United is taking a move from the Delta playbook and is rumored to be eyeing a deal to buy up to 40 used Airbus jets. Purchasing used planes is part of the airline’s plans to slash expenses and regain confidence from investors. Shoring up cost control efforts and spurring revenue growth have been front and center for company executives who took a beating from analysts on the third quarter conference call in October, when they were unable or unwilling to share details about United’s financial recovery plans. Industry leader Delta Airlines has significantly higher profit margins and is well-known for supplementing their fleet with used aircraft in the past, a fact that has apparently not escaped the attention of United’s management team.
Delta’s done this before
Between 2000 and 2010, Delta augmented its domestic fleet with Northwest’s fleet of DC-9 and acquired additional used aircraft. At the time, other carriers spent billions of dollars on new fuel-efficient Boeing 737s and Airbus 320s as anchors for their domestic fleets. When that happened, the market became over run with older, but still viable, MD80, 717 and MD90 airliners that Delta picked up at rock bottom prices.
Recently, an airline consultant was quoted as saying the purchase of the second-hand Airbus jets would be “a cheap way of bringing in peak capacity” for the ailing United Airlines and would give a much-needed boost to short distance service.
An unnamed source claims that aircraft operated by EasyJet, a discount carrier based in the U.K., are possibly the source of the planes. Most of them are reported to be A319 and A320 single-aisle aircraft. The maximum number of jets to be purchased is set at 30 or 40 at this point in time, according to United pilots. Since there is a ceiling for the number of used planes United will buy, the deal could actually come in for fewer. EasyJet has declined to comment so far.
The planes being purchased are generally used on domestic routes but it is still unclear where United would fly them. Their currently exisiting A319s have 128 seats while the A320s hae 150.
All United CFO Andrew Levy had to say over this past summer is that dipping a toe into the used jet liner market is “an important part of our fleet strategy.” It just so happens that Levy is also a former executive of Allegiant, a discount carrier well known for flying used airplanes.
A way to acquire additional capacity without massive capital expenditures
The market value currently for a used A319 fleet is around $480 million. Compare that to list price of $2.7 billion for new aircraft and United’s motives become clear: to save money, plain and simple. This isn’t the first time United has purchased used aircraft. Back in 2015, the airline bought second hand aircraft from China. This time around, the pilots’ memo disclosing the details did not make clear whether or not this new (or make that, used) batch of planes will be purchased or leased.
United is putting the hammer down on cost containment in other ways too. Delivery of the new twin-aisle Airbus A350s has been postponed until 2022. Also, United upgraded to a more fuel efficient verions of 61 Boeing 737s that were delivered in November. These two decisions alone saved the company $1.6 billion in capital expenditures.
When asked directly about the most recent cost-saving measures, i.e. purchasing used Airbus 319s and 320s, United declined to comment on specific acquisition decisions, simply saying by email, “We have made clear that we are going to explore the used market to acquire additional aircraft.”