United Airlines Ordered 200 Boeing Planes, Breathing New Life Into Plane Manufacturer
United Airlines placed an exceptional order for 200+ Boeing planes. An order of this size is a big deal for any plane manufacturer, especially Boeing of late. Here's what investors need to know.
Key Takeaways United Airlines ordered 200 planes from Boeing. The order shows a vote of confidence from a major airline. An order of this size also reveals United Airlines' overall goals.
If you've ridden on an airplane recently, there's a very good chance Boeing manufactured it, having built more than 43% of aircrafts in use today in the U.S. A recent spat of bad news, including news surrounding the 737, had Boeing's prospects trending down. But, with the United Airlines order, things are looking up - Boeing stock closed the week +6.90%.
Let's explore the details of this remarkable order and how it might impact investors in the coming year.
What's happening? In mid-December, United Airlines announced a massive order of Boeing planes that includes 100 new 787 Dreamliners. This announcement also revealed that United Airlines could add 100 more aircraft to the order.
If all goes according to plan, United Airlines will take delivery of approximately 700 new aircraft by the end of 2032. This would include an average of just over two planes per week in 2023 and three per week in 2024. As the airline upgrades its planes, it has a vision for a greener future. The more energy-efficient planes are expected to decrease carbon emissions by 25%.
Not only will the carbon emissions drop, but fuel costs will also decline as a result of newfound efficiencies. Gerry Laderman, United's EVP and Chief Financial Officer, said in a press release, "This order solves for our current widebody replacement needs in a more fuel-efficient and cost-efficient way while also giving our customers a best-in-class experience." He continued, "If the future of long-haul flying is as bright as we think it will be, United is able to capitalize on those opportunities by exercising these new widebody options - I look forward to the incremental margin and earnings these aircraft will generate."
United Airlines' vision
An order of this many planes indicates where United Airlines plans to take its company in the future. With more planes and lower fuel costs, the airline is chasing long-term profits and a firm hold on its market share.
Comments made in a press release by Scott Kirby, United CEO, illuminate the company's direction. Kirby stated, "United emerged from the pandemic as the world's leading global airline and the flag carrier of the United States."
He added, 'This order further solidifies our lead and creates new opportunities for our customers, employees, and shareholders by accelerating our plan to connect more people to more places around the globe and deliver the best experience in the sky.'
United Airlines has been adding nonstop flights to more global destinations in the last several years. For example, you can now fly nonstop from New York to Cape Town.
As the company lays out its vision, it's gone on a hiring spree. In 2022 alone, the airline hired 15,000 people. It plans to onboard another 15,000 employees next year.
A big part of the hiring is focused on pilots. The airline hired 2,400 pilots in 2022, with a goal of hiring over 10,000 pilots this decade.
Impact on Boeing
While United Airlines certainly has a vision for a great future, its choice to order hundreds of planes from Boeing has provided a light at the end of the tunnel for the company. In the last several years, Boeing has been the focus of intense scrutiny from Congress and the FAA.
Specifically, the 737 Max was under the microscope after two fatal crashes abroad. Of course, the negative attention wasn't good for the company.
As Boeing adjusted its operations, it laid off some workers in the finance and accounting departments. These jobs were reportedly outsourced to India.
After the wave of outsourcing, Boeing needed some good news. The recent announcement from United Airlines fits the bill. An order of this size will keep the plane manufacturer busy for years to come.
How this impacts investors
For investors, the vote of confidence from United Airlines might change the fortunes of Boeing. At the very least, this order means that the plane manufacturer has a steady flow of business to build on.
With expectations to deliver hundreds of planes, there are profits to be made from the order. After the press release on December 13, Boeing's stock went as high as $191.11 before closing at $187.13. Boeing Co stock closed the week at $184.70.
On the other hand, United Airlines stock opened at $45.50 and closed at $41.17 on December 13. Its price continued to fall on December 14 and December 15, closing the week at $38.43.
Only time will tell how this news will impact both companies in the long run. If you are investing in individual stocks, the news that splashes across the headlines can make an impact. The announcement of this large order is a big deal for both Boeing and United Airlines.
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