AIRLINES : United Plans Major Order of New Aircraft
UAL Corp. Chairman Stephen M. Wolf, in what may have been his final appearance before the airline company’s shareholders, said Thursday that United Airlines will soon make what “will probably be the largest order (of wide-body airliners) in aviation history.”
Wolf, who had not appeared officially in public since the collapse last October of an employee-management offer to buy UAL, also predicted that the company’s unions will succeed in their new effort to buy the firm.
The plane order, Wolf said at UAL’s annual meeting here, might be made as early as June 15. It might go to Europe’s Airbus Industrie, Boeing Co., or McDonnell Douglas Corp., he said, or it might be split among the three companies.
United is considering the Airbus A-330, the Boeing 777 (also known as the 767X) and McDonnell Douglas’s MD-11.
But Wolf appeared to indicate that Boeing had the inside track. He said United had been waiting for the Boeing board to announce that it was going ahead with the new 777, which it now has done. “We seem to be working more closely with Boeing than with any other prospective buyer,” on the plane, he said.
Commercial Aviation Report, an airline financial newsletter, said the UAL board is understood to be close to ordering about 150 airliners that will carry about 350 passengers. Airbus is believed to be still in contention, the publication said. The Airbus is about $10 million to $15 million cheaper than the 777, which will sell for about $100 million.
However, Boeing is believed to be likely to discount the 777 heavily for UAL if it is the first airline to order the plane, and Airbus would probably match the discounts, the newsletter said.
Wolf said UAL is also going to purchase some larger jets--most likely Boeing 747-400s, observers speculated.
Paul Turk, a spokesman for Avmark Inc., an Arlington, Va., aviation consulting firm, said the previous largest orders for wide-bodies were made by Delta Air Lines on Sept. 22, 1988, when the Atlanta-based carrier ordered nine MD-11s and took options on 31 others, and by All-Nippon Airlines, which ordered 20 747-400s in July, 1989.
Concerning the proposed buyout of UAL by its unions, Wolf told the shareholders that if it is completed he would stay around long enough to assist in an orderly transition and then would leave. Although United’s pilots, machinists and flight attendants said when they announced their $201-a-share offer March 19 that they intended to hire new management, Wolf had never before said that he plans to leave.
However, he also said that if the current deal cannot be financed or falls apart for any other reason, he would stay on and that UAL would remain the same public company it is today. It was clear throughout the meeting that Wolf is not happy with the latest buyout offer, which is for more than $4 billion.
“In principle, I am opposed to leveraging an airline, given the cyclical nature of the business and the enormous capital investments required in the industry, particularly at United,” Wolf told about 500 shareholders. “If, however, leveraging is inevitable, as it was in this case, I believe the preferable course to be employee ownership.
“The board’s decision (to accept the buyout offer) was the result of a long, difficult and sometimes tumultuous process, but, ultimately, given the circumstances we faced, it was the right decision.” The alternative, he said, would have been a proxy fight by UAL’s largest stockholder, the New York-based investment firm of Coniston Partners.
