United to Delay $6.7 Billion Worth of Jet Purchases
United Airlines said Monday that it is holding off buying $6.7 billion worth of airplanes from Boeing Co. until after 1995 to conserve cash in a travel slump.
United initially committed to 278 Boeing airliners the next three years. Now it is slashing the total by 122 to 156.
The aim of the cutback by the nation’s second-largest airline is to reduce capital spending in the period by 35% to $12.2 billion.
The biggest delays include 44 Boeing 737 and 60 757 airliners. United, owned by UAL Corp., said it plans to take delivery of all 66 aircraft it committed itself to this year.
United will now take delivery of 50 planes in 1993, 29 in 1994 and 11 in 1995, a total of 156 aircraft.
Other planes affected are Boeing 767s and 777s. The 777--a twin-engine jet--is still under development. United was its launch customer.
United will also continue to take delivery of wide-body jets as part of an international expansion program.
The delay should have no impact on McDonnell Douglas Corp. since all of the planes involved were ordered from Boeing.
The airline announced Jan. 30--the day it reported a record fourth-quarter loss of $252.6 million--that it would scale back capital spending, but gave no details. Chairman Stephen M. Wolf called the loss “an exceedingly unsatisfactory end to a very dismal year.”
The aircraft acquisition delays follow an $8-billion cut in capital spending announced last year by United’s chief rival, AMR Corp.’s top-ranked American Airlines.
The U.S. airline industry as a whole lost $6 billion in 1990 and 1991. There have been only fleeting signs of improvement this year.
United is Boeing’s biggest U.S. customer, and news of the cutback sent the Seattle-based aircraft maker’s stock down sharply.
Boeing closed down $1.25 at $48.125 on the New York Stock Exchange. UAL stock finished 87.5 cents lower at $144.25 a share.
But Boeing officials pointed out that the aircraft acquisition cutback will not mean canceled orders.
“There are no cancellations,” Boeing spokesman Craig Martin said. “Essentially what they did was ask them to reschedule delivery positions and option exercise times, and we’ve done that.”
Martin said the announcement affects some 737s on firm order but added that “the majority of rescheduled 737s and all 757s are options.”
He also said UAL’s request to stretch out deliveries of 737s was taken into account when Boeing announced 10 days ago that it will pare 737 production in October to 14 a month from 21.
It was the initial customer for the 777 twin jet scheduled for introduction in 1995. It ordered 34 of the aircraft in October of 1990.
Commenting on the size of the aircraft acquisition cuts, Smith Barney analyst Geoffrey Dann said: “It’s a little bit bigger than I expected. But they clearly said (in January) at least $2 billion” would be slashed.
