United may amend $12.4-B Airbus deal to take smaller jets

United Continental Holdings, Inc. may convert a $12.4-billion order for Airbus Group SE’s largest twin-engine jet to smaller long-range models. It’s also interested in a new Boeing Co. 737 Max that’s still on the drawing board.

Those are among the multibilliondollar changes under consideration as a new management team reviews the Chicago-based carrier’s order portfolio and revamps its fleet strategy, Chief Financial Officer Andrew Levy said in an interview. The goal: To close a profit gap with Delta Air Lines, Inc. and American Airlines Group, Inc.

United is weighing the conversion of Airbus A350-1000s as it looks to replace its fleet of 747 jumbo jets. The carrier could switch to a smaller version of the aircraft, or even the mid-sized A330. That would dent Airbus’s order book, since United is the second-largest customer for the -1000 variant, which took its first flight last week.

The airline also is studying the socalled Max 10X, a stretch of Boeing’s largest 737, after deferring 61 of the company’s smallest jets this month. The support from a blue-chip airline customer may help the planemaker close the business case for the proposed new variant, intended to help catch up to sales of Airbus’s A321neo.

“These fleet decision are big decisions, they affect your balance sheet for a long time,” Levy, 47, said in the interview at United’s Chicago headquarters. “These are big capital decisions that you have to live with for a really long time, so you need to make sure you get it right.”

The A350-1000 has only garnered 195 total orders, according to Airbus’s website. Qatar Airways is the largest customer for the jet, which is similar in size to Boeing’s 777-300ER. An Airbus representative declined to comment.

Levy said United also is rethinking its share buybacks after announcing a $2-billion repurchase plan this summer that followed a $3-billion effort from a year earlier. The pace may need to slow because of significant increases in labor expenses from several new union contracts as well as rising fuel costs, he said.

United Chief Executive Officer Oscar Munoz unveiled a $4.8-billion plan this month to reap greater revenue and savings from its worldwide route network. That includes improvements in the way the airline forecasts demand and manages seats, which is expected to generate an extra $900 million a year. Cost-cutting moves will save another $700 million by 2020, compared with last year’s level. (Bloomberg)