Shutterstock photo

What Is United Continental's New Fleet Plan?

Shutterstock photo

Shutterstock photo

United Continental Airlines, along with all other airlines, has benefited hugely from the low oil prices . Consequently, the low cost environment has enabled the carrier to refurbish, upgauge, and add more capacity to its fleet. While refurbishing helps the company provide its clients with a more convenient and comfortable flying experience, fleet replacement reduces its expenditure on depreciation and help saves fuel costs.

As a part of its 2016 fleet plan, United's fleet size will shrink by a net of 7, as it takes delivery of 21 mainline aircraft and retires more than 28 regional aircraft. We can expect the company's fleet to stand at 736 mainline aircraft and 493 regional aircraft by the end of 2016.

30094

A substantial part of United's fleet consists of Airbus aircraft, A319s and A320s. However, these are about 17 years old, on average. In fact, United's youngest Airbus planes were built in 2002. To get a perspective, its is inadvisable to run an aircraft beyond 23-25 years of age, as in such a case the cost of maintenance is more than that of buying/leasing a new plane.

While United Continental had planned to replace the bulk of its Airbus fleet between 2016 and 2020, in a scenario of low oil prices it deferred its plans as it made economical sense to keep flying older planes. By upgrading its A319s and A320s with larger overhead bins, slimline seats, satellite Wi-Fi, and streaming video, United has been able to keep these aircraft in service longer. However, the Airbus fleet, along with Boeing's 757s and 737s will need replacing within the next few years. Consequently, United Airlines will probably need at least 300 new narrowbodies between now and the late 2020s. To this end, the carrier has ordered as many as 100 737 MAX 9 planes and 65 737-700s, scheduled for delivery in 2017. Further, it would not be too much of a stretch to expect the order of additional Boeing airplanes and retirement of Airbus fleet to result in a simplified and standardized fleet of only Boeing airplanes in the future. This would not only be a huge win for the aircraft manufacturer, Boeing, but also United, as a single fleet strategy, as seen in the case of Southwest, allows a carrier to curtail its post sale costs by reducing the amount spent on servicing and maintenance.

Have more questions about United Continental ( UAL )? See the links below:

  • Is China The New Growth Market For United Continental?
  • How Did United Continental Perform Operationally In August?
  • Why Are Airline Manufacturers Witnessing A Slowdown In Commercial Orders?
  • How Is United Continental Driving Cost Efficiency?
  • What Has Led To A 15% Fall In United's Stock Price Since The Beginning Of The Year?
  • What Factors Could Likely Affect United's Unit Revenues In The Upcoming (Third) Quarterly?
  • Is A Turnaround In The Cards For United Continental?
  • United Witnessed A Decline In Q2'16 Earnings, Despite Substantial Fuel Cost Savings
  • United Continental Q2'16 Earnings Preview: Higher Oil Prices & Declining PRASM To Weigh On Results
  • Here's Why We Have Revised United Continental's Price Estimate To $52 Per Share
  • Lower PRASM And Higher Tax Bill Caused United Continental's 1Q'16 Earnings To Drop Despite Huge Fuel Cost Savings
  • Currency Headwinds To Offset United Continental's Fuel Cost Savings For 1Q'16
  • How Will United's Equity Value Be Impacted If The Crude Oil Prices Rebound To $100 Per Barrel By 2018?
  • How Will United's Equity Value Be Impacted If The Crude Oil Prices Average At $50 Per Barrel In 2018?
  • How Will United's Revenue And EBITDA Grow Over The Next Five Years?
  • How Important Is United's International Division For Its Overall Equity Value?
  • What Is United's Fundamental Value Based On 2016 Estimated Numbers?
  • Why We Think United Continental Is Worth $65 Per Share?
  • What Drove United's Revenue And EBITDA Growth Over The Last Five Years?
  • How Has United's Revenue And EBITDA Composition Changed Over The Last Five Years?
  • What Is United Continental's Revenue And EBITDA Breakdown?
  • How Has United Continental Utilized Its Cash Flows Over The Last Three Years?
  • How Have Plummeting Crude Oil Prices Impacted United Continental's Operating Margin?

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for United Continental

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap

More Trefis Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.