What Will Happen to United's Max 10s?
United's no longer counting on the airplanes. Plus: the CFO says MileagePlus is undervalued, and he has plans to change that.
After United Airlines CEO Scott Kirby gave an interview on Tuesday morning to CNBC, chiding Boeing for its recent quality lapses, a reader messaged me to say Kirby was mimicking a parent whose children acted up. I'm not mad, Kirby was saying, indirectly, to Boeing. I'm disappointed.1
Kirby and team kept the shtick going later in the day on United's fourth quarter earnings call. Kirby said Boeing was going through a "rough patch right now," and admitted that "we are their biggest critic at times,” but added that he’s still Boeing's biggest cheerleader. "There's no one that's a bigger Boeing supporter outside of Boeing that wants them to succeed as much as me," he said.
No doubt Kirby is angry about the Max 9 — and not just the grounding but also Boeing’s inept response to it. But financially, the effect on United is relatively small. United's 79 Max 9 aircraft should account for about 8 percent of capacity between January and March, airline president Brett Hart said. By not flying those airplanes for most of this month, United's CASM-ex fuel will be about three points higher than it should be for the first quarter, the airline said in an investor update.
But that's only where the drama begins. You may have seen reports Tuesday about United's commitment to the larger 737 Max 10. United has 277 on order with 200 options, CFO Mike Leskinen said, and the airplane (along with the A321neo) is supposed to serve as the backbone of United’s short-haul fleet into the 2030s. Boeing hasn't delivered one yet — it's not certified — and the Max 10 is "best case" five years behind schedule, Kirby told CNBC. United executives announced Tuesday they have removed the Max 10 from the fleet plan, telling investors they’ll give more information about what that means later this year. "This was the straw that broke the camel's back," Leskinen said.
These were harsh words. It is possible Kirby is so mad that United will walk away from Boeing. But I suspect this is more about saber-rattling, an opportunity to show Boeing that one of its largest customers is not happy. Perhaps United will shift some Max 10 orders to the Max 8 or Max 9. Or maybe it will top up its A321neo order to add more large narrowbodies sooner. But ultimately, I think United will operate a heavily-Max fleet. It’s in too deep already.
"We're taking it out of our internal plans, and we'll be working on what that means, exactly, with Boeing," Kirby told investors. "Boeing is not going to be able to meet their contractual deliveries on at least many of those airplanes. And I'll leave it at that."
An analyst gave Kirby another chance to complain about Boeing, asking if United might look more seriously at Airbus A350s. As you know, while United has an order for the Airbus A350, it repeatedly has deferred it in favor of Boeing 787s. Many readers believe United will never take the A350, but it could provide a bargaining chip. Would United move up its A350 order to send a message to Boeing?
Kirby didn’t answer the question, letting Leskinen take it. At best, Leskinen said, United would add the A350 in the "early part of the next decade" — the same schedule it set in 2023 after a big Dreamliner order.
Now let's look at some of the other interesting items from United’s fourth quarter call, including some ire toward investors for not properly valuing its MileagePlus program, the airline's success in stealing share from ULCCs, and its plans for Asia flying.
Oh, and be sure to read on for another lukewarm assertion that business travel *may* be starting to pick up.