United Airlines is taking even more 737-700s into its fleet with the announcement today confirming previous reports of 25 additional aircraft joining the operation. This ups the order book of the 73G type to 65 with deliveries starting at the end of 2017. The new 737s will accelerate the retirement of 50-seat regional jets for the company; fewer than 100 will remain by the end of 2019.
More interesting yet buried lower in the same announcement is a shift in the wide body aircraft strategy for the company, accelerating the retirement of the 747-400 fleet to be completed by the end of 2018. To help meet the capacity demand this retirement requires nine additional wide body aircraft were added to the 2017 delivery timeframe. Four additional 777-300ERs will join the fleet, on top of the 10 previously announced, and five additional 787-9 aircraft will be delivered sooner. These nine new planes are conversions of 787 order slots originally slated for 2020 and beyond.
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Bringing the new planes sooner helps to serve a number of purposes. For the narrow body aircraft it is all about reducing dependency on regional partners and shifting away from the 50-seat fleet which most customers would rather not fly on and which are becoming less operationally reliable from a pilot staffing perspective at the regional carrier level. It does mean that certain smaller stations will see reductions in frequencies or even being dropped form the route map completely but for most passengers and destinations it is good news in terms of comfort and reliability.
For the wide body fleet the changes are significant in two ways. First is the operational reliability factor. The 744 fleet is old and has been a maintenance challenge for many years. United had to consolidate the aircraft all to its SFO hub a few years ago in hopes of improving the reliability and that worked to a limited extent. Ultimately getting the planes retired and replaced with newer aircraft is the more effective play.
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Shifting from the 744s to smaller aircraft also represents a significant change in the way the airline operates its route network overall. The 777-300ERs will have a similar total passenger count to the 744 (albeit with no first class cabin) meaning the routes which require the most lift will continue to have an option available in the fleet. But more 787-9s flying in a configuration offering 30% fewer seats than the 744s could be challenging. This is where the route network shift becomes so significant. United is running more flights on what would historically be considered secondary routes, thanks in large part to the 787s in the fleet. Chengdu was added in 2015 while Xi’an and Hangzhou will be added in 2016. These flights are not daily service and are somewhat more experimental than the route planners have historically chosen, but they fill the company’s stated plan of pursuing growth markets and getting a toehold early in the game, a plan especially important in the US-China market. In the passengers would get to these cities by flying to Beijing or Shanghai or Narita before switching to a local carrier. Offering the non-stop service from the US mainland means lower demand on the “trunk route” to Narita and even potentially reduced demand into the larger cities in China, though the latter is likely to be replaced with the growing O/D traffic demand. Oh, and the new SFO-Singapore route, too.
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Put another way, this move helps United to further cement its efforts to shrink the hub operation at Tokyo-Narita and to grow its route network in a meaningful way in markets which are expanding more quickly. And it probably doesn’t hurt that Boeing has been looking to bridge the production gap on its 737 and 777 lines in advance of the 737MAX and 777X deliveries starting later in the decade, meaning that bargain pricing was likely.
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