United Airlines has placed its largest aircraft order in its history, and one among the biggest ever in U.S. air market history, signaling a bullish outlook for travel demand returns. All narrow-body aircraft will be eligible for the order. It includes planes for growth and replacement. Since the announcement of the order, the airline has actively promoted the benefits to customers. Scott Kirby, CEO of United, stated that the order was for a better customer experience. This is United’s most aggressive move, and it follows a recent order for 15 supersonic planes from a new company called Boom.
This new United order has many upsides, including the quick refresh of an old fleet. The new plane models, the Boeing 737MAX (and the Airbus A321NEO) are highly efficient and fuel-saving aircraft that are better for the environment than United’s current fleet. This order comes with significant risks. It has consequences for the domestic U.S. market, competition, labor markets, and regional airlines.
Regional Jets Can Be Replaced
United’s press release states that many of these planes will be replacing 50-seat regional jets. This has many interesting implications. This will result in a step function increase per departure in comparison to the RJs. It means that the schedule might need to change in terms of frequency or other requirements for each flight. Regional airlines fly the RJs on a cost-plus basis to United. This means that these flights have a lower per-trip price than United-flights. Because regional airlines employ labor that is not covered by United’s unions, and they generally work at lower wages, this partly explains why. A 737 replaces an RJ and it is now United pilots who fly the plane. The regional carrier must either redeploy the plane with United or find another use for it. Although the plane is larger, it will consume more fuel per seat and will require more fuel to land at airports. It will also be more costly to insure.