Blaming plunging demand from the US federal government and between Canada and the USA, United Airlines will accelerate the retirement of 21 aircraft, a move CEO Scott Kirby claims is evidence of how nimble United has become.
United Airlines Will Retire 21 Aircraft Early To Address Falling Demand, High Maintenance Costs
United Airlines has over 500 aircraft on order, but many of those aircraft are intended to replace existing aircraft (like the 23-year-old A319 I wrote about earlier today). However, the pace of aircraft retirements is not set in stone. If demand is up, United may keep older aircraft operational longer? If demand drops, an alternative to deferring new aircraft is to accelerate the retirement of old aircraft.
That’s exactly what United is doing. Kirby couched the aircraft retirement announcement in his rather candid assessment of how travel demand from both Canada and the US government has dropped:
It started with government. Government is 2% of our business. Government adjacent, all the other consultants and contracts that go along with it, probably another 2% to 3%. That’s running down about 50% right now, so a pretty material impact in the short term. I’ll talk about what we can do about that in the medium term.
And we’ve seen some bleed over to that into the domestic leisure market. Good news is that international, long haul, Hawaii, premium all remain really strong. We have seen government and some low-end consumer leisure weakness, which also appears consistent to me with a lot of other data that I look at. We’ve had a fuel price benefit from that, but and our internal costs are also better. You put all that together, and we now expect to be at the low end of our guidance range.
Unless I’m missing something, I don’t see a correlation between government travel and low-end consumer weakness, except as a vague indicator that the economy is cooling. The short-term drop in government flying certainly appears linked to efforts by the Trump administration to downsize the size and scope of many federal agencies.
The response, per Kirby, is to retire 21 aircraft ahead of schedule:
We didn’t put in a payout, but we expect to be at the low end of our guidance range. So what do we do in response to that? At United, we looked at that and said what we’re doing, one of the things that we’re doing is we’ve early retiring 21 aircraft. That’s something that will be cash positive this year. We’d have to spend $100,000,000 on engine overhauls this year alone for those airplanes.
It will be CASM positive. Those are our most expensive aircraft. We built a plan. We told all of you, we built a plan with optionality and flexibility that if we see short-term headwinds, we can make short-term responses. And that 21 aircraft, by the way, sort of correlates with what we’ve seen from the government.
Kriby further reflects on the nature of the drop in demand for air travel, pointing out a “big drop” in Canadian traffic, at least going to the USA.
We’ve already started the process of where that capacity is coming out, a lot of it transborder, big drop in Canadian traffic to go into the US so it’s going to come out in government markets where we’re seeing less demand. And we’re also going to cancel redeye flying. Utilization flying is generally unprofitable at airlines even in good times, and it’s really unprofitable in bad times.
Interesting that these are “bad times” and that redeyes will be cancelled (we’ve reached out to United for more info on what specifically Kirby was referring to in cancelling redeyes). It’s not a surprise that Canadian demand to the USA is dropping though, (just listen to President Trump mock Canada and Premier Doug Ford of Ontario fire back…).
We’ve also asked United what specific aircraft are being retired early. United’s oldest aircraft include the Airbus A319, A320 plus the Boeing 757, 767, and select 777-200 aircraft.
CONCLUSION
United Airlines will retire 21 aircraft early to address falling demand from Canada, the US federal government, nad to address weakness in the domestic leisure market. The two-fold takeaway is that United is able to adjust its fleet size due to current demand not only by deferring new orders but by retiring older aircraft more quickly. Secondly, United confirms that it is seeing a slowdown in demand, though at this point it has not re-adjusted its earning projections downward.
United should retire all of their 757s and their least desirable widebodies. It worked great for American! No regerts.
Why not the A320s from the 90s?
Yeah the 757 isn’t a widebody!
Premier Doug Ford. Rob was his brother (RIP)
Thanks. Updated. Two good men.
Rob was a crackhead and his wife called 911 when he threatened to kill her. Dude was a POS.
Let me guess, Marion Berry was a good man other than the time “The b#tch set me up”.
With all due respect, are you smoking crack today?
Dave, there you go again, endless projection (look it up because you’re obviously too stupid to know what it means). You’re the “crackhead” “POS”. Suggest you leave the “With all due respect” out, you obviously have no idea all what respect is (and you absolutely deserve zero respect). Please crawl back under whatever rock you’ve crawled out from and leave (all) the discussion(s) to civil intelligent people.
Economy is moving into recession , or worse .
You have to detox the addict before you can get them healthy.
Wall Street was mainlining government cheese for four years so now that has come to an abrupt halt.
It’s simple. People do not take a government job in the US to get rich. Generally, you trade the chance at a higher-income private sector job for job security.
Randomly taking an axe to government jobs without concern for the rule of law, or even what services those jobs perform is not just going to swell unemployment for those people across the US, but render ineffective whoever’s left. While it may be fun to think of these jobs as government waste, they’re by and large “profitable” in producing far more dollars in GDP then the government puts it.
