United moves toward a big order cancellation

2391307196_f387e83350.jpgFrom deferral to denial, United may become the first big carrier to take aircraft deferrals to the next stage: outright cancellation. UAL, parent of United Airlines, said deep in a regulatory filing that it may cancel an order for 42 Airbus aircraft, forfeiting a $91-million dollar deposit. United made waves back in 1992 when it broke from its former parent, Boeing, and instead ordered the Airbus narrow-body family to replace its aging 737 fleet. (It still has a slew of 737-500s, but is getting rid of them). But it is “highly unlikely that (United) will take future delivery of these aircraft,” UAL said in a Securities and Exchange Commission filing. Airbus has had some 43 cancellations this year, but some of them are in fact order shifts to its A350; Boeing has had none. But JetBlue is deferring Airbus A320 deliveries, and AirTran is deferring Boeing 737-700 deliveries. Both are also selling some of their fleet.

United has said it would cut its fourth-quarter main-line operations by up to 16.5%, meaning it will need fewer planes to serve its routes.United is committed to pay $2.2 billion for the purchase of 42 A319 and A320 single-aisle aircraft. If it does cancel the order, UAL would forfeit the advance deposit paid to Airbus. It added, “These aircraft purchase orders are still included in the company’s total commitment amount, as the company has not formally terminated the orders. The company’s current commitments would require the payment of an estimated $0.2 billion in 2008, $0.4 billion for the combined years of 2009 and 2010, $1.3 billion for the combined years of 2011 and 2012 and $0.9 billion thereafter.”

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