and im making a decent wage with a decent QOL contract.

SKIPPY

+1. I'm sporting *ZERO* wood (well, at least over this announcement, anyway :) )
 

spitfire1500

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Might be best to let Airbus have this one. With Tilton at the helm Airbus will be stuck with the liability later.
 

HA25

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At the rate United is growing, it might not be much more than a glorified travel agency by the time any of those jets are rolling of the line..

I sure hope they can do something in this contract to end the RJ disease.
 

SKYWRJGUY

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1) Doesn't UAL still have a bunch of options on A32X?
2) If their looking for 757 domestic replacements, why not use those?

Can't speak to the Airbi's ability to go the likes of LAX-OGG or other longer routes.
 

ualdriver

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1) Doesn't UAL still have a bunch of options on A32X?
2) If their looking for 757 domestic replacements, why not use those?

Can't speak to the Airbi's ability to go the likes of LAX-OGG or other longer routes.

1) yes. And if we don't take delivery, we lose a substantial deposit. I'm sure that will be "discussed" with Airbus.

2) Our executives have stated that they don't want a warmed over A320 or 737 model that only provides single digit improvements in efficiency over what is available. They want double digit efficiency improvements, so they're probably looking at 787, A350, next gen A320, next gen 737, and perhaps some of the newer 777's as we have a bunch of the original A models and those things barely make it from Europe to Chicago with a full load of people. I imagine we leave freight behind often with those things.

3) They'll get the money.

4) It would be nice if these were growth aircraft and not replacement aircraft, but somehow I doubt it. It will be years before we see any of these aircraft. The bauxite for these things isn't even mined yet :)

I absolutely hate to say this, but maybe our boys were "smart" in announcing this order when they did, considering the economy and the leverage they can probably exert. Maybe blind squirrels really do find nuts once in a while.
 

crj567

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What kind of idiots would lend this hopeless wreck of a company money for ANYTHING?
 

contrail67

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This looks like a pretty big carrot during contract negotiations. If you mean pilots would just sign off on this crappy contract proposal, look at all these shiny new airplanes you will get.

I'm still waiting for ATA's 717s to show up!

Don't count on a crappy contract....This is not ATA either.
 
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