In other words, far more people are going to lose their jobs.
In that environment, who’s planning a big vacation? Who’s going on a hiring spree? Who would bet on America?
Now add in a pointless trade war.
Because of the current environment, no company wants to state explicitly whose fault this is.
Fire them all
Genuine question–does the federal government requirement to travel in economy apply to all levels of government employees, or only the lower tier ranks? I have read that there is/was an allowance to travel international business class if the total travel time, including lay overs, exceeded 14 hours.
Also, does the government requirement to fly economy apply to contract employees too? How about NGO employees? My suspicion is that all the 100’s of billions funneled into left leaning NGO’s has funded a tremendous amount of international business class and domestic first class travel by our so called Washington “elite” grifters.
Good question – I don’t know.
When UA added IAD-DXB several years ago the published block time was just over 14 hours which supposedly entitled government employees to business class.
Not sure how accurate that was but it does make sense for UA to do that.
I believe that the rule is 13 hours across the board and even then for my component the Under Secretary of the Navy has to personally approve it. It must be a compelling reason, even if you are a senior executive. So, yes, they almost exclusively fly economy.
I wonder if it’s the 757-300 fleet. There are exactly 21 of the type, they’re heavily used on domestic leisure routes, and they have a bunch of 200-seat A321neos on the way.
That’s a great theory.
Is that how the Feds ended up $36T in debt?
Because of the profitable government jobs?
You do understand that every single government employee is an expense to tax payers employed in the private sector, correct?
The government isn’t self funding.
You do realize that the vast majority of that $36T debt is not government worker payroll? I did back-of-the-envelope math and came out to $300B/year. I then googled it and AI said it was $336B.
Most of the money is in the form of medicare/medicaid, Social Security, Defense, and interest payment on the debt itself.
Hopefully it’s the original 777s… but we can’t be that lucky.
Also, didn’t Kirby say demand was inelastic or something to that effect?
government flying certainly appears linked to efforts by the Trump admisntration ot downsize the size and scope of many federal agencies.
WOAH BUDDY! WATCH THAT SPELLING
admisntration ot
WHAAAAAA
Matt, I think he said “We didn’t put an 8-K out”, i.e. they didn’t have to correct the previous guidance, because they still expect to be in the range they had provided
“Plunging Demand.” The world knows full well what’s causing that.
Good luck with those rooting for failure strategies.
They should retire all the Neos! And instead of continuously purchasing airplanes, why not take care of their FAs and other employees first?
For a company that’s boast on being the biggest airline in history and for boasting those billion of dollars on revenue, yet the profit sharing they gave their employees is only 5%, this only shows how well underpaid employees are, especially FAs! And they demand to work them non-stop!
If FAs are happy and well taken care of, service will be better! Of course seniors get paid way better than juniors. They make $60 an hour. Compared to RSVs who make less. How can anyone survive in paying bills and housing? Unless you kill yourself from flying non-stop. They’ll put you in trouble if you call off work. What happened to mental health? Physical health? Will the new planes help for that matter?
That day of reckoning is coming. AFA-CWA is guilty of severe malpractice – may be time for FA union to disband and go at it like Delta does for a true industry-leading wage.
This article is full of false assumptions rather than factual evidence.
I wonder what the future of the UA AC JV will be after these tensions. Kind of surprising UA is using this kind of language as they really need Trump to open up Russian airspace open way more than AA and Delta do.
As a 1k with falling need for travel this year I am already considering not chasing status and kayaking. I am sure I am not alone. Wonder if UA will be as nimble trying to attract the business of such flyers by lowering status targets.
I have a feeling that the number of people visiting the United States will continue to decline, while Americans will increasingly find that their passports don’t open many doors.
Only $300B a year in federal government salaries, huh?
Which means that Federal government salaries add a trillion in debt every four years, correct?
And what about state government salaries?
Local government salaries?
And what good or service does the government offer you to purchase voluntarily?
Maybe a fishing license? But that’s only to keep you from getting fined if you get caught fishing without a license.
I was obviously referring to the drop in Canadian traffic and how that is sure to extend to other countries worldwide.
Retire the CRJ200’s
Hopefully the eight across business class 777s will go.
United is failing FAST. They fly 105% of ASMs that Delta does, but only makes 80% of the revenue.
The economic benefits of the election of Criminal Trump are coming home to roost. By the time he’s finished, there will be no airline industry left in the US or should that be North Mexico?
I think a 25 year old Airbus should retire. Scary. But they have new aircraft orders. Its not plunging demand. They want to pack ‘us in as few aircraft as possible and fill every seat!
I’m not sure an old aircraft is unsafe just because it is old…
Please update us on the “canceling of redeye” – surely they won’t eliminate the West-to-East coast redeye flights? Those are incredibly practical for work, and they are always sold out. They used to have a redeye every hour from San Francisco (before covid) and I think still plenty of traffic. Fingers crossed they won’t kill one of the best schedules!