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!!

 

Remember those "trade deals" Trump says we are being screwed on? Look at any country we fly to and how many flights those countries get to the US and how many we get to there, and then look at the populations of each nation and I"ll bet we are underflying an equal share to each nation. Why should a country 1/5th the size of us get as many flights to the US as we get to them? Or even 1/2. Should be equal. I'll bet Buffet is betting US airlines start getting much more International flying over the next few years.

 

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In that case, Warren needs to have a chat with his buddy Trump to avoid those trade wars with China.

 

Man aint that the truth!! If he actually does what he says he will do (which isn't exactly his strong suit) and slaps a 45% tariff on all goods from China - which China has already said it will mimic right back), United Airlines as we know it will implode.

 

Wasn't that the LCAL mgmt strategy? Shrink/cut to profitability?

 

Don't worry future half winger the sky is far from falling. There is more to this announcement than meets the eye, what it is no one knows.

No one saw this announcement coming, hell we just placed the order 6 months ago. All your reading now is shock and questioning.

This overall doesn't mean much over a 25 year career. It postpones upgrade and reduces hiring over the short term but over the long game the airline will grow. The orders are not cancelled yet.

 

Looks like they just decided to get bigger planes.

United Airlines converts 737-700s order to -800, -MAX versions | Airframes content from ATWOnline

 

Correct but no specified order date. United had 320s on the books for a decade before they got rid of the orders. Delta still has 787s on the order book. So the question is will we ever see these aircraft?