United places its biggest plane order in bet on return of premium travel

United Airlines has placed an order for 270 jets, the biggest in the airline’s history, in a bet on a resurgence of premium travel after the pandemic.

The Chicago-based company said on Tuesday it was ordering 200 Boeing 737 Maxes and 70 Airbus A321neos and expected to create 25,000 jobs by 2026 linked to the order.

At the same time, United is reconfiguring its existing fleet with more first-class and premium economy seats and improved in-seat entertainment and overhead storage.

United’s plans are the latest signs of divergence between American and European airlines’ strategies.

As the pandemic ebbs in the US, more American carriers are placing orders. Southwest said in March it would take 100 Boeing 737 Maxes, while Delta ordered another 25 Airbus A321neos in April. American Airlines had largely completed updating its fleet before the pandemic hit, leaving the airline with a higher debt load than peers.

On the other side of the Atlantic, few carriers committed to significant new aircraft orders during the pandemic as they instead looked to conserve cash during the disruption.

However, low-cost carrier Ryanair bucked the European trend in December with an order for 75 Boeing 737 Max jets with a list price of $22bn. Analysts at the time suggested the airline would have got a “really screaming good deal”, underlining the benefits of having the cash to commit to aircraft purchases in the current climate.

Combined with its current orders, United will add more than 500 new narrow-body jets to its fleet between 2022 and 2024, as it retires about 300 planes, the bulk of them regional jets.

The number of United seats on US domestic flights will rise 30 per cent over the next five years, while the number of premium seats will rise 75 per cent compared with 2019 levels.

United’s shares fell 2.6 per cent on Monday on concerns about how the order would affect the company’s financial position. The list price of the planes is more than $30bn, but typically airlines pay about half the list price.

“It will be up to the company to articulate . . . how new orders change the investment trajectory while also providing room for debt reduction,” said Evercore ISI analyst Duane Pfennigwerth. “What is the path back to meaningful free cash flow, which will enable balance sheet repair for United?”

Scott Kirby, chief executive, said the fleet changes would “revolutionise the experience of flying United as we accelerate our business to meet a resurgence in air travel”.

The airline has about $33bn in long-term debt. Like competitors, United raised cash from investors and the US government to survive the Covid-19 crisis, when travel curbs and passenger fears led to a collapse in air travel.

United continues to suffer from the decline in business travel. However, Andrew Nocella, chief commercial officer, said the situation had improved in recent weeks.