Word that UAL Corp.'s (NASDAQ:UAUA) United Airlines Inc. is shopping for up to 150 new aircraft is good news for both plane manufacturers and for fans of a once-proud airline that has taken it on the chin in recent years.
United, which until only a few years ago was the nation's largest carrier, has not made a major fleet purchase since 1998. In the years since, the company has struggled through a prolonged bankruptcy that caused employee resentment that still lingers today, and more recently unsuccessful attempts to merge first with Delta Air Lines Inc. (NYSE:DAL) and then Continental Airlines Inc. (NYSE:CAL).
For aircraft manufacturers Airbus SAS and Boeing Co. (NYSE:BA), the potential order comes at a time when a poor economy is causing airlines to defer existing orders or delay making new commitments. United's current fleet is heavy with Airbus planes for short-haul missions and Boeing jets for its international and long-haul, and both manufacturers have reason to believe they can secure at least part of any new large order the company makes.
But the news is probably more significant for United, an airline that has mostly been in the news in recent years due to labor unrest or attempts by management to sell itself. Industry consultant Scott Hamilton
writing on his blog summed up the feeling of many in the industry, saying United "CEO Glenn Tilton has previously shown zero inclination to invest in United, preferring to shop the airline for a merger."
Some reason for hope that United intends to be around for the long term could do a lot to ease tensions between management and its unions, in particular pilots who have
objected to the airline's planned codeshare alliance with potential merger partner Continental and who operate a
special Web site calling for Tilton's ouster. Pilots have used the lack of any new jet order as a sign that United was just biding time until a buyer came along. It is too much to suggest that an order would mean no eventual deal for United, but if nothing else it at least gives pilots and other constituents of the airline something to feel positive about.
Forrester Research Inc. airline analyst Henry H. Harteveldt says now is a good time for United to begin negotiating, as the current climate should produce a good deal. The airline can negotiate now, subject to financing, and try to secure the money it needs for deliveries as business conditions improve. -
Lou Whiteman
Lou Whiteman is a senior writer covering the automotive, transportation and industrial sectors. Follow him on Twitter @louwhiteman
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