ANALYSIS: United has options with 787 deliveries

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United Airlines plans to have 25 Boeing 787-8s in its fleet by the end of 2015, a significant addition at an airline that anticipates little or no growth during the period.

The deliveries present the Chicago-based carrier with a number of choices: use the 787s to replace other widebody aircraft and keep available seat miles (ASMs) flat, grow its widebody fleet and drawdown other aircraft types, or expand with the addition of new capacity.

"Really it's the economic conditions at the time and also, what we really like about the airplane is its so flexible," says Ron Baur, vice-president of fleet at United, onboard the airline's first 787 revenue flight since January on 20 May. "Because of the range and the operating costs, it gives us a lot of flexibility."

That flexibility allows the airline to choose between replacing older Boeing 767-200ERs and 767-300ERs, upgauging long-haul Boeing 757-200s or adding capacity, he says.

The airline took delivery of six 787s from September 2012 through January, when a US Federal Aviation Administration (FAA) grounding of the type halted deliveries. This resulted in a net increase of three aircraft to its widebody fleet - for a total of 159 - during the period.

United plans to add two more 787s and remove five 767s for a total widebody fleet of 156 aircraft by the end of the year. This removes the fleet additions in 2012 and returns it to the same number of widebodies as at the end of 2011.

These moves are in line with the carrier's capacity guidance. John Rainey, chief financial officer of United, said that it plans for a "nominal increase in ASMs" of about 1% annually and to keep its fleet count flat for the next five years, during an investor presentation earlier in May.

"One of the things we're doing at United is trying to have a measured, metred replacement of our fleet," he said.

The airline anticipates capacity shrinking by 0.75% to 1.75% this year compared to 2012.

ASM growth is not entirely out, however. Brian Znotins, vice-president of network at United, says that the 787s will be used largely as replacement aircraft if the economy is stagnant but could be used for expansion if the economy picks up, during the flight to Chicago on 20 May.

"[We] have a lot of aircraft coming off lease over the period," he says. "This creates options."

The lease on one 747-400 will expire in August 2015 and on nine 767-300ERs from this July through July 2015, according to Flightglobal's Ascend Online database.

The US economy is expected to grow by 1.4% this year, 3.4% in 2014 and an average of 3.6% annually during the following four years, according to a report by the non-partisan US Congressional Budget Office (CBO) in February.

United will launch new service between Denver and Tokyo Narita on the 787 from 10 June. The type will then be used to replace Boeing 777-200s on the other international routes in August, including Houston Intercontinental-Lagos, Los Angeles-Shanghai Pudong and Los Angeles-Tokyo Narita. All of these routes were either launched or planned prior to the grounding.

United 787 planned routes, August 2013

Innovata FlightMaps Analytics

Executives at the airline have repeatedly spoken about using the 787 on routes that have significant peak versus off-peak swings in traffic. For example, demand is less to Australia and South America during the northern summer, and to Asia and Europe during the northern winter. However, the airline has had little opportunity to implement these schedule changes due to the grounding.

Znotins says that United is "always evaluating opportunities" for growth. China and India are two "hot" markets that the airline is following and could be ideal for more service on the 787, he says.

Asked what cities the airline is looking at in China, he says that growth would have to be balanced between additional frequencies to Beijing and Shanghai versus any new destinations. He mentions Changchun, Guangzhou and Shenzhen as three large second tier cities in the country.

United flies to Beijing from Chicago O'Hare, Newark, San Francisco and Washington Dulles, and to Shanghai Pudong from Chicago, Los Angeles, Newark, San Francisco and Washington.

The carrier is in the fortunate position of having flexibility over the next few years. It could continue its tight capacity discipline or shift towards some modest growth if economic conditions warrant it. Either way, this is a positive in the constantly changing airline industry.

"In the airline industry fortunes can change pretty quickly," said Helane Becker, an airline analyst at Cowen Securities in New York, recently.