Originally Posted by
jsled
From Barrons....
Capex Deferral – United announced the deferral of 61 737NGs to 737MAX (undisclosed amount but we expect less) which is expected to reduce capex by ~$1.6B in 2017-2018. The company also announced new Embraer orders which will add roughly $550m in capex so the net capex savings is roughly $1B which we see as a positive. We had previously seen United’s ramp in capex over the next few years as a negative and
view the incremental $1B in savings to be largely returned to shareholders. We would also expect this to put some pressure on Delta to re-evaluate the expected ramp up in its own capex.
CASM-ex Guidance Better Than Expected – United expects 2017 CASM-ex to increase 3.5%-4.5% in 2017 (above its prior “guidance”) but which now includes 1.5%-2.0% of growth from contracts for its IBT group and
snap-up rates for its Pilots to the new Delta rate (calculated by the y/y increase in pay rate). Beyond 2017, United expects to keep CASM-ex below 1% from 2018-2020 which is a bullish guidance, in our view, and should significantly contribute to an improvement in United’s relative margin performance.
United Continental: It?s Not Just Warren Buffett - Stocks to Watch - Barrons.com
Yup. It ain't about CAPEX is my bet. I'm going to hang my hat on it being scope, which worries me as they already did the math on this once and decided it was too expensive to get the SNB with the costs associated of adding a new fleet type vs the steal they got from Boeing. So now Kirby and Levy are here and things are changing. But the math hasn't really changed, unless unlocking the 76'ers is so appealing to you that you give it more decision weight; which seems to be a Kirby trademark.
One thing Barron's got wrong; they didn't "order" new Embraers technically. They purchased aircraft that were already ordered but supposed to be leased back.
The next move will be interesting. As far as the 61 737 MAX's with an undetermined delivery date, don't count on those planes ever arriving. Not that they won't get here, just don't count on it if you're a applicant trying to figure out how much growth UAL will have. We had 42 Airbus orders for over a decade before they finally wrote it off. On the flip side, we have taken delivery of SUBSTANTIALLY more 737-900's and even now 737-800's than we ordered. It's a changing target and some of the time they don't even announce what they are shooting at!!