Boeing, Airbus To Battle For United Order

September 23, 2011

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United Airlines is shaping up as the next major US battleground for Boeing and Airbus to sell narrow-body planes, as the world's biggest airline mulls an order sources say could reach 200 aircraft.

Bagging the entire order from United Airlines would be a major coup for the victor. An order for 200 single-aisle planes is potentially worth about USD$18 billion at Boeing and Airbus list prices.

Discussions are still at the early stages. But industry sources familiar with preliminary soundings expect United to place an order to refresh its fleet late this year or early next year.

"They (United Continental) are looking at it," said one of the sources. "Airbus and Boeing are getting ready. (United) sees the timing as good, just like the other guys."

Another industry source said United's order could be "something like 100 or 200 (planes), but less than American," referring to a recent order for 460 single-aisle planes worth up to USD$40 billion from American Airlines.

Some US airlines, financially more stable after a years-long industry downturn, are updating their narrow-body fleets, mostly comprising Boeing 737s and Airbus A320s, with newer planes to help blunt the impact of high fuel costs.

"United has the newest and most fuel-efficient fleet among the network carriers, and we have regular, ongoing communications with manufacturers," said United Continental spokesman Mike Trevino. He declined to comment on prospects for an order in the near future.

Boeing and Airbus also declined to comment on talks with United Continental.

So far this year, the world's dominant plane makers have slugged it out for sales to American Airlines and Delta Air Lines, which ordered 100 Boeing Next-Generation 737-900ER planes valued at USD$8.5 billion last month.

US-based Boeing and European Airbus now offer versions of their best-selling narrow-bodies with new fuel-efficient engines. The newer models, which are still in development, are dubbed the 737 MAX and the A320neo and will not be ready for commercial service for several years.

Boeing decided in July to outfit its 737s with newer, more fuel-efficient engines in order to capture part of the huge order from American Airlines, which formerly was an all-Boeing customer. The airline ordered 260 Airbus planes and 200 Boeing planes.

The move was seen as a victory for Airbus as it attempts to poach more of Boeing's narrow-body customers in its home country.

Boeing had previously said it was leaning toward a full redesign of its best-selling 737. Redesigning the plane would have taken longer but could have provided greater fuel savings than the re-engined version.

United Continental chief executive Jeff Smisek said in May he was willing to wait for a redesigned narrow-body.

It was unknown if United is likely to order re-engined planes. The carrier could award the deal entirely to one plane maker or split the order between the two.

Founded four decades ago, Airbus pulled off one of its earliest and most unexpected market coups by selling 100 jets to United Airlines in 1992. Now the airline is set to be the focus of the USD$80 billion-a-year aircraft industry once again.

United Continental, which has a narrow-body fleet of about 550 Boeing and Airbus planes, formed last year from a USD$3.17 billion merger of United Airlines and Continental Airlines. The carriers still operate separately while they complete their integration.

The company has 125 firm commitments to purchase new aircraft: 50 Boeing 737s, 50 Boeing 787s and 25 Airbus A350s. United Continental also has purchase options for 42 Airbus A319 and A320 aircraft.

United and Boeing have a shared history, both being founded by William Boeing. United Air Lines and Boeing were both subsidiaries of United Aircraft and Transport Company before it was broken up in 1934. Airbus overtook Boeing as the world's largest jet-maker in 2003.