Wednesday, June 17, 2009

United Airlines

United Airlines
has been cited by reputable media institutions that it has formally asked both Boeing and Airbus to come up with attractive proposals for an order totaling 150 plus airplanes that it intends on using to replace its fleet of 97 Boeing 757-200s + 26 Boeing 747-400s + 19 Boeing 777-200As + 35 Boeing 767-300ERs. Out of its fleet of B 752s, it intends to initially replace its oldest models first as they along with the B 772As are soon approaching 20 years of service.



This is what I personally love doing i.e. fleet planning and route network planning and this upcoming order by UAL is another appetizing news item to analyze and comment on. Here are my view points on what steps I feel UAL should undertake with its replacement fleet planning:

1. Replace Boeing 757-200s with Airbus A 321-200s. This is a no brainer as Boeing is yet to produce a successor to the B 757 and as a result the A 321 has been a worldwide success over the past decade. The A 321 was specifically designed to be a future B 752 replacement aircraft and it has done that job admirably for many airlines worldwide such as BA, IB, US and has proven to be an extremely useful aircraft for AF, AZ, IT, QR, AC, RJ, TK etc. It can easily fly all of UA's trans-continental, Caribbean and Canadian flights nonstop from its major hubs of IAD, ORD, SFO and LAX with a full payload. The aircraft too has better operating economics versus the B 752 on regional flights with a full payload.

2. Replace Boeing 747-400s with Boeing 777-300ERs. The B 748 is too big and so is the A 380 for UAL. When UA bought the B 747-100 in the early 1970s and again the B 747-400 in the late 1980s, the market dynamics were still the same i.e. fly big planes once a day to slot restricted airports and everyone goes home happy. However, ever since 1996 this has all changed. With aviation bilateral agreements between countries getting more liberalized, alliances being formed, hub and spoke business models coming into effect and slot constrained airports opening up more and more, the focus for premium legacy carriers such as UAL has been on "frequency" rather than "capacity" to attract the leisure and especially the business traveler. The B 773ER can also fly ultra long haul routes nonstop which the B 744 might suffer payload restrictions on such as IAD-HKG, ORD/IAD-DEL etc nonstop.

But most importantly, the reason why the B 77W should be ordered also has to do with fleet commonality purposes which can result in huge cost savings for UAL in the long run. Currently, their wide bodied fleet has 3 aircraft types i.e. B 767 + B 777 + B 747 which means 3 different types of certified cockpit, cabin and engineering crew are needed to be trained and hired by them for the task at hand. By reducing the wide bodied fleet type to 2 variants only i.e. B 777 and B 787, massive benefits through cost savings and other forms can arise as well.

3. UAL should also seriously contemplate placing an order for Boeing 777-200LRs to allow it to fly without any payload problems medium density ultra long haul routes nonstop where demand and yield does exist. These include replacing the B 772ER on flights from IAD to KWI and DXB as well as launching new routes such as IAD-DEL, IAD-JNB, ORD-BOM and IAD-HKG.
On the whole, the B 77W has been a stellar product seller for Boeing and a proven B 744 replacement aircraft for airlines such as AF, KL, PK, SQ, BR, JL, NH etc.

4. Replace entire Boeing 767-300ER and Boeing 777-200A / -200ER fleet with Boeing 787-800s, -900s and -100Xs respectively. The B 788 is the perfect aircraft from a capacity and range standpoint as it will seat approximately 10% more passengers than the B 763ER plus fly longer range flights nonstop. It also allows UA the flexibility to open up new long haul low density routes that would be too large for a B 772 to fly on. These include routes to Africa and Latin America in particular such as IAD-EZE and IAD/ORD-CAI. On the domestic front, the B 788 can also replace all 2 class configured B 763s used on high density domestic flights. Domestically, it can too be used to launch new nonstop long haul routes which currently UAL doesnt fly but sees good seasonal demand especially in the IATA Winter season i.e. IAD-HNL nonstop.

With regards to the B 789, this aircraft can be used on routes both on the domestic and international network where the B 772 may be seen as too big or inefficient to be flown on. In a typical 3 class international configuration, the B 789 would seat 235 passengers with UAL's specifics and 280 in a domestic 3 class layout. This aircraft is ideal to launch new long haul nonstop international flights such as LAX-Italy (daily), IAD-RUH (3 weekly), IAD-LOS (daily), LAX/SFO-DXB (daily), LAX-CDG (daily), SFO-CDG, SFO-SGN, LAX-CAN As far as the B 787-100X is concerned, it is right now a "paper aeroplane" still under research study by Boeing. However, according to the manufacturer it is destined to become the direct replacement aircraft for all Boeing 777-200ERs, Airbus A 330-300s and Airbus A 340-300s worldwide as it will be seating 310 passengers in a 3 class configuration and have the flying capability range similar to that of the B 772ER.

One may ask why cant the Airbus A 350 be looked at as a possible replacement aircraft for UAL's B 763ER and B 772 fleet and the reasons are as follows:

a) The A 358 is too big of an aircraft to replace a B 763ER.

b) The A 358 and A 359 can easily replace UAL's entire B 772 fleet but due to internal political pressure, Boeing would seek to lobby hard with UAL and if needed with the U.S. Govt as well to ensure that this would not happen.

c) The A 350s too would be delivered only from 2017-18 onwards which is too late for UAL as it needs aircraft within 4-5 years maximum to start rapidly replacing its aging B 763ER and B 772 fleet especially the -200A versions.

d) By looking at UAL's history, their widebodied aircraft have always been American made i.e. Boeing or McDonnel Douglas and there seems to be no indication what so ever that this will be changing anytime soon.

e) Added cost incurred by adding an extra fleet type into the company which would require extra training and a dedicated workforce thus an un-necessary additional expense which can be avoided.

Concluding, one can see the pros and cons of the above mentioned reasons mentioned and the case is strongly in the favor of the B 777 and B 787 which would make UAL within 7-8 years time have a wide bodied fleet consist of 2 types only which will be of huge financial benefit for the carrier. By ordering Boeing aircraft too, UAL would be winning key brownie points with the U.S. Govt and American public as a huge order by them will definitely result in Boeing creating more jobs at its manufacturing plants across the U.S. which will overall help lift the currently sagging American economy.

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